HC Deb 26 June 1959 vol 607 cc1584-99
Mr. Houghton

I beg to move, in page 6, line 4, to leave out from first "pension" to "is" in line 6.

Behind this simple and innocent looking Amendment lies a complicated subpect and an exceedingly sticky wicket. It is a matter which I raised in Committee upstairs to which I had not then found a complete answer, and upon which I promised to send the Financial Secretary a memorandum. That was a measure of self-protection so that if I floundered hopelessly this morning and got positively incoherent on this topic, the hon. and learned Gentleman might be able to get up and say that I had explained the point clearly, he thoroughly grasped it and would proceed to deal with it in his own inimitable way.

The Amendment attempts to deal with the position of public servants who, on reaching normal retirement age, extend their service in what is called a disestablished capacity. This goes back to the Superannuation Act, 1949, which as a Bill I remember clearly, because my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) was then Financial Secretary to the Treasury and was piloting that Bill through Committee upstairs. The first thing I did to my right hon. Friend in that Committee was to vote against him. I joined forces with the right hon. Member for Monmouth (Mr. P. Thorneycroft) on the question of unestablished service to count, a matter with which the House of Commons is familiar. I was so convinced by the arguments used by the right hon. Member for Monmouth that I decided to support him. The right hon. Gentleman has not since honoured the point of view which he took on that occasion, but I let that pass.

The Superannuation Act, 1949, introduced a number of important changes and improvements in the Civil Service superannuation code, particularly pensions for widows and orphans, but it also provided for civil servants who reached the normal age of retirement to continue their service in the public interest beyond that date. To encourage them to do so, the 1949 Act enabled a civil servant reaching the normal age of retirement formally to retire, draw his lump sum gratuity, have his pension determined under the relevant Superannuation Acts and then continue in the public service in a disestablished capacity. The great attraction of that arrangement was that the civil servant concerned would be able to draw his lump sum gratuity, which he no doubt wanted for some important purpose—perhaps to pay off a mortgage or to do something to which he had looked forward. The gratuity would enable him to do it.

The provisions of the Superannuation Act, however, did more than allow him to draw his gratuity and have his pension determined and then carry on either in the same grade or in a lower one. It also provided that the extended service that he rendered in a disestablished capacity should count for additional pension and additional gratuity. The Act dealt differently with the two types of extended service. In the case of the officer continuing in a disestablished capacity in his then existing grade or rank, the Superannuation Act, 1949 laid down that the addition to his pension could be made by reference to a recalculation of his position at the final and actual date of retirement on the basis of his total service and the average of his remuneration for the years preceding his final retirement.

In the case of the civil servant who stepped down a grade during the period of extended service, the 1949 Act provided that he could have a recalculation of his pension by reference to the added years of service, but based on the pay that he was getting in the period immediately preceding the formal and earlier date of retirement. That was to give him the benefit of a recalculated pension on the basis of his higher remuneration at the time he stepped down and not upon the lower remuneration that he received during his period of extended service in a lower grade.

Those provisions were satisfactory. It remained only to deal with the third type of case, namely, the civil servant who did not avail himself of the provisions of the 1949 Act. He just went on as a fully established civil servant, postponed his retirement, served in his existing grade or rank until a later date and then finally went out. In his case, his pension was based in the normal way on the average of his remuneration during the three years preceding final retirement and drew his gratuity then and not before. He continued in the same way as he would have done at the earlier age of retirement had he availed himself of the provisions.

In the case of the 1956 Act, something had to be done to safeguard civil servants and others because these provisions have been extended to other superannuation schemes in the public sector—from being at a disadvantage in connection with the pension increase which was being made in the 1956 Bill when it was before this House. The problem was that if a man had his first or formal retirement before the relevant date for a pension increase, was then reemployed and finally retired after the relevant date he would obviously get into trouble in connection with his pension increase.

