Ministers drop MPs' pensions plan

Plans to raise taxpayers' contributions to MPs' pensions have been dropped, ahead of a Commons debate.

A planned increase had been accepted by all parties in March but the government now says it will accept a Lib Dem plan to freeze the amount from public funds.

The proposal would have seen MPs' own contributions rise by £60 a month, but the Lib Dems said taxpayers would have paid £750,000 more than last year.

All party leaders have indicated that MPs' final salary schemes must end.

The cost to the Treasury of MPs' pensions has risen from £9.8m in 2003 to £12m last year. Over that period, MPs themselves were asked to contribute only an extra £700,000.

Frozen contributions

In March the main parties endorsed a plan to increase both MPs' contributions and contributions from public funds, but it was not put to a vote.

BBC political correspondent Laura Kuenssberg said the political mood had changed in the wake of the MPs' expenses scandal and the impact of the recession.

MPs are due to debate the plans on Thursday but the Liberal Democrats planned to put down an amendment, supported by the Conservatives, that would have frozen taxpayers' contributions.

In a statement, Downing Street said all parties had previously agreed a recommendation from the independent Senior Salaries Review Body (SSRB) in 2007 about the level at which the public contribution should be capped.

Downing Street added: "Were the [Lib Dem] amendment to be selected, the government would be happy to accept it and consult further.

"In any case, this was always going to be a free vote and the government has asked the SSRB to review fundamentally MPs' pensions for the longer term."

A review proposed in January 2008 was put off by MPs, who voted to delay the inquiry until the cost of pensions hit 20% of their total payroll, which is around £130m.

The Government Actuary's Department had warned the prime minister that the 20% threshold was likely to be breached.

In February 2009 Gordon Brown ordered the review to consider the "full range of options" for reducing the burden to the taxpayer - including increasing the retirement age or ending the generous final salary pension scheme.