HC Deb 22 January 1965 vol 705 cc598-601

Question proposed, That the Clause stand part of the Bill.

Sir K. Pickthorn

In stating that I have a few remarks to make about this Clause I hope that my comments will be tolerated, since they might equally well have been made when we were discussing earlier Clauses. My main point concerns subsection (4) of this Clause, which states: The amount by which any rate is altered under this section shall not exceed one fifth of the rate in force immediately before the passing of the Resolution or making of the order altering the rate. That subsection would seem to put a sort of completeness on the various features of the Bill and would appear to look like, above all, a guarantee against personal suffering from inflation on the part of Ministers and hon. Members. I suppose that similar sentiments could be expressed about Clause 7.

My experience of people outside the House of Commons is that many of them are inclined to make impolite jokes about increases in hon. Members' pay. However, my impression is that far more of them are seriously disquieted by what we are now doing; in other words, by the pensionable part of the matter.

Consider just what we are doing. We are, first, putting up our salaries by a quite unique procedure, a procedure which, I make bold to say, nobody quite understands. I recall that a former Prime Minister once promised me in answer to a supplementary question that I would have the matter fully explained to me. I cannot blame him for not having given that explanation because I did not return to the subject. Had I done so I am sure that the explanation would have been provided.

Thus we are taking the first step, which most people accept—despite the few slightly impolite jokes that are made about us. Now, however, we take the second step and go a stage further. We now say that anybody who gets a reasonably safe seat and who can reasonably count on being re-elected twice—that is, and sitting for 10 years—is guaranteed that upon that happening—and we must accept that Parliamentary salaries will continue to go up if the value of the £ continues to go down—his pension will go up. We are doing this by an understandable and simple procedure, not at all the sort of procedure one must normally face when attempting to obtain additional expenditure from the Exchequer. It is a procedure which, naturally, hon. Members are tempted to facilitate—a procedure which will ensure that hon. Members' pensions will be continually going up.

We would be wise—despite this Clause, which comes after a number of other important Clauses—to do all we can to induce the Government to keep inflation down to 20 per cent. per annum, for it will be difficult under the Bill to keep our pensions precisely up in value in relation to the falls in the value of the £ if inflation is not halted.

I mention these facts at this point in our deliberations because the Clause we are discussing seems to make these matters stand out. It appears to make the factors involved in the earlier Clauses, which might otherwise not receive any objection, stand out in focus and we should be conscious of the fact that considerable numbers of the public consider that the first duty of the House of Commons is to prevent inflation.

When we pass an elaborate Bill on top of considerably increasing our salaries—a Bill which more or less guarantees hon. Members and ex-hon. Members this sort of pension; guarantees it as far as is humanly possible, certainly more so than ever before—we must ensure that we do everything in our power to reduce inflation, although I have no doubt that inflation will go on at least as fast as it has gone on since 1915.

Mr. Diamond

I am most grateful to the hon. Member for Carlton (Sir K. Pickthorn) for raising a point that should be clarified; and if that impression gets abroad, as he fears it might, it is right that it should be stopped at the very start. The situation is not quite as he imagined it to be, and I am therefore grateful to him for giving me this opportunity to explain it.

I start by saying that Parliament is supreme, and if Parliament at any time—at any time—decided to introduce fresh legislation that would be a matter for Parliament. All one is deciding here is what flexibility shall be introduced into the Bill without new legislation; not without coming to the House, but without new legislation. What is provided in the Bill is, of course, absolutely essential. It is that if the fund gets out of balance it must be put back into balance. The Actuary will report whether or not it is in balance and, if it is not, it must be put back into balance.

It is not the point of inflation at all, if I may explain to the hon. Gentleman—

Sir K. Pickthorn

The hon. Gentleman means that Clause 15 is not the inflation point?

Mr. Diamond

No part of the Bill is the inflation point—nor is the subsection to which he referred part of the inflation point.

Care has been taken to see, especially as we have fixed contributions and fixed benefits, that as far as can be foreseen this fund should remain in balance on these fixed monetary receipts and payments being made, but that depends on a calculation that everyone in the House recognises is not an easy one. It depends on how many Members stay as Members, and for how long, how often they cease to be Members of Parliament, and do not find their way back again and do not, therefore, complete ten years of reckon-able service.

On past experience, it appears to be the case that, on average, each Member serves for about 15 years. There is, therefore, a pretty reliable average to go on, but that pattern might change quite considerably. One does not know—it is conceivable that it could. If that pattern changed—and this has nothing at all to do with inflation—the fund would become out of balance. We may get a situation in which there are many contributions and very few benefits because everyone serves for nine years and nobody for ten. Or we may get an imbalance the other way, in which everyone serves for 45 years and draws the maximum pension. This is just to illustrate the sort of circumstance for which the Clause provides.

It is essential to provide within the legislation for reasonable flexibility to maintain the balance of the fund. However, one does not want to provide for unreasonable flexibility. If the fund were so completely out of balance—that is, say, to 50 per cent. out of balance—it is clear that the matter should come before Parliament fully again, and Parliament should decide what kind of structural revision was necessary. For that reason, the limit to which this fund can be altered and kept in balance without fresh legislation is the limit of 20 per cent. to which the hon. Member has referred. That can be done by a process of affirmative Resolution, but it is not necessary to have new legislation for it.

I hope that the hon. Gentleman will feel that there is no anxiety on the ground of inflation. The Clause is not designed to deal with that. It is merely that, as we have fixed monetary amounts, we are making certain assumptions about the continuation of membership. One has to make reasonable adjustments for that, but if the adjustments become unreasonably large it is right for Parliament to look at the matter all over again. As I say, I am grateful to the lion. Gentleman for having raised this matter, and I hope that I have satisfied him with my explanation.

Question put and agreed to.

Clause ordered to stand part of the Bill.