§ Order for Second Reading read.
§ 3.58 p.m.
§ The Chief Secretary to the Treasury (Mr. John Diamond) rose—
§ Captain Walter Elliot (Carshalton)
On a point of order. In the Explanatory Memorandum at the beginning of the Bill, the last paragraph refers to the Armed Forces. Would it be in order for those hon. Members who are fortunate enough to catch your eye, Mr. Speaker, to speak to a certain extent about the Armed Forces, as long as it is related to the public services as covered by the Bill?
§ Mr. Speaker
Perhaps I had better quote the classic Ruling. If I may speak personally, I rule with regret, because in the past I was deeply interested in the kind of question which the hon. Gentleman wishes to raise in this debate. However, if he turns to the OFFICIAL REPORT for 9th November, 1962, he will find that Mr. Speaker said:I think that a general comparison between Service pensions and civil pensions is permissible. But I do not think that matters of detail relating to Service pensions are in order."—[OFFICIAL REPORT, 9th November, 1962: Vol. 666, c. 1387.]I know that hon. Members will have that aspect of it—the question of Service pensions—in mind, but they must find some other opportunity of debating the whole issue of Service pensions.
§ Mr. Enoch Powell (Wolverhampton, South-West)
Further to that point of order. I am sure that it will be understood that the terms of the Royal Warrant, which covers Service pensions, customarily follow closely the provisions of the Bill, and, I understand, will do so in this case. Therefore, I would respectfully assume that your Ruling, Mr. Speaker, does not mean that the policy embodied in the Bill, which will also be applied to Service pensions, cannot be debated.
§ Mr. Speaker
The principle itself certainly can be debated but how far they raise what they are interested in in this debate must depend on the ingenuity of 1352 hon. Members, although I will, of course, rule out of order anything that really is out of order. I imagine that there will be an opportunity—although, of course, I cannot foresee these things —of debating the issues dealt with in the Royal Warrant in due course.
§ Mr. Diamond
I beg to move, That the Bill be now read a Second time.
This is an important Bill. It relieves human hardship, it is an exercise in the all-important sphere of social priorities, it affects more than 700,000 people and those who live with them, it is costly— more costly than any of the similar Measures which have been introduced on five previous occasions since the war— and it has been given pride of place in the Government's legislative programme. It is therefore with pleasure and with high hopes that I may succeed in my Motion that I move the Second Reading of the Bill.
I will begin by explaining the cause of the hardship to which I referred. Public service pensions are normally related to length of service and pay at retirement. They carry no built-in right or promise of increase after retirement, but when there has been a marked fall in the value of money causing hardship to pensioners the Government, as a good employer, seek the authority of Parliament to pay increases to alleviate this hardship. The last occasion on which this problem was tackled was the Pensions (Increase) Act, 1962. We now find ourselves once more faced with this familiar situation.
Having stated the problem, I will now describe the background to the solution which the Government propose. We are responsible for the management of the public services and are, therefore, concerned to see that public service pensioners do not, as a result of inflation, suffer hardship—whether in absolute terms, if their pensions will no longer buy the necessities of life—or relative hardship, if their pensions will no longer give them the standard of living which they had earned through their years of service and to which they had reasonably looked forward when they retired.
In considering hardship, we must necessarily take into account the total retirement income which public service pensioners derive from public funds. The 1353 great majority of public service pensioners are drawing not only their occupational pension but also a National Insurance pension which has benefited from many increases, the last and most generous of which was in April of this year.
In addition to our responsibility for the management of the public services, we have a wider responsibility to the general body of taxpayers and ratepayers —who, after all, foot the bill—and for the economic situation as a whole. The increases in the Bill represent, in the Government's judgment, the fairest possible treatment of public service pensioners and also the most that the country can be asked to afford at a time when there is great need for all sections of the community to moderate their claims on the nation's economic resources.
While taking measures to alleviate the effect of past inflation, the Government have been conscious of the anxiety of many pensioners about the effect which future inflation may have on the pensions which they now enjoy and which will be increased by this Measure. There are two answers to this anxiety. The first is the prices and incomes policy which is being vigorously pursued by my right hon. Friend the First Secretary of State. Many Governments have paid lip-service to the fight against inflation, but the efforts of my right hon. Friend give us a real new chance to achieve price stability—and success will bring incalculable benefits to everyone in this country; above all to pensioners and others living on small fixed incomes.
The second answer relates to the radical review of the social security system which is being carried out by my right hon. Friend the Chancellor of the Duchy of Lancaster. This, when complete, will provide us for the first time with a rational framework within which we can build a constructive pensions policy in both the public and private sectors.
It follows, therefore, that in this Measure the Government have not attempted to set a definitive pattern for the future. I know that many hon. Members feel, and have stressed in earlier debates, that the sort of Pensions (Increase) Bill which we have seen in recent years is not a satisfactory solution to the long-term problem. This Bill, however, is essentially a holding Measure 1354 awaiting the outcome of the fundamental review of social security. In form, it follows closely the pattern of the 1959 and 1962 Measures, for in a holding Measure of this sort it would not be appropriate to introduce piecemeal alterations and innovations in the basic structure. It therefore applies the existing precedents and principles in a fair and, indeed, generous way and it makes some worth-while improvements on the fringe. I hope that the House will accept it as such, within its limited terms of reference, until the Government can introduce the positive new policies on which they are now working.
As I said, the number of pensioners affected is more than 700,000. To be more precise, it is about 710,000. There are 236,000 civil servants, 98,500 teachers, 125,000 local government officers and the police, fire services, National Health Service, former civil servants in India, Pakistan and Burma and others; totalling in all 574,200 pensioners. As hon. Members are aware, the pensions of the Armed Forces of the Crown are governed by Instruments issued under the Royal Prerogative. Their position has been most seriously considered and the Prerogative Instruments will give corresponding increases to about 125,000 pensioners, including former members of the Armed Forces of India, Pakistan and Burma. A further 9,750 overseas pensioners will receive increases under Clause 5, making a total of about 710,000.
It is probably unnecessary for me to add that the description "public service pensioners" does not, for these purposes, include the pensions of employees in the nationalised industries any more than it includes the employees of private firms. The nationalised industries have full powers to make their own arrangements for pensions and increases in pensions.
§ Mr. Arthur Palmer (Bristol, Central)
Is my right hon. Friend aware that the Bill is of great indirect interest to the nationalised industries in view of the comparable increases which they usually provide in relation to this type of Measure?
§ Mr. Diamond
The Bill is of great interest to the public as a whole.
The main provisions of the Bill appear in Clause 1. All public service pensions 1355 are to be increased in accordance with a percentage scale which rises from 2 per cent. to 16 per cent. depending on when the pension began. Where these pensions have already benefited under previous Pensions (Increase) Acts the percentage is applied to the pension as already increased.
I will give two examples of how this works. Consider a local government officer in the general division who retired in 1960 after a short career of 20 years. He might well have had a pension of £192, increased under the 1962 Act to £200. That is increased under this Bill by a further £16—namely, by 8 per cent.—on the increased pension of £200. Now consider a postman who retired in 1953 after 40 years' service. Supposing that his pension amounted to £190, already increased to £258. Under this Bill he will get a further increase of 16 per cent. on that higher figure, or £41.
§ Mr. Bryant Godman Irvine (Rye)
If the postman had retired in 1950 he would then have a certain percentage increase, up to whatever the date might be. On that he then gets a 16 per cent. increase, from 1957, under this Measure. Does not that mean that the postman who retired in 1950 will not get the same amount of increase as another postman who retired in 1957?
§ Mr. Diamond
No. The answer to the hon. Member's difficulty is that under certain of the previous Bills there was, as it were, a levelling up of pensions as between 1950 and 1957. We therefore, as it were, got everyone on an equal basis in 1957, which means that it is not necessary to go back beyond that date to fulfil the very purpose which the hon. Member wants fulfilling.
The Act of 1962, which provided a maximum increase of 12 per cent., gave, however, an additional flat-rate increase to pensioners over 70. Instead of repeating this provision, we have decided that a higher maximum percentage increase of 16 per cent. is to be preferred, for the problem with which we are dealing in this Bill is the problem of past inflation; and the amount of that depends on the date of retirement rather than on the age of the pensioner. A man of 70 may only have been retired for five years, whereas a pensioner of 60 might well find him- 1356 self faced with the cumulative effect of 15 years' inflation, or even longer.
Since there has been a mistaken report in a leading national newspaper, I want to make it absolutely clear that those over 70 will benefit under the provisions of the Bill in exactly the same way as those under 70. Moreover, the percentage increase will be calculated on the existing pension—including, of course, the 1962 flat-rate increase—so that a further benefit will accrue to the over-seventies; namely, the percentage addition to the flat-rate increase. There is certainly no question at all of their suffering in this Bill because of the special provisions in the last Measure. We are not removing benefits; we are adding a high-percentage increase to an existing flat-rate increase.
Perhaps I might now give some examples of the total effect of the increases under this Bill. I must take them together with increases under earlier Acts and improvements in National Insurance. All these increases, taken together, mean that for most public service pensioners the real value of their total pension income has not merely been retained but increased over the years. The hon. Member for Rye (Mr. Bryant Godman Irvine) referred to a pensioner in 1950. Since December 1950, the cost of living has risen by 75 per cent. By comparison, married civil servants with 40 years' service who retired at that time will now get percentage increases in total pension income as follows—and I remind the House that we are comparing these with an increase in the cost of living of 75 per cent.
The percentage increase for a postman will be 124 per cent.; for a clerical officer, 120 per cent.; for a higher executive officer, 100 per cent. Even for an assistant secretary the increase is one of 67 per cent. If we now take retirements in December 1956, since when the increase in the Retail Price Index has been 28½ per cent., the corresponding figures are: postman—65 per cent.; clerical officer—59 per cent.; higher executive officer—49 per cent.; assistant secretary—40 per cent.
In fact, total pension income has failed to keep pace with the rise in the Retail Price Index only for senior officers—that is, assistant secretaries and upwards— 1357 who retired before 1952, and, to a very limited extent, for some of those in various ranks above the level of clerical officer who have retired since 1960. The situation is substantially the same in all the other public services. I therefore think that we can view the effect of these combined proposals with some measure of satisfaction.
§ Mr. Norman Cole (Bedfordshire, South)
I am sure the right hon. Gentleman would be the first to agree that although this increase of pensions over the years has more than kept pace with the 75 per cent. increase in the cost of living, it is no more than happens to the ordinary worker, whose affluence has increased in that period, and the same should apply to Civil Service pensioners.
§ Mr. Diamond
I am only drawing attention to what I think the House would want to know; that is to say, the extent to which we, as a good employer, think it right to go beyond our legal obligation and to add to the fixed pensions of those who retire after having served with the public service so as to take account of the fall in the value of money. I am not referring to any aspect of the matter other than that at the present time. I thought it right to give the House the full figures, so that everyone could see that, with minor exceptions, referring mainly to those in the higher pension categories, the House is more than carrying out its obligation to see that the purchasing power of pensions has more than kept up with the purchasing power of the £.