It was noticed that it could happen that again the additional pension rights as a result of the further service could be less than the increase in pension lost by crossing the relevant date. Section 6 of the 1956 Act safeguarded the position of the civil servant from being worse off by extended service. We have done something on similar lines in Clause 2 of this Bill. The provisions in Clause 2, like the provisions of Section 6 of the 1956 Act, enable a civil servant in that position to receive the more favourable of two alternatives. He can either have his final pension plus pension increase, if any, at the actual and final date of retirement, or he can have his pension as calculated on the formal date of retirement plus pension increase, if any. It would usually be the case that the pension increase applicable to the formal and earlier date of retirement would be higher than the pension increase applicable to the actual and later date of retirement, because we have provided in our scale of pension increases a higher percentage for the earlier date of retirement.

12.45 p.m.

Whether the civil servant continues in his existing grade or not in an established capacity, he is still protected by Clause 2, and, as the Financial Secretary pointed out when I raised the matter in Committee upstairs, Clause 2 is a relieving Clause, not a disabling Clause. Clause 5, however, in this respect is a disabling Clause, and subsection (1, a) of it deals with when a pension shall be deemed to begin. It lays downs that in general circumstances the pension shall be deemed to begin on the day following the last day of service. It seems to me that the words in brackets prevent a civil servant who became disestablished under Section 36 (2, b) of the Superannuation Act, 1949, from counting for this purpose the day following his formal or earlier date of retirement.

As I understand it, the deletion of these words would enable such a civil servant to get an increase under this Bill composed of two elements. First, his pension at the formal date of retirement plus pension increase, and an addition of pension for extended service plus pension increase, but at the date relevant in the latter part of his pension to his actual and final date of retirement. That would give him the benefit of two increases or two separate elements of his total pension, whereas the Bill as it stands would give him the choice of one calculation or the other but not the benefit of both. The question is: is it unreasonable or unfair to others that a civil servant who retires under the provisions of Section 36 of the Superannuation Act, 1949, should have a pension increase based on his formal date of retirement and another increase based on his extended service added to it plus any increase that might be applicable to that having regard to the date of his final retirement?

One extremely damaging point can be made against my proposal—at least from a superficial point of view it might be regarded as damaging. It would give to a civil servant with extended service a higher total pension than would be granted to a civil servant without extended service but who retired on the same total length of service as the other man. It would give to a man who retired at 65 with the benefit of extended service on the lines of the 1949 Act plus my proposal a higher pension for a total of 35 years' service than it would give to a civil servant who retired at 60 and did not have extended service but who also had 35 years' pensionable service.

From some points of view, that could be regarded as an anomaly, but from my point of view I do not think that it is. I think that the person who renders service after the normal retirement age is entitled to some benefit, even for the same length of service, over and above the public servant who retires at the normal age after equal length of service.

There may be other difficulties about the proposal. If I had all the resources of the hon. and learned Gentleman in this matter I have no doubt that I could answer straight away all the points he is going to put up against me.

I have gone almost demented trying to find the answer to this problem. I can only hang this on what I believe is a clear and reasonable principle, namely, that the civil servant or public servant who extends his service beyond the normal retirement age should get some benefit for doing so. He expected it; it was an inducement held out to him; and I think he should get it.

Now, under the provisions of this Bill as it stands, he may not get it. It is possible for the addition to his pension by reason of extended service to be completely nullified by the pension increase which is to be granted to his earlier pension calculated by reference to the date he could have gone out had be chosen. I do not think that is right.

I do not think it is fair to the civil servants to say, "The addition you have earned by extending your service has to be set off against the pension increase. We cannot give you the benefit of both. You can have one or the other, but you cannot have both." There are some public servants who did extend their service who are now going to draw no better pensions than those they would have drawn had they retired when they were entitled to and not rendered their additional service. "Ah! But," their Lordships of the Treasury say, "remember he drew his gratuity. He has had the benefit of a tax-free lump sum and gratuity during this time." What of it? "And also he was able to continue full-time service and draw salary, and, of course, in addition to his pension. The total is within the ceiling of his pre-retirement remuneration under Section 20 of the Superannuation Act, 1834, but at least we let him stay in and be able to earn his living and draw gratuity and have the use of it." That does not seem to me to come into the argument at all. I think that in addition to drawing the gratuity which he was entitled to at that dale, and in addition to being permitted to earn his living by extending his service, his total pension should reflect some increase for having stayed on. Under the provisions of the Bill that may not be so, or where it is so the addition for extended service is reduced because the pension increase is to be taken into account as well.

