MPs will have to stump up another £750,000 for their pensions after the fallout from the expenses scandal forced a change of heart in the Commons last night.

The Conservatives announced that they were supporting a cross-party amendment to stop a 7 per cent rise in the taxpayer contribution to MPs’ retirement benefits.

And within an hour the Government had caved in, saying it would accept the will of the House.

The Government had already asked MPs to increase their contributions to their pensions by £60 a month this year. But until last night’s about-turn the taxpayer still faced the increase because of growing liabilities in the fund.

MPs had been expected to vote to increase their fund as companies across the country cut back on provision for retirement.

But Steve Webb, the Liberal Democrat MP, and Frank Field, the Labour MP, tabled an amendment to a motion from Harriet Harman, the Commons leader, that would have implemented her statement to the Commons of several weeks ago.

Ms Harman planned to cap the taxpayer contribution at 20 per cent, which would still have meant an increase. Mr Webb’s amendment limits the contribution to 18 per cent, meaning that MPs will have to pay another £60 a month on top of the £60 extra they have already agreed to pay.

Last night Alan Duncan, the Shadow Commons leader, announced that the Conservatives were backing the amendment. Soon afterwards the Government followed suit.

Mr Duncan said: “The world has moved on since the Government decided to do this. Even if MPs contribute more themselves we just don’t think it’s remotely fair that the Government should be asking the taxpayer to pay anything extra.

“We will oppose the government motion and will support the cross-party amendment tabled today.”

Mr Webb told The Times: “At a time like this when every working person is worrying about their pension and how it will be affected for the future, it seems right that we should make the right kind of move to respond to that.”

Last year the proportion of MPs’ pensions met by the taxpayer was 18 per cent to cover liabilities and 8 per cent to cover a deficit in the scheme caused by a previous break in taxpayer contributions.

Had the Government not intervened this year the contribution would have had to be 23 per cent for liabilities, plus 8 per cent for the deficit.

The move comes after 96 per cent of UK companies surveyed by PricewaterhouseCoopers said defined-benefit pension plans are unsustainable.

The PwC survey found that 16 per cent of private sector employers have already frozen accruals to existing members’ defined-benefit pension funds and 42 per cent of the remainder plan to do so. Researchers found that 88 per cent of employers believe the public sector has an unfair advantage in being able to offer taxpayer-funded defined-benefit funds.

Under today’s motion MPs, whose pay starts at £64,766 a year, will increase their own contributions from 10 per cent of salary to 11.9 per cent for the highest level of pension, paying one fortieth per year of service, and from 5.5 per cent to 5.9 per cent for those accruing pension at one sixtieth per year.”

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