§ Dr. Reginald Bennett (Gosport and Fareham)
The Chief Secretary has said that he has kept to the legal obligation to make sure that the purchasing power of the pension keeps pace with the inflationary devaluation of money. This seems clear from what he said, but do we gather from this that he is doing nothing in this Bill to bring up the already inadequate lower levels of earlier years to some comparability with those of later categories?
§ Mr. Diamond
The answer must be the arithmetic of the figures I have already given. If we were concerned only to keep level with the purchasing power of the £ there would be no need to give, for example, the postman—who has suffered a fall in the value of his money 1358 since he started to be a pensioner of 28½ per cent.—an increase of 65 per cent., more than double the fall, or to give to the clerical officer an increase of 59 per cent. There is a substantial margin in those figures which the hon. Gentleman could allocate to a variety of other good reasons which no doubt his Government had in mind and this Government have in mind.
Perhaps, therefore, I could go on to the minor provisions—
§ Mr. Speaker
Order. Perhaps I can help the hon. Member for Glasgow, Provan (Mr. Hugh D. Brown). If he seeks to intervene, it is not enough for him to stand. He must say something which indicates to his right hon. Friend that he wishes to intervene.
§ Mr. Brown
I am grateful to my right hon. Friend. He has given so many figures that it is difficult to follow them all, but in his comparison of the cost of living since 1950 he gave a figure of 124 per cent. for the postman. Does that assume that it was flat rate, but included the National Insurance pension increases as well? If so, does it not make it slightly deceitful to put it forward in that way, as many in 1950 would not be in receipt of the retirement pension?
§ Mr. Diamond
I do not think that it is deceitful in even a minimal sense, because I made it clear in at least two precise phrases that the income we are talking about is total income—pension income from both occupation and National Insurance. As I made clear in my opening remarks, we are dealing with the problem of hardship, not with a legal liability. In considering the extent of hardship, one must have regard to a retired person's total retirement income. I therefore think that it is inevitable that one must take account of the figures I have given to my hon. Friend.
I wish to turn to some of the minor provisions to be found in subsequent Clauses of the Bill.
§ Mr. R. T. Paget (Northampton)
Before my right hon Friend leaves that point, will he say if for Service pensioners the same principle will apply? Will they be given at least the purchasing power at the date of commencement under the Prerogative Instruments?
§ Mr. Diamond
Yes, the answer in principle—I do not go into detail—is that the same considerations, we trust, will have the same effect under the Prerogative Instruments.
Clause 2 refers to the calculation of pensions increases for public servants who have been re-employed after retirement so that they earn further pension for additional service. Under the Pensions (Increase) Acts the percentage increase to be granted always depends on the date on which the pension began. In the case of re-employment, the pension is at present deemed to have begun at the date of final retirement. This has caused anomalies for the additional service has often produced no effective enhancement in pension as compared with what would have accrued to the officer if he had merely remained in retirement. Accordingly, in those cases Clause 2 throws back the date on which the pension is deemed to have begun to the earlier retirement. In this way account is taken both of additional years of service and of increases in the cost of living.
Clause 3 deals with retired public servants who were superannuated under special schemes, such as the Federated Superannauation System for Universities and the Federated Superannuation Scheme for Nurses and Hospital Officers. These schemes are not directly run by the employer, but contributions are paid during service to an insurance company or similar body, which is responsible for paying the superannuation benefit on eventual retirement. Since 1946 benefits corresponding to those in the Pensions Increase Acts have been available to civil servants superannuated under F.S.S.U. No powers have however previously been taken to permit the payments of increases to ex-employees of other public services who have been superannuated under such schemes. We think it right to cover those omitted, especially nurses superannuated under the Federated Superannuation Scheme for Nurses and Hospital Officers.
1360 Clause 4 enables certain overseas pensioners to qualify for pension supplements. It dispenses with a technical restriction relating to the place of payment and also treats employment by local government bodies, or bodies under the auspices of the United Nations, as equivalent to employment by a national Government.
The Bill does not attempt to introduce any wholly new method of dealing with public service pensions because this is not the time to do so. I recognise that the view is widely held that there is need for some change. But what the new system should be can be decided only after a full review and in its proper context. It would be a mistake to introduce piecemeal changes, before the underlying principles had been thrashed out and a long-term policy established. For these reasons the Government do not think that this would be the right time for them to undertake that public service pensions will be automatically reviewed at fixed periods or that they should be automatically adjusted, for example, in accordance with some index.
For the same reasons this is not the time to deal with the problem of parity, especially when it is realised that for most pensioners the Bill, taken in conjunction with this Government's increase in National Insurance and the other measures which have helped them over the years, will ensure that total pension income will more than match the increase in the cost of living since retirement. It is of course true that some of the oldest public service pensioners who are not eligible for the National Insurance retirement pension are not well off, but their problem is a general one which cannot be dealt with within the scope of a public service Pensions (Increase) Bill. Within the sums available for public service pension increases, I think the best possible deployment of the resources has been made to help those most in need.
The cost of the proposals in the Bill is estimated at £19½ million in the first full year, of which about £5 million falls on the local rates and the balance on the Exchequer. In addition, the Exchequer has to bear the cost of the pensions increases given under the Royal Warrant amounting to an additional £5½ million. In round figures, therefore, the total cost to the Exchequer is some £20 million and to the local authorities some £5 million; an overall figure of £25 million. 1361 This contrasts with the figure of about £22 million for the Act of 1962 and represents the most expensive measure of pensions increases for public servants that has ever been recommended to this House.
§ Mr. Eric Lubbock (Orpington)
The right hon. Gentleman mentioned a figure of £25 million. I am looking at the Financial Memorandum where figures are given of £18.2 million plus £5.5 million for the Prerogative Instruments outside the Bill. Adding those two together I get £23.7 million, not £25 million.
§ Mr. Diamond
If the hon. Member looks further, I think he will find £1.4 million which I do not think he has taken into account.
§ Mr. Diamond
In view of their very great incerest, the local authority associations and the Greater London Council have been fully consulted in confidence about the proposals in the Bill. They have raised some points of detail, but are in general agreement with our proposals.
I have attempted to describe, as shortly as is consistent with clarity, the background to this Bill, its main and some of its minor provisions, and its effect on those concerned. I have attempted to show why the Government's proposals are appropriate in present circumstances and fully as generous as our circumstances will permit, for we must hold a reasonable balance between the requirements of our citizens as public service pensioners and the extra demands made on our citizens as taxpayers. It only remains for me to tell the House when the new rates of pension will take effect. We are having our Second Reading only a little over a week after the Bill was published; and the Government, with the co-operation of the House, hope to keep up this brisk pace with a Bill which means so much to so many pensioners, and to secure the Royal Assent before Christmas.
If we succeed in this, pensions will be payable at the increased rate with effect from 1st January, 1966. Many pensions are paid by the Paymaster-General's Office—these include most but not all pensions for Civil Service, those of the National Health Service and teachers' 1362 pensions. These pensions are paid monthly or quarterly in a cycle which extends over the whole period. For these services the Paymaster-General's Office plans to pay the increase on the pensioner's first normal pay date after 10th January, and this payment will include the arrears of increase back to 1st January. There will be a proportion of more difficult cases, mainly of pensions falling to be re-assessed under Clause 2 of the Bill, where final adjustment of the pension to the current rate will take some time. In such cases the Paymaster-General's Office will pay the straightforward percentage increase according to the timetable which I have described, and any necessary further improvement— of course with arrears back to the 1st January—will be paid as soon as possible afterwards.
I shall listen with the greatest cafe to points made in the debate and my hon. and learned Friend the Financial Secretary, if he has the exquisite pleasure of catching your eye, Mr. Speaker, will be eager to reply to them at the end. I have the happiest recollections of the support which the House was good enough to give me when I introduced a similar measure providing for the pensions of Members of Parliament. Although neither I nor my hon. and learned Friend would claim that we have never been associated with a Measure which had a small element of controversiality in it, I hope, nevertheless, that this Bill will be regarded as the kind of Bill which at the end of the day the House will feel ready to speed on its way.
§ 4.29 p.m.
§ Mr. Peter Walker (Worcester)
I wonder if I may be permitted to express at the beginning of my speech a particular regret at the absence from this year's debate of two very distinguished Members of the House who took part in previous public service pension debates. I refer, first, to the late noble Lord the former right hon. Member for South Shields, who took a very active part in past debates upon this subject and who was always listened to in the House for his very fine and great human qualities. I think that the whole House will miss his contribution to this House.
I refer, secondly, if I may be permitted to say so, Mr. Speaker, to the absence of 1363 yourself from this debate, for I do not think that anybody played a greater part in these debates over the years than yourself. I should think it is probably true to say that of the many people who took great pleasure in your becoming Mr. Speaker those connected with the public service pensioners were probably amongst those who had the greatest joy.
We welcome the Bill. It will bring some relief to the anxiety which has been expressed in recent months by public service pensioners, many of whom have naturally been alarmed at the effect upon their pensions of the rise in the cost of living which has taken place during the last 12 months. [HON. MEMBERS: "And before that."] And before, but never at such a pace as has taken place during the last 12 months. The rate has again been the rate of the 1945–51 Government, and naturally there has been considerable concern.
I was interested in the manner in which the Chief Secretary to the Treasury defended the Bill as not being a Bill bringing in any basic reform on the question of public service pensions because of the inquiry which was being conducted by his right hon. Friend the Chancellor of the Duchy of Lancaster. I think that this will disappoint many public service pensioners, because many of us will remember the vigorous speeches of the right hon. Member for Sowerby (Mr. Houghton) on this subject in past debates. It was made very clear in the debates upon the 1962 Act that the Labour Party was ready with many reforms in mind, poised ready to put them into action. If it had been stated at the General Election that a year after a Labour Government came to power they would introduce a public service pensions Bill without any major reform being brought about in it in the general structure of public service pensions, this would have been greeted with some surprise. Yet this is what has happened. One remembers those phrases of the right hon. Member for Sowerby, when he said that he hoped that this would be the last of such public service pension Bills. This Bill is very much a replica—
§ Mr. Diamond
I am sorry to interrupt the hon. Gentleman, but he has referred to the speech made by my right hon. 1364 Friend the Member for Sowerby (Mr. Houghton), who may feel a little reticent at the moment sitting on the Front Bench. Will the hon. Gentleman go on to read towards the end of the speech which my right hon. Friend made on the very occasion he is referring to? The hon. Gentleman will find that my right hon. Friend said in the most explicit terms—I am not quoting the exact words —" But, Mr. Speaker, I am sure that there will be another such Bill". He was right.