That is the best I can do with this Amendment. It may be that my purpose could not be fully achieved without going beyond the bounds of this Bill, and that is a great handicap, if it is so. We have on the whole in this Bill let the past bury its own dead. We have constructed the pension increase in this Bill on all that has gone before, good, bad, and indifferent. It is, I know, difficult to go back to the beginning or go back half-way and try to put right things which have been done on previous occasions, hut, whether I have made my case technically or not, I hope that I have put to the Committee what I believe to be the general principle here, that extended service should carry some addition to pension which should not be eaten away or extinguished by the pension increase.

I have had a great many letters on this matter from public servants who are at a disadvantage on this account. It is not enough merely to protect them from being worse off for having rendered extended service. Because that is what Clause 2 is designed to do: prevent them from being worse off. Clause 5 and its attendant provisions does not give a civil servant with extended service the full benefit of extended service. It deprives him of the advantage of the pension increase which would be applicable to his formal earlier date of retirement and some reward for extended service on top.

I hope I have got through this difficult exercise to the reasonable comprehension of the Committee and that the Financial Secretary, who has, of course, been aided by a preview of what I was going to say, will be equally successful in the defence of whatever position he feels impelled to take up.

Sir L. Heald

If I do not press my hon. and learned Friend to accept the Amendment, I am sure that the hon. Member for Sowerby (Mr. Houghton) will appreciate that it is not in the least because I do not sympathise with his point of view. As I shall try to indicate quite briefly, I agree with him that something should be done about it if possible. It is simply that it is a very complicated and difficult subject, and I must frankly say that I am not quite certain that he has either covered the ground completely or in a way which cannot be, as I am sure it will be in a few moments, represented at any rate as not altogether satisfactory; but on his general subject I think we can all have a great deal of sympathy.

I try in these things to be logical in my arguments. My hon. and learned Friend was very anxious to point out, in answer to what I said a few moments ago, that we must encourage people to go on working. If we are to do that, then if we have a civil servant who comes to the age of retirement and says, "I should like to go on: after what the Financial Secretary has said I ought to do. I want to go on working to help my country," has to be satisfied that he will get something for it.

I think when one reads the wording—I have said it before but I think it should be said again—of Clause 2 of the Bill one finds it rather startling to think that the Legislature has got in this Bill a provision against a man getting absolutely nothing at all for his further service. It seems to me an almost inconceivable thing that it should be found necessary to do that.

Mr. Houghton

The Clause does not prevent a man getting nothing at all. It prevents him from being worse off for his extended service. He can under the Bill get nothing.

Sir L. Heald

I am much obliged. I was not being quite accurate about it.

At any rate, if one has a case like the case of the man I quoted before, who has done eight or nine years' extra service and who feels that in effect he is getting no benefit at all, it is not going to encourage people to go on. I do think that that is a consideration which must be taken into account more than apparently it has been.

My anxiety about this matter is really this, that the proposal of the hon. Member for Sowerby is not directed to deal with more than one of several difficulties and anomalies and troubles. I can think, for example, of three which have been pressed upon me very much by quite different types of people.

There is first of all the man I mentioned who goes straight on. He says, "Instead of retiring I shall listen to the Financial Secretary and say I am convinced by that I ought not to retire; I ought to go on." That is the first one. Then there is the man who retires and after a few years is appealed to by my hon. and learned Friend to go back, and he does. The third case is one which we are not discussing here but it is another example of the general problem. It is that of the man who for a number of years has been in the public service but not in an established position and who becomes established and then retires.

1.0 p.m.