§ Mr. Walker
Yes, the right hon. Gentleman did say that, but from all that had gone before one concluded that the Bill which would come in next would be a Bill containing proposals for the reform of the structure of public service pensions. The only other explanation I can think of is that the right hon. Gentleman had no confidence that a Labour Government would be returned. The fact is that no reform appears in this Bill.
Therefore, I should like to make it clear from the commencement of my speech that we on this side of the House regret this and we undertake that, as soon as we obtain power again, we will introduce a number of basic reforms as regards public service pensions. I want to outline those, because they are matters which we naturally regret are not contained in this Bill.
First, we would ensure that pensions increases apply to people at the age of 55 and not as at present, at the age of 60. There are many members of the Armed Forces, the police and the fire service who have to retire in their forties and fifties. These people obtain no benefit from public service pension increases until they reach the age of 60. We consider this to be wrong, particularly as some of those retiring in their early fifties find it very difficult to obtain remunerative employment in those later years. We therefore undertake to ensure that those pensioners will enjoy the increase provided by Bills such as this at the age of 55, instead of at the age of 60.
Secondly, we will bring all pension rates up to the level of those who retired in 1956. Whereas all those pensioners who have retired since 1956 have enjoyed increases under the various Pension (Increase) Bills which have enabled the 1365 purchasing power of their pensions to be maintained, for those who retired prior to 1956 the purchasing power of some of their pensions is in some cases considerably less as a result of the inflation in the years in between. I recognise that certain pensioners are already doing better than are the pensioners who retired in 1956, as a result of the increases which have been given in past Bills. Where they are obtaining better pensions, obviously those will remain; but for those obtaining lower pensions than those who retired in 1956 we undertake to ensure that all pensioners will at least be at that level.
Thirdly, we would introduce the appropriate legislation to ensure that public service pensions were reviewed at regular intervals, and we envisage certainly a maximum of three years between such reviews.
I recognise that there are certain arguments for and against this proposal. I also recognise that when this was last discussed it was a proposal to which we, then the Government, stated some of the objections. However, in the general examination which has taken place within our party and within the policy committees on this subject we have now come to the conclusion that the weight of advantages are in having a regular review and thus avoiding the sort of clamour and pressure that have to be created, somewhat to the embarrassment of many public service pensioners, to ensure that a suitable Bill is introduced.
§ Mr. Lubbock
Does the hon. Gentleman recall that on the occasion of the last Pensions (Increase) Bill this suggestion was made by my noble Friend, Lord Wade, and then rejected by the Conservative Front Bench?
§ Mr. Walker
If the hon. Member for Orpington (Mr. Lubbock) had been listening, he would have heard me state quite clearly that during the debate on that Bill that was the case. I hope that if the hon. Member for Orpington makes suitably attractive proposals himself, as I am sure he will do, he, too, will find a place in the House of Lords in the future and obtain the rewards of that House.
§ Mr. Lubbock
I am grateful to the hon. Gentleman for giving way again. 1366 He just neglected, I am sure out of inadvertence, to give the credit to my noble Friend, Lord Wade.
§ Mr. Walker
This is a suggestion which has been made on all sides of the House at various times. Whilst I can understand in the present political climate the necessity for the Liberal Party to claim anything they had said in the past, it should be appreciated that this subject is one on which views have been genuinely expressed on all sides of the House.
These three reforms—first, bringing down the age to 55 for those who benefit by these Bills; secondly, putting all people at least upon the basis of those retiring in 1956; and, thirdly, ensuring that a regular review is made of public service pensions—will, I believe, in total make a considerable contribution to improving the general structure of the public service pension position. I turn to the detail of the Bill.
§ Mr. Diamond
I have carefully followed everything the hon. Gentleman has said. He has described three major reforms which he proposes. Would he be good enough to tell the House now —I am sure he has gone into this most carefully—what the cost of those reforms would be? When he replies, would he fit his reply into the context of the remarks of his right hon. Friend who made a speech at Glasgow, I think it was, about the Conservative Party's attitude to taxation?
§ Mr. Walker
To go into the Conservative Party's attitude on taxation would obviously be too wide a subject for this debate, as the Chief Secretary well knows. If the Government would like to give time for a debate on the whole question of levels of taxation—
§ Mr. Walker
The cost of these proposals would naturally vary with the position obtaining at the time when they were promulgated. There are many things which have been done by the Government which I would certainly consider to be of less importance than the basic reforms we suggest here. I believe that the cost of these reforms should be given a priority. I am sure 1367 that the Financial Secretary will comment upon the cost of these reforms in his reply, and we shall be only too pleased to hear what the cost is.
§ Mr. Diamond
But the hon. Gentleman said that these proposals had been most carefully considered in various committees before being put forward as Conservative official policy. Is he now saying that these committees decided to put forward these proposals without the foggiest idea of what the cost would be?
§ Mr. Walker
The hon. Gentleman is asking for the detailed costs of these proposals. When these costs were looked into we had only the statistics which were available from the past. We did not have those that were available at present, nor did we have the result of this Bill in mind. I therefore did not come here prepared with the detailed costs of the proposals. I only ask the Financial Secretary in his winding up speech to give his estimate of the cost and to say categorically that the Government do not think it worth while to undertake this expenditure. We do. We have some conception of the cost and we think it worth while to give this priority.
§ The Chancellor of the Exchequer (Mr. James Callaghan)
The hon. Gentleman does not know the cost. I see his difficulty about that, but if it is shown that it involves higher taxation, is the hon. Gentleman willing to vote for higher taxation and defend it in the country, or will the party opposite do what they did with the old age pensions—vote for an increase and then vote against higher taxation?
§ Mr. Walker
If under the right hon. Gentleman's Chancellorship this year production had gone up instead of going down, perhaps there would have been more revenue available to him than there is. I am certain that the taxation which would have been obtained if production had not dropped would have more than met the cost of these proposals.
§ Mr. Walker
It may not be an answer which the Chancellor likes. He is doubtless ashamed of the drop in production that has taken place.
1368 The Bill endeavours to meet the rise in the cost of living since the last Pensions (Increase) Act, although it might be still true to say, for example, that those pensioners who retired more recently—in 1963 and 1964—will not be obtaining an increase in their pensions which meets the rise that has taken place in the cost of living during the past year. One of the factors which must bear heavily on the minds of public service pensioners at the moment is the rise in the cost of living which is likely to take place in the months after this Bill comes into operation.
Here there is cause for disquiet. The Chief Secretary suggested that there were two matters which should bring comfort to the pensioner. One was the attempt by the Government to bring in a prices and incomes policy. The other was the review which is being made by his right hon. Friend the Chancellor of the Duchy of Lancaster. I do not think that the prices and incomes policy will be very much comfort to public service pensioners if it is such a success in the future as it has been in the past. During the past year when there has been all the publicity about this policy the effect has been that the gap between production and rising incomes is greater than it has been for a decade. Therefore, if this "success" continues it will be an alarming situation for public service pensioners.
There are other actions by the Government which must cause particular concern. I refer to the manner in which at the moment they have stopped certain rises in the cost of living by means of subsidy. For example, when London bus fares were going up they decided to provide a £5 million subsidy to prevent their being increased this year. That subsidy happens to end on the same day as it is intended to bring in the pension increases. Is the subsidy to be continued or are the public service pensioners in the Greater London area going to discover on the day they get their increase in pensions a very substantial increase taking place in London bus and train fares?
One of the difficulties of this type of subsidy is the way in which it discriminates between public service pensioners in one area and another. For example, public service pensioners in my constituency and in that of the Chief 1369 Secretary have had substantial increases in their bus fares this year which did not receive a subsidy from the Treasury. Does it mean therefore that public service pensioners there deserve a greater increase than those in the Greater London area?
Likewise, a similar argument could be applied to coal. The Government subsidised coal with £15 million to the coal industry. That subsidy ends in April. Does that mean that within a few months of these pensions coming into operation all the coal prices for the pensioners will be increased? There must be some feeling among pensioners that the increased gap between production and incomes and the ending of temporary subsidies given to certain basic commodities will combine to ensure that in 1966 there will be a considerable rise in the cost of living and that this will somewhat erode the effects of this Measure.
I should like to ask the Financial Secretary what is the Government's current thinking upon some of the proposals that they made when this type of Measure was last debated in 1962. It is true to say that: four proposals came out of the speeches of Front Bench Opposition spokesmen at that time. The first was that there should be a major inquiry into the whole problem of public service pensions. Presumably this is forming part of the greater inquiry now being conducted by the right hon. Gentleman the Chancellor of the Duchy of Lancaster, though I should have thought that this was a matter where, if an inquiry was needed to formulate the Government's view, it would have been better done as specifically an inquiry into this problem so that speedy decisions could be made. I say this because we have no conception when the general inquiry will come to a conclusion. Perhaps the Financial Secretary can give us a date when a report of that inquiry will be made.
Secondly, in that debate there was a proposal that there should be a bi-annual review of public service pensions. Why have the Government not decided to do this? The excuse that there is a general inquiry going on would not stop this provision coming into operation, because if the general inquiry is finished before the two years have expired the House will accept whatever new suggestion is 1370 made, but if the inquiry was not completed this provision would ensure that these pensions would be reviewed. Why has this proposal been dropped?
Thirdly, great play was made in that debate of the position of civil servants who had unestablished service and that the whole basis of calculating their pensions was unfair. Have the Government now come to the conclusion, on looking at this matter in greater detail, that this is a problem which they are unable to tackle?
Fourthly, there was the question of the re-employed pensioner. I believe that Clause 2 of the Bill—which is rather Complicated and I therefore may be wrong—still does not deal with the point that this is affected by Section 20 of the Superannuation Act, 1834 where pay and pension together cannot exceed a person's previous pay before he ceased employment. It was pointed out then that certain people during a period of time can neither obtain a pay increase nor a pension increase. This does not appear to have been tackled in this Bill.
As for the date of bringing in the increased pension, I would remind the House that the last time when this was debated the then Opposition introduced an Amendment with the ingenious idea that the pension should be backdated to the time when it was originally announced. It would be interesting to know why the party opposite find that less attractive in Government than it was when they were in Opposition.
There were also general pledges on the question of parity of pensions. We need a clearer statement from the Financial Secretary on where the Labour Party and the Government stand on this issue. There are many quotations to be found on this subject. The one which probably had a great deal of effect came from the then chairman of the National Executive of the Labour Party, the present Colonial Secretary. In his capacity as chairman, the right hon. Gentleman said, in a letter of reply to the chairman of the Officers' Pension Society:As to your further point, you will know that we are favourably disposed towards the principle of parity, and that we would open negotiations with interested bodies to see how reforms along these lines can be introduced.1371 Have these negotiations taken place? Do the Government consider that the proposals in this Bill are all that is required to go towards the principle of parity, or do they now reject the principle of parity and intend not to go towards it in the future?
Public service pensioners believed that the return of a Labour Government would bring about some of the reforms I have mentioned. Now, a year after their arrival in office, they introduce a Pensions (Increase) Bill providing for none of the suggested reforms. An explanation is called for. It is not sufficient to say, that they are holding a general inquiry. There was a natural understanding that, after 13 years in opposition, right hon. and hon. Members opposite had some conception of what their policy would be and would be ready to put it into operation.
I come now to some of the details of the provisions. The Chief Secretary seemed a little confused about whether he was treating this exercise as one of tackling hardship or seeing, as a good employer, that the pensions were maintained. This was certainly so in his reply to the intervention by his hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown), who pointed out that the manner in which the right hon. Gentleman grouped both the National Insurance pension and the public service pension gave an unfair illustration in many cases. The Chief Secretary nods his head. Will he deny that there are some public service pensioners who do not receive the National Insurance pension?
Mr. H. Hind (Accrington)
§ Mr. Walker
I take it, therefore, that the Chief Secretary agrees that there- are some public service pensioners who do not receive a National Insurance pension. His hon. Friend was quite right in making the point that some of these people will not benefit from the aggregate advantage which the right hon. Gentleman set out in his speech. Therefore, there will be some pensioners, particularly those in the category referred to, those without National Insurance pensions and some 1372 who have retired for a longer period of time, who will still consider that they are suffering hardship. This is why we make our proposal that all these public service pensions should be brought up to the 1956 levels.
Apparently, the Chief Secretary rejects the idea that there is a general case for a larger pension at the age of 70 than at 65. I recognise that, in the context of public service pensions, the length of service is a crucial factor, but I hope that the Government will not reject the general premise that people at the greater ages have greater needs than those who are somewhat younger.
§ Mr. Lubbock
The hon. Gentleman urges his proposal that all pensions awarded previously should be brought up to the 1956 level. When did his party first put this proposal forward?
§ Mr. Walker
We put it forward in our recent statement of policy. I do not deny that. During our 12 months in Opposition, we have used the time far more sensibly than right hon. and hon. Members opposite did in their 13 years and we have come forward with many more sensible and important proposals.
On the general proposition that older people should have a larger pension, I remind the Chief Secretary that people of 70 have greater physical difficulties, they find the renewal of furniture, clothing and so forth an increasing problem as age increases, and they experience other difficulties such as the lack of savings spent in the interim years, and so on.
In my view, we were quite right in the 1962 Bill to provide for an extra flat rate increase for people over 70. I think that, to some extent, the Government concede this; they are retaining it and increasing it by a percentage. But I hope that, in considering the position of pensions generally, both public service and National Insurance, they will not forget that there are particular problems experienced by the more aged people in our society.
We shall support the Bill. We shall do all we can to speed it on its way through Committee and its final stages. We want to see the benefits of the Bill coming in at the earliest possible time. We shall endeavour in Committee to introduce constructive suggestions, and 1373 we hope that, as in the past on matters such as this, in which we all share a similar objective, the whole subject will be debated in a constructive way.
§ 4.56 p.m.
§ Mr. H. Hynd (Accrington)
Other hon. Members apart from myself must have listened with a certain amount of cynical amusement to the speech of the hon. Member for Worcester (Mr. Peter Walker). I seem to remember that many of the arguments which he used were put by this party and knocked down by the then Government during the long barren years of Tory Administration. Listening to the hon. Gentleman, one might have thought that public servants would have had all these things added unto them during those 13 years, but now, it seems, since they went out of office, the Tories have changed their minds and are coming forward with new proposals. It is good that they do. There is more rejoicing in the House when one Tory comes to the penitents' seat than over the ninety-and-nine who have not yet done so.
My right hon. Friend the Chief Secretary eloquently described the cause of the problem which is dealt with in the Bill. I shall not weary the House by repeating what he said about the rises in the cost of living or the way that pensioners who paid on an actuarial basis over many years of public service now see their pensions diminishing in purchasing power. I welcome the Bill, and I congratulate the Government particularly on the way they have, on this occasion, actually increased its scope.
I take Schedule 1 as an example. It covers civil servants and local government employees, even civil servants who served in India, Pakistan, Burma, the Sudan and Egypt. That is a pretty wide scope, but it applies also to judges, postmen, police, teachers, nurses, employees of the National Health Service and, what is more, the staff of the Cotton Commission, of the Trustee Savings Banks and— I am very interested in this one—of the College of Domestic Arts of South Wales and Monmouthshire.
That is a very wide and generous interpretation of public service, and the Bill is intended to deal with them all. I say, "Good luck to them, including the staff of the College of Domestic Arts of South 1374 Wales and Monmouthshire". I hope that they all enjoy their pensions. But, as this is a Second Reading debate, I assume that it would be in order to suggest a slight extension of the list in Schedule 1. I am sure that my right hon. Friend will know what I have in mind.
In his speech, my right hon. Friend said that the nationalised industries had not yet been dealt with by these Pensions (Increase) Measures. He will know that, although they have not been brought within the scope of the Acts, ex-employees of the gas and electricity undertakings have had equivalent increases given to them by their former employers. But this has not been extended to ex-employees of the railways, and many of them, by the way, are among the people referred to who do not draw a National Insurance pension in addition to other pensions because they were exempted at the time of the original National Insurance Act.
Like other public servants who are not yet included, these people are, naturally, asking why. On 25th March, my hon. Friend the Parliamentary Secretary to the Ministry of Transport, whom I am glad to see in his place, put it this way:The distinction is the distinction between those who are in any way Government servants and those who may be public servants of some other kind, which railway men certainly have been and are, though they are not Government employees. The Pensions (Increase) Acts apply to the employees of central and local government, but not beyond that…"—[OFFICIAL REPORT, 25th March, 1965; Vol 709, c. 1073.]Do they not? Where does the College of Domestic Arts of South Wales and Monmouthshire come in? Surely railways officials are just as much public servants as are the staff of that estimable college?
This principle has been admitted by the Minister. He is very sympathetic. It has been admitted by the British Railways Board. More than 100 hon. Members of all parties signed a Motion to this effect in the last Session and they felt so strongly about it that this Motion is Motion No. 1 on the Order Paper today. If "sympathetic and urgent consideration" has been offered by the Ministry, as we were told on 25th March, then I am very disappointed that when we are including the staffs of the Trustee: Savings Banks, the Cotton Commission and the College of 1375 Domestic Arts pf South Wales and Monmouthshire, it has not been seen fit to include railway superannuitants in the Bill.
§ Mr. Deputy Speaker (Sir Samuel Storey)
Order. I have allowed the hon. Member to refer to railway super-annuitants, but it is strictly outside the scope of the Bill, and I hope that he will not pursue it. May I remind him that three years ago the right hon. Member for Southampton, Itchen (Dr. Horace King) was called to order on this very subject. Now that the then poacher has turned gamekeeper, I do not think that we can pursue the subject further.
§ Mr. Hynd
Naturally I bow to your Ruling, Mr. Deputy Speaker, and I certainly do not wish to mention super-annuitants again. But let us look at the list and see whether hon. Members who have perhaps a little more imagination than I have can think of some other sections which would be equally applicable to this long list in Schedule 1. There is a list of 31 different classes of people, quite apart from the reference in Clause 3 to the College of Domestic Art of South Wales and Monmouthshire. It may well be that there are some classes of people who consider themselves to be public servants but who are not included in the Bill.
Is it to be impossible in Committee to suggest an Amendment which would bring some of those people within the scope of the Bill? If there are 31 classes of people in Schedule 1, is it impossible under the rules of the House to make it 32 or 33 classes? With great respect, it is the first time I have been told that we are not permitted to suggest an Amendment of that kind.
Of course, I may be told that any class which I suggest in my Amendment is not a class of public servants. The whole argument then revolves around what is a public servant. I am trying to think of borderline cases. Let us say that the staff of the Accrington Citizens Advice Bureau or some such office as that are involved. Are they public servants? Would it be in order in Committee for me to table an Amendment to add to Schedule 1 a 32nd class to include the staff of the Accrington Citizens Advice Bureau, who might consider themselves 1376 to be public servants? This is the kind of difficulty which we face.
§ Mr. Lubbock
If the hon. Member looks at the Money Resolution he will find that the Bill authorisespayment out of moneys provided by Parliamentof increases of pensions to which Section 1 of the Pensions (Increase) Act, 1962, applies. If they are not mentioned in that Act, they cannot be included by the hon. Member in his Amendment.
§ Mr. Hynd
With great respect, there are one or two additional classes in this Bill which were not in the 1962 Act. I suggest that the hon. Member's argument would not hold water.
In any case, surely it is a question whether a person is a public servant or not. How far can we go? We might have a class of public servants who were not included in the Bill because the undertaking in which they were engaged was not making a profit, If that argument is to be advanced, we must look at the classes in Schedule 1, and see whether in every case they are employees of an undertaking making a profit. How are we to decide which set of public servants or quasi-public servants are to be included? This is a difficulty.
As the Government themselves have been so generous in extending the list to cover such people as the staff of the College of Domestic Art of South Wales and Monmouthshire, I feel that they might well have gone a little further. It may well be that some class of public servant which I have indicated has been paying for years into a superannuation fund which has then been invested in the undertaking in which these people work, perhaps at 4 per cent., much below the market rate. If this is so, then this undertaking has been making a profit out of these people. That is another reason why the Government should have been a little more generous in considering what should be done about improving pensions. All the arguments adduced by the Chief Secretary about the need to increase the incomes of pensioners to meet the rise in the cost of living applies not only to the 31 classes in Schedule 1 but to other pensioners. I hope that the Government will pursue this matter and see whether anything can be done about it.
1377 Other employers have tried to follow the Pensions (Increase) Acts to some extent. For example, I am told that the Chairman of the British Railways Board is meeting the general secretary of the Transport Salaried Staffs Association tomorrow morning to discuss the possible implications for a certain class of person whom I am not allowed to mention in the debate. I hope that this time action will be taken which is an improvement on what has been done before.
As one of my colleagues once said, Mr. Deputy Speaker, you have punctured my peroration and ruined my speech by your Ruling, but I must bow to your Ruling, and I will not mention railway superannuitants again unless the Government provoke me.
§ 5.8 p.m.
§ Captain Walter Elliot (Carshalton)
I am very grateful that I have caught your eye, Mr. Deputy Speaker, and I apologise to the House for the fact that I cannot stay here until the end of the debate. Unfortunately, as a back bench Member we do not get the programme of business as early as we should like, and I have an engagement from which I am afraid I cannot escape. I am delighted to follow in the debate the hon. Member for Accrington (Mr. H. Hynd), whose speeches I always enjoy almost as much as his company, but I hope that he will not feel that I am discourteous if I do not follow his argument. The Chief Secretary said that he would listen carefully to any suggestions for a new system of public service pensions and I hope that I shall make some contribution in that sense and that he will consider what I have to say. The hon. Member for Accrington has certainly given the Government something to think about.