There are all these different cases. Perhaps the better thing from my point of view is to ask my hon. and learned Friend whether he would not say that the whole of this matter in some way will be reconsidered, so that we can deal with it when the question arises again; and we would hope to deal with it fairly soon. These things are surely much better dealt with by way of negotiations by experts round the table. There is always the fear one has that when we have finished with the Bill the file will be put away in the Ministry and not taken out again until some people start another agitation. If we could be told that there is concern about this matter on both sides of the table, as we know there is, and a real effort will be made to deal with it, it would be a great encouragement.

Whatever anybody says about the difficulty of dealing with hard cases and anomalies, it is undesirable that we should have a position in which a man, however logical the arguments against him, will feel that it is not worth his while going on working. I have not understood these things perhaps as fully as I might, but I am sure that the hon. Member for Sowerby will not regard it as in any way a reflection on his arguments if I ask my hon. and learned Friend to deal with the matter in that way, and to give an assurance that it will not be put away until next time and that it will be noted now.

Mr. Simon

The hon. Member for Sowerby (Mr. Houghton) in Committee promised me—or threatened me—with a memorandum dealing with this matter, which he sent in due course and for which I am very grateful. It was a masterly enunciation of the whole problem and of the law affecting it. I think that it was Disraeli who said that there were only three people in Europe who really understood the Schleswig-Holstein problem. One was Bismarck, the other a German professor who had gone mad, and the third himself—and he had forgotten what it was about. By the time that I had read the hon. Member's memorandum I was in Bismarck's position, but I regret to say that now I am hovering between the position of the German professor and that of Disraeli. I will, of course, reply to the hon. Member in detail in correspondence. I do not think that it would be appropriate on this occasion to go into the technical complexities of the problem, which, as he indicated, are very great. It is a problem which bristles with difficulties if one is to avoid unfairness.

The hon. Member for Sowerby and my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) are quite right when they say that the whole of the hon. Member's purpose, even if it were desirable, in any event could not be carried out without further legislation affecting the substance of the Superannuation Act. I can assure my right hon. and learned Friend that this is not a file that is put away for any length of time. It is a remarkably dog-eared one which is frequently taken out. I hope that that will be some consolation to him.

The purpose of the Amendment is to deal with the case of the civil servant who retires and returns to work at a lower grade. Its effect is to take the whole of his pension and increase it in a way which I will describe in a moment. At present, if he works on at a lower grade he gets a number of substantial advantages. The first is that he is entitled to reckon the extra years for which he works for extra pension. Even more important, they count for pension not at the rate at which he is working, but at a notional and very favourable rate related to the old and higher pay which he had been earning before he retired originally, and not to the new and lower pay which he earns by continuing to work. In other words, he takes a less onerous job but the pension is calculated for the extra years he works at his older and higher pay. The effect of the Amendment is to compute the pension and increase it, not by the percentage which would be appropriate when his service was actually completed but by the percentage which would have applied if he had completed all his service by the time he is retired. In other words, it introduces a new notional element in order to put him higher up the escalator.

I will not go into the complexities and technicalities. It would be sufficient if I say—and it is really no more than was said by the hon. Member for Sowerby himself—that the Amendment gives these pensioners a much better bargain than any one else, and they get it—and this is the gravamen of the case against the Amendment—in most cases without those concerned having had to live on pension during the time when the hardship occurred which the increases are intended to offset. The pensioners who would be affected by the Amendment have been living on pay which ought to have been, and largely has been, increased to take account of the cost of living. Therefore, they would have an advantage over other pensioners even though they had not undergone the same hardship as other pensioners in having their pensions eroded.

It seems to me, therefore, that that is unacceptable, at any rate as we consider the matter at the moment. The hon. Member for Sowerby put it that "It gives to the civil servant with extended service a higher total pension than the civil servant whose total service was the same length but was not extended." It seems to me that if we did that, the latter civil servant would have a very real grievance. I feel that it would be very wrong to introduce an anomaly of that sort, to the latter's disadvantage as he would claim.