Naturally I welcome the Bill, but I am afraid that it appears to me the last nail in the coffin by the Government in respect of the principle of parity of pensions. Whatever they say and however they play about with language, this is a gross betrayal of their election promises. I must confess that I was very interested to hear the Chief Secretary's remarks about the percentage increases not being unfair to the older pensioners. Some of my figures do not seem to bear 1378 that out, but I will re-examine them and see what has gone wrong. I was also interested to hear that this applies to the effect of inflation on public service pensions. The Chief Secretary said that these pensions had kept ahead of inflation. I have some figures on that, too, which do not seem to bear his views out, but, again, I will examine them to see where they have gone wrong.
I agree with my hon. Friend the Member for Worcester (Mr. Peter Walker) that it is a great pity that the imaginative principle, which was introduced by the last Conservative Government, of a flat-rate increase for pensioners over 70 has not been retained.
§ Mr. Diamond
As the hon. and gallant Member is in good company in his misunderstanding, I am sure that he will forgive me for intervening to point out that it has been retained. It is not being repeated but it is being retained, and the percentage to which I have referred will apply to it. But surely the whole purpose of a flat-rate increase is that it is given to fill a certain difference. Once it has been given, the purpose of levelling up has been achieved. Having given it once and having reached the necessary level, that is sufficient. It is not implied in the Conservative philosophy of giving that one particular flat-rate increase that it should be given every time.
§ Captain Elliot
I do not want to dwell at length on this subject but there is a distinction. I understand that the 16 per cent. increase also applies to that £20, but the principle has been absorbed into the general system of awarding pensions increases, and I think that it ought to have been retained in such a way as to cater for the special needs of those over 70.
I am also sorry to hear that the age limit for the receipt of the increases has not been brought down to 55. Many people come out of the Services these days and do other jobs, and the importance of a pension to the public service man is sometimes underestimated. If he can do his work in the public service, in whatever field, without having to worry about his pension when he retires, then he can give his full time to the job in hand. If, on the other hand, during the course of his service he has to worry about the adequancy of his pension—I did this 1379 myself—he spends a lot of time preparing himself for another job. To a certain extent, I submit, that affects his efficiency in his service. In view of the increased number of people who work after retirement, the importance of this should not be underestimated. If the age for the increase were brought down to 55, it would help the efficiency of these public servants.
I criticise the Government for what I consider a cynical repudiation of their election pledge of parity of pensions. In fact, I believe that there are compelling arguments against it, and I am glad that in the past, as now, we on these benches have had the political courage to say so. It is very expensive, in the first place, but there are other arguments against it too. The nature of the job changes, there are recruiting problems which have to be considered and the terms of the pensions offered play their part in solving these problems. But certainly we should work towards lessening the differences in pension between those retiring today and those who retired in earlier years.
Welcome though the Bill is, as earlier Measures were welcome, it is not the way to go about the job. I have said this before and I say it again because the right hon. Gentleman said that he will listen carefully to any suggestion. If pensioners have suffered erosion of their pensions or have fallen behind, in the first place we have to attach the blame for this where it belongs. It is not only on the Government, either the present Government or the last Government. In the first place, it is largely the fault of those who negotiate the salaries on behalf of the staff side of the various categories of public servants.
The men and women in the public service who are working today owe much to successive Conservative Governments —the acceptance of the principle of comparability of the Civil Service to outside industry and, for the Fighting Services, the acceptance of the Grigg Report's recommendation for a biennial review of Service pay and pensions. These have brought great financial benefits to all the people in those professions. Today, they are well paid and look forward to good pensions, but time and again they scrape the bottom of the Treasury barrel with their demands without a thought 1380 for the older retired people of their professions.
Is it asking too much to suggest that the negotiators should have the unselfishness to forgo a small fraction of the extra money made available to them to meet their claims in order that a comparable percentage increase can be paid to their retired former colleagues? It would not be much. The number of retired people in any given profession compared with the number of serving members is quite small. In addition, the average pension is perhaps half the average salary level. It would not, therefore, be much of a sacrifice to ask.
It has been argued that those currently earning have a right to be better off in real terms as they are at any given moment producing the wealth of the country. I reject that argument. The average pensioner lives to enjoy his pension for perhaps up to 20 years after retirement. What happens to the nation in that period will have been decided, for better or worse, quite as much by what was done before his retirement as after.
Again it will be argued that the negotiators will pitch their claims higher in order to get what they regard as the right amount for active members. But that is what they do now. The demands always are too high. But no doubt an offer would be accepted and the association or union concerned would then be told that, if its members wished their retired former colleagues to share in the settlement, the accepted sum would have a small amount subtracted. This would be said and done publicly and if the representatives of the working members insisted on grabbing the lot it would be an excellent thing to focus the attention of the nation on them.
The case of the Fighting Services is different. They have no unions to put their case. On the other hand, senior active officers have great influence in these matters. In the first place, the biennial review of Service pay was introduced to get over recruiting problems, but I do not think that this is a serious point today. Service pay and pensions are well above what is necessary to recruit, in my view. In the case of the Services, of course, the Government could direct that the principle I advocate would in future be applied when Service pay 1381 adjustments were made—that a small percentage would be deducted to raise the pensions of retired former service people.
But I do not want the Government necessarily to take the initiative. I want it to come from the Services themselves, to see it being done at the request of the professional members of the governing boards of the Services. If properly explained, I am sure that it would be accepted by all officers and men serving and I believe that, instead of affecting recruiting, it might indeed improve it.
§ Captain Elliot
I am grateful to the hon. and learned Gentleman for that point, which adds great weight to what I have said. But I believe the Service chiefs should give the moral leadership and show some charity and unselfishness in this matter. The opportunity will arise early next year when, I understand, Service pay and pensions will be reviewed. If the review follows precedent it will award substantial increases. If the Services do what I suggest, I believe it would be reasonable to expect the civil servants and other unions and associations to follow suit. If they do not do so, the nation could discount their crocodile tears which are often shed over pensioners.
I hope that the Government will take action to bring this to the notice of those concerned. It is wrong that every two or three years, as a result of sustained agitation, the Government have to produce £20 million to £30 million to settle the matter. If the Government will do what I suggest I will support them in this, and if their approach is rejected I, and, I hope, all of us, will focus our criticism on those responsible for the rejection. But if those concerned accepted it I believe we should finish with this problem for good and all.
§ 5.24 p.m.
§ Mr. Harry Randall (Gateshead, West)
Hon. Members opposite who have spoken in this debate have taken the opportunity to display the "new look" of the Conservative Party.
§ Mr. Randall
There is no need for me to be careful. It has been demonstrated here this afternoon. What is equally true, of course, is that, despite the dispute across the Floor about the cost of the proposals which the Conservative Party has in mind, we did not get any answer. I appreciate the difficulty of providing it immediately, but the House is entitled to recall that there were Pensions (Increase) Acts in 1956, 1959 and 1962, and that on no occasion during the debates on those Measures did we hear from the then Government about such a change in the superstructure of pensions nor anything about a regular review. There were requests from both Liberal and Labour hon. Members asking for a regular review but we were never able to get it.
§ Mr. Jennings
Would not the hon. Gentleman agree that there was a radical change in the structure of this type of pension when the Tory Government moved over from a flat-rate percentage increase to the escalator system?
§ Mr. Randall
Yes, but today, if the Opposition are arguing that percentages are something basic and are to set aside the question of parity, I should be surprised.
§ Mr. Lubbock
I remind the hon. Gentleman of what was said by the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), as Chief Secretary to the Treasury. When the proposal for a biennial review was made by Lord Wade, the right hon. Gentleman replied:I do not find this proposal at all attractive."—[OFFICIAL REPORT, 20th November, 1962; Vol. 667, c. 1159.]Now the same proposal is being put forward from the Tory benches.
§ Mr. Randall
That is the point. There should be an explanation from the Opposition. It is not good enough to put up these proposals after the years in which they had the opportunity to put them into operation. The hon. Member for Worcester (Mr. Peter Walker) says the Opposition have had time to be much more sensible. I hoped throughout their 13 years of office that they would have time to be sensible and introduce some of the things they now advocate.
§ Mr. W. H. Loveys (Chichester)
Does the hon. Gentleman feel inclined towards the idea of a regular review?
§ Mr. Randall
I am coming to that. If the hon. Gentleman had listened to my right hon. Friend the Chief Secretary he would have known that this is only an interim Measure. It is all very well for the right hon. Member for Wolverhampton, South-West (Mr. Powell) to have a chuckle about it, but it has been said and I am delighted that there is to be this review and that not only the question of the biennial review will be concluded but other aspects of public service pensions so that we can avoid what we have had in the past—the lobbying and pressure that goes on from outside.
I am at one with many hon. Members in this respect. I want to see this matter removed from the arena. This is a distasteful business and I do not like it. I assure the House that the pensioners do not like it. I understand that not only my right hon. Friend the Chancellor of the Exchequer but my right hon. Friends the Chancellor of the Duchy of Lancaster and the Minister of Pensions and National Insurance are involved in the inquiry.
§ Sir Lionel Heald (Chertsey)
Does the hon. Gentleman really mean that it was only Liberal and Labour Members who raised the question of a review? The words he has used were identical to words I used during a previous debate.
§ Mr. Randall
I beg the right hon. and learned Gentleman's pardon. I should have recalled his activities over a number of years in his commendable efforts on behalf of civil servants. I apologise to him.
There is no doubt that among public service and Armed Forces pensioners there will be general agreement with and appreciation of the Government's action in proposing increases in these pensions at a time when the Government are being heavily pressed over a wide range of Government expenditure. That should be kept well in mind. When financial circumstances are easier, we ought to have some of the things which I want in a Pensions (Increase) Bill, but they are difficult at the moment and I am sure that both the public services and the Armed Forces will appreciate the Bill, even though it is an interim Measure while the 1384 general review is being undertaken. For me it demonstrates that the Government are genuinely concerned for those who have served the State and it carries out the undertaking to public servants that early attention would be given to this matter.
However, the Bill ought not to be regarded as the last word. I prefer to regard it as a patching-up operation. With all the other social legislation under review by the three Ministers whom I have mentioned, no one can reasonably expect a complete answer to the requests which public servants and others are putting to us. However, I am sure that the House would rather that we dealt with this matter away from lobbying and the pressures which we have had before and removed from the political arena.