In addition, the civil servant who would be affected by the Amendment—who retires but serves on at a lower salary—already has an advantage over the other one—the civil servant whose total service was the same length but was not extended—for the first one, when he retires originally, gets his tax-free lump sum benefit. The hon. Member for Sowerby asks "What of it?" Let hon. Members think of the one left out. He has not had a lump sum benefit in the earlier years, and he would like it. Apart from the fact that the one enjoys a lump sum earlier, we also cannot shut our eyes to the fact that in the meantime he has been drawing, if he has so wished, interest on that lump sum. Therefore, he has already had an advantage, and he is to have a further advantage, which I think would be wrong. In addition, not only does he draw the lump sum benefit on disestablishment but he adds to it on reemployment, in the same way as he adds to the pension.

I hope that, looking at it that way, my right hon. and learned Friend the Member for Chertsey will still feel that there is an encouragement to the civil servant to go on working.

It is true that the advantage the man gets is "nullified" by a Pensions (Increase) Bill, but it is also true that to some extent we lift the others so that they do not suffer the hardship from which he has been spared. Nevertheless, it seems to me, particularly when one looks at the lump sum benefit, that there are real advantages in the civil servant continuing to work, and we should not be justified, apart from the technical difficulties of legislating over the whole of this field, in accepting the Amendment.

Mr. Glenvil Hall

As the hon. and learned Gentleman knows only too well, this matter has meant an enormous amount of correspondence for almost every hon. Member of the House during the last weeks, certainly since the Bill was announced as possible. During its Committee stage, we took occasion to ventilate this matter, partly in order to get an explanation from the hon. and learned Gentleman and also to suggest what would be the effect of the Clause, which is a complicated one. Although my hon. Friend the Member for Sowerby (Mr. Houghton) did his best to make it plain to us, I was one of those who found it difficult to follow what he was saying. I have had the benefit of receiving the memorandum he was good enough to send to the Financial Secre- tary and it is enlightening. If the hon. and learned Gentleman will fulfil the promise he gave a few moments ago to the right hon. and learned Gentleman the Member for Chertsey (Sir L. Heald) to look at the matter, my hon. Friend might be willing to ask leave to withdraw the Amendment.

I suppose the difficulty arises because of the nature of the provisions in the Bill by which the percentage scales depend completely on the date of retirement. Where a man does not retire on the date he normally would have done, but goes on working in a disestablished position, complications arise, and because of that he is likely not to get the full benefit of the extra work he puts in. Fundamentally, all of us would agree that if a man puts in another five years' work there should be some benefit to him for the extra years, and therefore I did not altogether follow the statement of the hon. and learned Gentleman that the man was not on pension during the years when hardship was being suffered. That may be true because he was working then, but more often than not he was on a lower scale of pay, and the increased cost of living affected him even though he was working.

Mr. Simon

The right hon. Gentleman will appreciate that the man will normally, almost inevitably, be on a higher rate of pay than the pension he would enjoy if he retired; otherwise, he would not have any incentive to continue working.

Mr. Glenvil Hall

I understand that, because if he were not getting more than he would get if he retired, he would not go on working. The point I am trying to make is that the cost of living affects him whether he is working or not. Even when he has retired, as these people have, and even if during the years he was working the hardship of the increased cost of living did not bear upon him, it certainly bears upon him now that he has retired. Therefore, I could not altogether follow the argument adduced by the hon. and learned Gentleman.

As I have said, my hon. Friend may be willing not to carry the Amendment to a Division on the understanding that the Financial Secretary will look at it—as he promised the right hon. and learned Member for Chertsey. The only question is when? The Bill will have to go to another place and that, I imagine, would provide an excellent opportunity. It would avoid the fear expressed by the right hon. and learned Gentleman that the matter may be put into the pigeon holes of the Treasury and not brought up for many years. There could not be a better time than now, when the matter is fresh in our minds. All of us are anxious to reach a settlement, and all of us know that a large number of people feel deeply about it. I would like to feel that the hon. and learned Gentleman will rise in his place when I sit down, and will give us his promise that something may be done about this matter between now and the time when the Bill becomes an Act.

1.15 p.m.