It is generally accepted today that there will be an incomes policy which will have a consequential effect on increases in wages and salaries. We must similarly face the problem of regularly adjusting the pensions of public servants. When the Government give this matter more detailed consideration, as I am sure they will, I hope that they will not regard it on the basis of cushioning the pensioner against the rising cost of living. They should move towards public service pensioners enjoying a share of the rising standard of living of the community as a whole, rising standards made possible through increases in purchasing power. Pensioners are entitled to no less than that. However, having said that and while strongly urging the Government to continue to seek an answer, I very much welcome the Bill.
I want to deal with the proposed scale of increases while broadly follows the pattern of the 1962 Act, and I have two comments to make. First, like other hon. Members, I welcome the extension of the further two years which has provided an escalator of 2 to 16 per cent. against the 2 to 12 per cent. of the 1962 Act. This extension will provide 16 per cent. increases for all who retired before April, 1957. However, the period round about 1957 is very significant and it is most relevant when adjusting the pensions of civil servants.
There is little doubt that the salaries of civil servants were depressed before the settlement of 1956 which followed the Priestley Commission of 1953–55. Prior 1385 to that, we had the Tomlin formula as the yardstick for measuring wages and salaries in the Civil Service. The Tomlin formula dealt only with long-term trends and during those years Civil Service pay fell far behind.
The scales which were ultimately recommended by the Priestley Commission were, in the words of paragraph 346 of the Commission's Report.the best attempt that we have been able to make".In paragraph 323 the Commission said:…we have not been able to apply either the principle of fair comparison or the methods we recommend to the extent we should wish to see them applied in the future.If that means anything, it emphasises the extent of the depression of Civil Service wages and salaries prior to the setting up of the Priestley Commission.
That is why 1957 is extremely important. If wages and salaries around that period were depressed, there was a consequential effect on pensions for those who retired before the implementing of the Priestley recommendations. Nevertheless, the Priestley proposals and the central pay increases made an important step forward. But that change in salary had a significant effect on pre-Priestley pensions. This is the burden of the grievance and complaint of that section of pensioners. They feel a sense of injustice and grievance, because depressed salaries at that time resulted in pensions which were equally depressed and which could not be put right as a result of the later Priestley recommendations.
For example, to take a middle grade; the salary of a principal in 1956 was £1,670 and in 1959 it was £2,375. A principal who went on pension in March, 1956, today receives a pension of £949, but the 1959 pension is £1,103. There is a difference for the same grade of £154 per annum. With postmen, the difference is £40; with clerical officers it is £35 and with higher executive officers it is £69. This is why there is a sense of grievance and injustice among that section of pensioners.
I hope that my right hon. Friend will consider whether he can agree that pensions paid to pre-April, 1957, pensioners, pre-Priestley, can be brought up at least to the level of April, 1957 pensions. That would be warmly welcomed and would 1386 make the significant contribution to easing the controversy about this matter. I do not know what the cost of such a concession would be, but I should like my right hon. Friend to consider it.
The second point which I wish to bring to the attention of the House concerns the cut-off date of 1st April, 1964. Anybody who has retired since then will receive no increase, but in the period 1st April, 1964, to 1st April, 1965, the cost of living rose by 5 per cent. and the wages index probably by about 6 per cent. It is certain that even before the Bill reaches the Statute Book there will be a pressure group of people who have not been included. I should like my right hon. Friend to consider the possibility of making the cut-off date 1st April, 1965.
There has already been some discussion in connection with those over 70 years of age. As I understand the position those who were entitled to benefit under the 1962 Act retained that entitlement, enhanced by the proposed percentage increases. I welcome that very much. Unfortunately, the Bill makes no provision for continuing this principle of an additional sum at the age of 70. In other words no one who retires after 1st April, 1961 is going to benefit. I very much hope that this is an oversight, because, even on the basis of the proposed increase, many of those who reach 70 in the future will receive less benefit than that which is provided under the 1962 Act.
This will particularly affect the lower pensions. Under the 1962 Act a man who retired three years before received, on reaching 70, an addition of £10, which certainly will now attract the 12 per cent. increase, making it £11 4s. Under the 1965 proposals the man who retires three years before, in 1961, does not get the £10 at 70. This will hit the lowly-paid grades very hard. The 1962 Act had an overriding ceiling of increases of 25 per cent. of pensions in payment. I hope that my right hon. Friend will consider continuing the principle of the 1962 Act by the very simple course of extending it by three years, with the consequential amendments to the sums.
Can the Minister make a pledge that he will be looking at public service pensions within a reasonable time? Whether or not it is possible to find a permanent 1387 solution it is certainly clear that Pensions (Increase) Bills have to be introduced at fairly regular intervals. There was one in 1956, 1959, 1962 and now we have this Bill. All have followed months of agitation. It seems reasonable to ask the Minister to give an undertaking that, quite apart from any general examination of the system, there will be a further review of public service pensions within, say, two years, to see to what extent they require to be amended. I welcome this Bill and hope that the Minister will be prepared to look at the points I have made and bring forward the necessary Amendments.
§ 5.45 p.m.
§ Mr. J. C. Jennings (Burton)
I have pleasure in following the hon. Member for Gateshead, West (Mr. Randall). It is not the first time that we have followed each other in debate in this House. The first time was many years ago, when I had the great privilege of congratulating him on his second maiden speech after he had spent an enforced holiday outside of this House. I agree with much of what he has said, but not all of it—I never do, and I could not be expected to do so as a friendly enemy. It would be churlish of me not to welcome this Bill, but I do so with reservations. I welcome it as an interim and holding measure. I was interested in what the Chief Secretary said in his introductory remarks, that the Government had not attempted to set a definitive pattern in the Bill for the future. I am using his own words. He defined it as a holding measure, and that is all it is.
This matter has a very long history. Particularly in post-war years, this problem has reared its ugly head time after time in the House. No one was more vociferously against the principles enunciated by the Tory Government than many hon. and right hon. Gentlemen who are now having to bring in a Measure which is on all fours with what the mean Tories did. It is a repetition. Time after time in the last year, since the advent of a Labour Government, some of us have pressed the Minister, both privately and in this House, for some definition of future policy. What answer have we received? "Await the review." What answer do we get today? "Await the review." What has happened to it? 1388 I agree with the hon. Member for Gateshead, West that it might be better if public service pensions were detached from the general question of social insurance and pensions; only let us have some speed of action to deal with the anomalies and the hardships which exist.
The plain truth is that this Bill merely resembles previous Bills. There is no radical change. It adopts the escalator system, which was brought in by a previous Tory Government, as a completely opposite policy from the flat rate. Apart from minor details, it perpetuates the same definitive system brought in by the Tories in their 1962 Bill. From time to time Members opposite, when they were on the Opposition benches, criticised the Tory Government for being mean and inactive, and they used all the usual sob-stuff about pensioners. I want to quote from the Prime Minister in order to see what the attitude of the then Opposition was. In a written statement, before the election, he said:Since we feel the position"—and this means after 13 years of Tory rule—is a positive disgrace, we have persistently brought this matter up in the House of Commons. We have also called for public service pensions to be linked to some economic indicator, so that the pensioners are not only compensated for rises in prices"—and this brings in the point made by the hon. Gentleman the Member for Gateshead, West—but also receive their full and fair share in rising national prosperity.I could not subscribe more to the latter part of this statement. This statement was made more than a year ago. If the position was bad then, how much worse is it now when, in the words of the hon. Member for Gateshead, West, the cost of living has gone up at least 5 per cent.?
These very people in respect of whom the Prime Minister was complaining a year ago are now in a far worse position. Yet the then Opposition was poised for action! Now they bring in the same type of Bill which they condemned. The most important part of the statement of the Prime Minister is in the middle, when he says:We have also called for public service pensions to be linked to some economic indicator…Is there any evidence in this Bill that the whole scheme has been linked to any 1389 indicator, whether cost of living or anything else? We have to wait for that.
I had some questions to put to members of the Treasury Bench, but, like good statesmen, they have read the minds of hon. Members on the Opposition benches. Some of my questions have been answered before I asked them, and I am grateful for that. I was wondering whether this was just an interim Measure, and I am grateful for the assurance that it is. I look forward to some drastic changes of policy when we get the result of the review. How soon can we expect the review to be finished? We have had a year now, and I should think that the time is rapidly approaching, when, in order to make some concrete change in the present scheme, we should have a definite announcement. I think that this is just an ad hoc measure. I regret that there has been no indication so far of any link with economic circumstances or anything else. I look forward to hearing exactly what is in the Government's mind.
Much has been said about parity. There are differences among Members on both sides of the House about the wisdom of introducing parity. This is an old subject. In 1956, those of us in the 1922 Committee set up the Heald Committee. I was the secretary and my right hon. and learned Friend the Member for Chert-sey (Sir L. Heald) was chairman. We did valuable work. We acted as a pressure group on the then Tory Government. At that time parity was a burning issue. When we pressed for it, we were told that the cost would be £22 million. A few years later it had risen to, I suspect, £50 million or £80 million. If the Government were to grant parity now, the cost would be much more than £100 million.
We must be clear about what parity means. To put it simply, it means paying all pensions at the rate current for those now retired. As my hon. Friend the Member for Worcester (Mr. Peter Walker) said, one could give many quotations to show what the Government's attitude on parity was when they were in opposition. My hon. Friend quoted the official statement by the present Colonial Secretary when he was Chairman of the Labour Party. There is another one. An official statement was made from Transport House over a year ago—just 1390 before the election. It shows the hedging which takes place in political circles— and I say "circles" advisedly—on questions which involve the expenditure of public money.
This is what the official statement from Transport House said:While the Labour Government would not be able to accept parity in full or at once for financial reasons, it would be prepared to give careful and sympathetic consideration to any proposals made.The quotation made by my hon. Friend the Member for Worcester of what the then Chairman of the Labour Party said indicated that hon. Members opposite had great sympathy in this matter. We on this side were always told when the Government were in opposition that sympathy was not enough. Sympathy is not enough in this case either.
The hon. and learned Member for Northampton (Mr. Paget) made a very courageous stand in the House on this subject. Having been a rebel on occasions myself, I appreciated and admired greatly what he did. If he will allow me, I should like to quote what he said about this matter when he spoke at the Dispatch Box on behalf of the Labour Party in Opposition:I then had the task, the very pleasant task, of being the spokesman for the Labour Party at the Dispatch Box on the two Army Estimates and of making this pledge in most specific terms, which was that we would take the first opportunity to raise the pensions of the retired Service people to what they would have been had the man retired upon the latest pay scale…I was authorised to give this pledge.That was the position of the Labour Party in those days.
I ask the Financial Secretary: exactly what is the Government's attitude to parity? Do they propose to say that "the first opportunity" has not yet come? No doubt we shall be told that the legacy left by the Tory Government has prevented them from doing what they said they would do. We are tired of this story; it is wearing thin. However, looked at practically in view of the economic circumstances, when will "the first opportunity" come of at least going some way towards parity?
There has been a change of heart on this side of the House, and I welcome it. [HON. MEMBERS: "Oh."] That is all right. I have fought my right hon. and hon. Friends as hard as I have fought 1391 the political devils opposite. Time after time when we have discussed Pensions (Increase) Bills I have castigated those on my own Front Bench. I am pleased to see that at last they have taken notice of what I have said. They have come to this conclusion without help from me. They have gone halfway towards parity, because I gather from the policy statement, and from what my hon. Friend the Member for Worcester said, that they are prepared to accept parity for all pensioners up to the 1956 level. This is going a good way. It is a step in the right direction, and a long step.
The Government could improve the Bill. I give them this suggestion free of charge: they could steal the Tory thunder if they gave parity up to 1956 level and then continued the escalator scale. Will the Government be any less generous than the Tories would have been? If so, the charge of meanness is transferred from these benches to the benches opposite.
The Chief Secretary said that he would be prepared to look sympathetically at suggestions for improving the Bill. I hope that it is improved in Committee. There has been an incessant recurrence of Pensions (Increase) Bills—1944, 1947, 1952, 1954, 1956, 1959, 1962 and 1965— almost an average of one every three years. The right hon. Member for Sowerby (Mr. Houghton) has stood at the Dispatch Box time after time and fulminated against this very system; and so have I. We were friends together across the Floor of the House on this question. Now we have a repetition.
It must have come to the minds of hon. and right hon. Members on the Treasury Bench that a Bill every three years is no good. The trend over the last few years has been for people to have a wage or salary increase every year. If workers do not get an annual increase, there is trouble. Therefore, if there is to be an economic link with pensions, as the Prime Minister said before the election, there must be an annual review of pensions to keep them in line with the earnings of the rest of society. Therefore, what is the Government's policy on this?
I will spend just two or three minutes on the Bill itself. It follows the previous 1392 pattern. It re-establishes the escalator principle that the longest retired get the biggest percentage rise. However, there is one significant omission, and that is the age bonus in the 1962 Act.
I know that the Government will tell us that while we on the Tory side in the 1962 Act gave an age bonus to those over 70, some public service pensioners did not like it because, they said, it smacked of charity. Nevertheless, whether that is true or not, here was an extra £20 for certain classes.
Let me ask the Financial Secretary this. In estimating increases at the top end of the escalator on or before 1st April, 1957, where 16 per cent, is given, is £20 added on to arrive at 16 per cent? I hope it is——
§ The Financial Secretary to the Treasury (Mr. Niall MacDermot)
The Chief Secretary has already stated that about three times and made it perfectly clear, as clear as it can be made.
§ Mr. Jennings
I missed it. I am sorry. I am glad of the reassurance.
Can I make one further suggestion, then? Some of us will probably put this down as an Amendment in Committee. The oldest pensioners, of course, were in service when salaries were much lower. Therefore, they are the people who suffer. Could I then suggest that, at the top end of the escalator, the escalator be much steeper than it is in other parts? Look at the escalator now— percentages of 2, 4, 6, 8, 10, 12, 14, 16— up by 2 per cent. through each group. Suppose we take percentages of 2, 4, 6, 8, 10, 12, and then make 14 per cent., the last but one group, 16 per cent., and the last group, the on or before 1st April, 1957, group, 20 per cent. I think we shall give some added compensation at the very top, the people the hon. Member for Gateshead, West is worrying about.
I hope the Government will look sympathetically at some of these things. I hope that, from the answer at the end of the debate, we shall know what the Government's intentions are regarding parity and regarding the general future structure, as this is a holding Measure. Therefore, in conclusion, I will repeat what I said at the start, that I welcome 1393 this Measure and, with these reservations, I commend it, recognising that it is essentially a holding Measure.
§ 6.3 p.m.
§ Mr. R. T. Paget (Northampton)
I shall be very short, and may I start off with an apology. I hate speaking in a debate without staying to the end. On this occasion, I have to go to an engagement. If either my hon. and learned Friend or the right hon. Gentleman opposite indicate to me that they wish me to stay on any point, I will, of course, cancel it; otherwise it is an engagement which, for personal reasons, I am very happy to keep.
§ Mr. Powell
In that case I am sure that the hon. and learned Gentleman will not take it as a discourtesy if, of necessity, references are made in his absence to what he will have said either this evening or on previous occasions.
§ Mr. Paget
Of course I fully understand.
Firstly, I have for many years argued what I call the good money principle. That is, if the State, which controls the value of its money, pays its obligations in a depreciated currency, it is behaving dishonestly. It is not in the same position as the ordinary employer. It controls the means of paying its obligations and, therefore, it must not pay its obligations with bad money, money which it has made bad. As I understand it, that position was—and I am delighted to hear it—accepted by my right hon. Friend the Chief Secretary. What he said was, as a good employer we must pay pensions at the purchasing power which they had when we pledged them.
But in arriving at that we must take into consideration not merely the pension for service, but the public pension, too. We as employers said no more than, "At a certain date we will give you a certain purchasing power". And as to whether we also give to other people with different service a part of that purchasing power— well, the service pensioner who objects to that is really taking up the position of the later arrivals in the vineyard. I accept that position; but if that is the position of the Government, I hope it will be applied generally and not merely when it suits them.
1394 Of course, it could not apply to pensioners who were under 60, because they would not get the State pension, if I can call it that, the National Insurance pension—and so if there are to be pensioners under 60 they must be entitled to have their pensions brought up to the purchasing power necessary to buy what they could have bought at the time that they were granted. I hope that we shall hear from the Financial Secretary that that principle is accepted. It may be important to this Bill; it is, of course, highly important as to other groups of pensioners who under Royal Warrant may follow this Bill.
The second point which I want to cover is still dealing with pensioners who do not receive National Insurance pension. Those are those who were over 65 in 1948 and were, therefore, not eligible for the National Insurance pension. Those would be older gentlemen —not very many of them—who are 88 today. But it also covers a much more considerable group, widows, often very much younger, of officers and others who were over 65 in 1948. I hope we can be assured that special provisions will be made also for that group who do not get the National Insurance pension.
There is yet another group, and that is those who are living abroad. Pensioners quite often have gone to live abroad. Having given their life of service, they have gone to a sunnier clime and also what in the old days, at any rate, were places where money went further. That is another group to whom the principle of honest money for pensions, which, I understand, was accepted by the Chief Secretary, should apply. That is yet another group whose special place must be looked at.
Now I deal with the second major point in this Bill, what has been described as the escalator principle to deal with the depreciation of money. But it only deals with depreciation since 1956. Now when the retiring age is 60 it may be reasonable, but if we have a group of pensioners 90 per cent. of whom retired before 50 and whose pensions are based on older rates, including in the case of widows rates which applied before the 1914 war, then to stop the depreciation allowance in 1956 renders them very inadequate indeed. Therefore, in so far as this Bill is to serve as a model for 1395 other groups of pensioners, it must be recognised that other considerations apply.
Reference has been made to a pledge which I made from that Dispatch Box. Of course, that pledge did not apply to the officers who come under this Bill. It applied to the members of the Armed Forces whom we recognise to be in a different position. None the less, that is only one among the pledges which, we must recognise, we made when we were in Opposition. I certainly recognise, not very happily, that I am on this side today—because I made that pledge from that Dispatch Box there. The election in one of the Scottish divisions—and, one must feel, very probably others—was decided on pledges given to pensioners who were in the election circulated from their organisations with copies of these pledges and with the specific statement that the Liberal and the Labour pledges were satisfactory and those of the Conservatives were not.
Therefore, when one comes to consider those pledges, I feel that we who sit here because of them must take them very seriously indeed. I do not say that they take a different position from all other pledges. They do not. We were bequeathed an impossible position by the Tory Party who for a year had squandered because it dared neither go to the country nor to retrench, and these pledges, as all others, must reasonably be subject to some postponement this year —perhaps, even the next?—but do not let us discard them for that reason. The principle of parity is a just one and is a principle which ought to be retained.
§ 6.14 p.m.
§ Mr. W. H. Loveys (Chichester)
It is with some trepidation that I follow the hon. and learned Gentleman the Member for Northampton (Mr. Paget). We all know his very great interest in and his very great experience of these matters, and many in this House and, I know, a large number in the country have great admiration for the stand which he took and is still taking over his previous pledge on parity, which, as he mentioned, he took from this Dispatch Box, and which was cast aside by his own party as soon as it came into power.
We all have particular sympathy with that class which he mentioned who are 1396 often called the old-age non-pensioners, and we hope that the Government will indeed take note of the hon. and learned Gentleman's suggestion that special provision for these people should be made. We hope that that suggestion will not fall on deaf ears this evening. It is so very important.
It is always a great pleasure for an hon. Member like myself, who represents a constituency which has a very large number of retired public service pensioners, to be able to support a Measure of this sort. I have had that pleasure on every Pensions (Increase) Bill that has come before the House since I was elected. However, my support of each Bill has always been, and is today, a qualified one. On this occasion I am particularly glad that you, Mr. Speaker, are in the Chair, because I recall being called to speak following you in the Second Reading debate of the last Pensions (Increase) Bill. On that occasion I had the temerity to say that I agreed with everything you had said. I hope that I am not out of order in mentioning that, because, as has been mentioned previously, all hon. Members are aware of the tremendous interest which you take in this matter.
§ Mr. Loveys
I mentioned that my support of this sort of Measure has been a qualified one. I have two qualifications; first, the Bill does not go far enough in some spheres—although I appreciate that it is easy to say that more money should be provided—and, secondly, there is no sign at all of an overall change in the system so as to remove many of the anomalies which exist in the sphere of public service pensions.
On the first point, I said that it is easy to say that the Bill does not go far enough. The Chief Secretary pointed to the enormous cost involved and said that about £25 million would be the additional cost in the first year. That is a lot of money, but it is all a question of priorities. I cannot help but feel that we have our priorities wrong in this country when we say that the apparently inevitable inflation, from which we have suffered for several generations, must inevitably drastically lower the living 1397 standards of many older members of the community, although that inflation does not affect the majority of younger people earning salaries and wages, for their earnings continually increase and more than offset the cost of living.
I do not believe that it is inevitable. Why should all the financial advantages of an affluent society go only to those who work at present? I am sure that the younger generation, if they fully understood the position, would be prepared to see a larger share of the national cake going to the older members of the community. After all, we all hope to join them one day.
Higher increases are necessary for the older pensioners because they are the people who most need them. I appreciate that in the escalator provision the maximum has gone up to a 16 per cent. increase, but that applies only to those whose pensions began not later than 1st April, 1957. Although 16 per cent. sounds a large increase—compared with the increase of 12½ per cent. on the last occasion—it is not large when applied to the very low basic pension of the older pensioner. Why does not the escalator provision apply to pensions which began before 1957? As the hon. and learned Member for Northampton said, there are so many non-pensioners—that is, non-ordinary retirement pensioners—in this category.