Mr. Simon

It would be wrong for me to leave the Committee under any misapprehension on this point. A promise to review the matter before the following stage of a Bill has a significance quite different from the words I used. It would be wrong, therefore, if I left the Committee with any idea that we intend to review the matter in any way with a view to Amendment in another place.

Mr. W. R. Williams (Manchester, Openshaw)

I hesitate to intervene, because I was late coming into the Committee and I have not heard the whole of the debate, but I must pay a tribute to my hon. Friend the Member for Sowerby (Mr. Houghton) for delving into the intricacies and technicalities which ordinary fellows like myself find it difficult to follow or check. However, I did not entirely agree with everything my hon. Friend said, as he knows, although I am in agreement with him on at least one point. It is that both he and I have had a large correspondence on this subject, not only during the last few weeks but for at least two years.

Frankly, I have been torn between conflicting emotions on this issue. On the one hand, I have a feeling that some of the people who have corresponded with us are being treated unfairly in some measure but, on the other hand, I have to weigh that in my mind against any unfairness accruing to other people were certain points to be conceded which we have been asking the Treasury to con- cede. I will not develop the argument further at this stage but, in view of the hon. and learned Gentleman saying that he could not see his way clear to give consideration to this technical matter before the Bill comes back from another place, I support the point of view put by the right hon. and learned Gentleman the Member for Chertsey (Sir L. Heald), namely, that a technical matter of this kind might be considered at an early date between the Treasury and experts of the Civil Service Staff Association and people representing retired pensioners. They would be able to go into all the details and could also consider anomalies. After that is done, would the Financial Secretary be good enough to send a letter to some of us showing what conclusions have been reached, so that we can conclude some of the correspondence we have had on this highly technical aspect of the Bill?

Dame Irene Ward

Before my hon. and learned Friend replies on the question of an undertaking, may I ask him a question? I fully agree that an inquiry could not take place before the Bill goes to another place, because that might cause undue delay to those who are waiting for their pensions increases. However, if after examination a means is found of meeting the point raised by my right hon. and learned Friend and hon. Gentlemen opposite, would the Financial Secretary give an undertaking that he will not appear at this Box and say that, an agreement having been reached, legislation is necessary and time cannot be found for it in the legislative programme?

I want to be assured that this will not happen. I want to be certain that, if something fair to all sides can be agreed, then we shall be able to pet the matter put straight without having to fight for a place in the legislative programme.

Mr. Simon

Two questions have been raised, one of which I can answer easily. I find the one put by my hon. Friend the Member for Tynemouth (Dame Irene Ward) very much more difficult to answer than the other.

If the matter is raised with the Government by the Staff Side, I need hardily say that it will be very carefully considered in accordance with the ordinary machinery of the Whitley Council. I can go further and say that I will certainly write to the hon. Member for Manchester, Openshaw (Mr. W. R. Williams), the hon. Member for Sowerby (Mr. Hough-ton) and my hon. Friend to tell them the result of any such examination.

My hon. Friend asked me to give an undertaking that any legislation which is required will move to the top of the legislative queue. I can only remind her that that is a matter for my right hon. Friend the Lord Privy Seal as Leader of the House and ask her to picture what would be my condition if I gave her off the cuff the assurance for which she asks.

Mr. Glenvil Hall

Throughout our proceedings in the Standing Committee and here the hon. and learned Gentleman has always indicated that the matters under discussion have been "sympathetically considered". Now they are to be "carefully considered". I do not know what the difference is. I hope there is a difference because the things which have been "sympathetically considered" have resulted in nothing. I hope that in the light of what has been said by the right hon. and learned Member for Chertsey (Sir L. Heald), who, after all, is a prominent member of his side of the Committee, something more will be done than just "sympathetically considering" what has been said from all parts of the Committee. Perhaps the hon. and learned Gentleman will give us an assurance that "carefully considered" is better than "sympathetically considered".

Amendment negatived.

Clause ordered to stand part of the Bill.

Bill reported, with Amendments; as amended (on re-committal), considered.