Much has been said—so I will not weary the House by commenting at length on this issue—about the question of complete parity. My hon. Friend the Member for Burton (Mr. Jennings) was right to explain exactly what "complete parity "means, because many people are not clear about it. They think it means taking full account of the increase in the cost of living when, in fact, it means very much more. It is that every pensioner should be brought into line with those who are retiring at the present time. I do not agree with the idea of complete parity because the cost would not only be enormous but it would give one section of pensioners an advantage very much in excess of the vast majority of pensioners.
Nevertheless, we must look further along the road towards complete parity. There must be a reasonable mean between complete parity and immutability—that dreadful word which has fortunately disappeared from the pensions scene. It is 1398 nice to have a Bill which does not speak about "immutability". I believe that that reasonable mean could be achieved by the new Conservative policy on public service pensions, which I hope we will introduce soon after the next General Election and which would bring all pensions up to the 1956 level. If that were done one would sweep away a large number of anomalies at one stroke.
The need for an overall change in the system of allocating public service pensions is often raised. The new Conservative policy represents such a change, for it does away with many of the anomalies which exist in the unfortunate coding system which hits the older pensioner the hardest. It suggests a regular review as well as the idea of bringing pensions in at 55 instead of 60. This need to remove the present anomalies cries out for a changed system. It should not be too difficult for a regular form of review of Crown pensions to take place, so avoiding the necessity of the sort of Bill we are discussing.
There must be a criterion—possibly the Ministry of Labour's wages index or something of that sort—so that we can remove the need for the continuous lobbying and intensive campaigning which goes on and to which these people who have given long service to the State are subjected.
When reading what was said in past debates on Pensions (Increase) Bills in the OFFICIAL REPORT, I noticed that practically every hon. Member spoke of the need for a change in the system. Certainly not one hon. Member opposed that suggestion. It is because of this and because of the obvious feeling in the House today that there is need for a new system for public service pensioners that I hope the Government will give an assurance that this matter is receiving their immediate attention.
I am disappointed that nothing has been done by the Labour Government so far to go along with the will of the House in this matter. With that reservation, and with the reservation I mentioned earlier—that not enough has been done to help the older pensioner—I am glad of this opportunity to welcome the Bill.
§ 6.26 p.m.
§ Mr. Arthur Palmer (Bristol, Central)
Having listened to all the speeches made today, I am left with two reflections, 1399 both of which are rather melancholy. The first is to note how good a short period of opposition is for the reforming zeal of the Conservative Party. There is an old rhyme which starts, "The Devil was sick, the Devil a saint would be". That seems appropriate now.
From 1952 through to 1962 we had Pensions (Increase) Acts from Conservative Governments. Apart from the introduction of the escalator principle, they ran along the same basic line. Now, apparently, it is to be different. Proposals for reform which were contemptuously tossed aside when they were in Government have now become the spearhead of their attack on the Labour Government. I do not find this convincing or a good exercise in political morality. That is why it makes me rather sad. Conversion always needs a decent interval of time if it is to win respect.
My second melancholy reflection is that even my virtuous hon. and right hon. Friends at the Treasury have become far less fundamentalist as reformers since taking office. I hope that this is only a temporary lapse; there are years ahead in which they can make amends. I congratulate them on having produced this Bill so early in the new Session. I also warmly congratulate them on the early proposed date of implementation. That will be warmly welcomed throughout the country.
I intervened today because I am particularly interested in the position of pensioners in the nationalised industries. As hon. Members who have attempted to raise this issue have discovered—and as I shall no doubt discover if I go too far—the Bill does not cover pensioners in the nationalised industries and, therefore, my comments on this issue must be very limited.
The nationalised industries are not formally covered by the Bill, although, as I pointed out in an intervention earlier, my right hon. Friend the Chief Secretary must remember that, with the unfortunate exception of the railways, the nationalised industries do to a great extent follow suit in this matter. That means that the Bill creates a precedent over a wide sphere outside the public services as such I cannot then refer further to the problems of pensioners in the nationalised industries, except to 1400 say that those problems are similar to those faced by public service pensioners. While my remarks will be about public service pensioners, I shall at the same time be expressing the difficulties of the other pensioners.
The public service pensioner devotes his life to the State or the community in the hopeful expectation that upon retirement his standard of living will not be too different from that which he enjoyed when in work. That is his expectation, and it is one reason why he goes into the public service, and perhaps at times receives a rather lower wage on a comparative basis with outside occupations.
It is often said that nobody should expect to cushion himself against inflation, that one should cure it, but in a real world most people cushion themselves against inflation, at any rate during their younger years. As I am sure the right hon. Member for Wolverhampton, Southwest (Mr. Powell) would be the first to emphasise, supply and demand helps the wage and the salary earner and an effective trade union does the rest. Increased prices help the businessman, and capital gains help the investor, but the pensioner, especially after he has been retired for some years, finds himself sinking lower and lower.
I emphasise the phrase "after some years", because it is often argued that retirement pensions are related to final salaries or final wages, and hence, because of this arrangement, the pensioner shares the increasing prosperity in real terms of the rest of the community, but I suggest that everything depends on just when retirement takes place. Two people, while they are working, may have similar responsibilities and similar jobs, but there may be a gap of about eight years between their respective retirements. As a result, they will receive widely differing pensions and have widely different standards of living.
It could be argued, and I think at one time it was, that an occupational pensioner contracted for a certain rate of pension and received it in sheer cash terms, but for a long time Governments of both the political parties have recognised that any such approach is much too rigid, and we have therefore had a series of Pension Increase Acts over the postwar years. I doubt—and I must say that 1401 I was surprised to hear the figures which my hon. Friend the Chief Secretary gave —whether the public service pensioner is compensated for more than about half the real increase in the cost of living on his own pension. My hon. Friend threw in the National Insurance Pension to improve the picture. That is a way of arguing it, but I think the figures given by my hon. Friend need a little more examination. I am very open-minded, and I was impressed by the figures, but I am still left with a feeling of doubt. I should have thought that with capital appreciation, and with the vast sums of money that are now invested to provide pensions in contributory schemes, or put aside out of public revenues for non-contributory schemes, it would be possible to change for all time the whole outlook on pensions and responsibility for them.
§ Mr. Diamond
My hon. Friend has drawn attention to the form in which I gave information to the House, and I am naturally anxious to give information to the House in whatever form it is required. I think my hon. Friend is really asking for information as to the comparison between increases in pensions and rises in the cost of living, but taking account only of the Pensions Increase Acts and not of the National Insurance Pension as well.
I can give as many figures as my hon. Friend wants, but I think it would be helpful if I said that if we include this Bill, but exclude the flat-rate addition for the over 70s in the 1962 Bill, and if we pay no attention to the increase in the National Insurance retirement pension, then, if we take 1956, we find that the cost of living has risen since then by 31 per cent. while pensions have increased by 35 per cent. If we take 1957, the cost of living has increased by 27 per cent., while pensions have increased by 30 per cent. Since 1958 there has been a 22 per cent. increase in the cost of living, but a 22.8 per cent. increase in pensions. The figures tail off after that. I can give as many figures as the House wants, but that is sufficient to indicate that the situation is very different from what my hon. Friend thought it was.
§ Mr. Palmer
I am grateful to my hon. Friend, and I congratulate him on his frankness. I was left with the nagging 1402 doubt to which I referred, but I shall study the figures.
The Government—and long may they continue in office—are making a brave attempt to keep productivity, pensions and incomes in step, and I hope that they will succeed, but, nevertheless, given full employment, I think that prices and incomes will rise in any event, and provided the process is controlled and real living standards also rise, I do not think that we have very much to worry about. I prefer this state of affairs to the deflation and the mass unemployment of the 'thirties, but it nevertheless seems unjust that pensioners should be excluded from these contemporary benefits of so called affluence.
Perhaps they are not entirely excluded, but I think that they should be more fully included. A pensioner should not be excluded merely because his service to the community was given earlier in the time scale of existence.
When one studies pension arrangements, one cannot help noting how often they are carefully organised to give the maximum standard of living at retirement, but after retirement there is very little in the average scheme which provides automatically for the maintenance of that standard. Pension arrangements and pension schemes should contain provisions to relate pensions throughout the life of the pensioner either to the current retirement salary, for his former job, which is sometimes known as the principle of parity, or to changes in the cost of living, which really means the principle of the regular review. My hon. Friend may not be aware of this, but in the nationalised electricity supply industry we have been looking very closely at these two possibilities. It is a joint operation between the unions and the Boards, and it would be a pity if the nationalised industries, or some of them, went ahead and left the general public service behind.
The argument is used—and my hon. Friend used it earlier today—that such reforms would cost a lot of money. I accept only that it would certainly mean a new financial and actuarial approach. My hon. Friend said that this was not an opportune time for such a great change. Maybe, but I should have thought that there was still no doubt at all about 1403 the justice and desirability in principle of a new approach to pensions in an inflationary age and the sooner the better.
I sincerely welcome the Bill. I am glad that it has arrived so soon. I hope also that my right hon. Friend, and my hon. Friends at the Treasury, will not too soon forget what they said about the reform of public service pensions as a system when in Opposition.
§ 6.40 p.m.
§ Mr. Charles Morrison (Devizes)
In common with every other speaker I welcome the provisions contained in the Bill. It has the virtue of acknowledging the plight—and in many cases the hardship—of public service and Armed Service pensioners. Their case has been stated and restated on many occasions with force and justification.
To some extent the Bill's proposals will help to overcome the immediate anxieties caused by the rise in the cost of living and, in particular, the violent rise over the last year, but in many ways this is a disappointing Bill. Granted it takes into consideration roughly the rise in the cost of living since the 1962 Bill, but there is no accounting for any possible future rise, and if the Government's record over the past year is anything to go by such a future rise could be steep, and almost inevitably will be so, judging by the figures both of production and of the 7 per cent. increase in earnings.
It will also be disappointing to those who are covered by it, because it contrasts so much with Labour Party statements before the election and particularly at the time of the introduction of the 1962 Bill. My hon. Friend the Member for Worcester (Mr. Peter Walker) has already drawn attention to the things said then, and I have no intention of repeating them. Granted that the Chief Secretary has said that the Bill is merely a holding Measure; it appears that it has become another of Labour's "tomorrow" Measures.
For how long will this holding Measure remain a "tomorrow" Measure? Shakespeare wrote:Tomorrow, and tomorrow, and tomorrow, Creeps in this petty pace from day to day, To the last syllable of recorded time.Very likely we shall not have to wait that long, for the next Conservative Gov- 1404 ernment will introduce much more satisfactory proposals. Undoubtedly, the proposals which will have given greatest pleasure are those contained in Conservative policy, as described by my hon. Friend the Member for Worcester, which, too, have been set out in the recently published Conservative policy statement.
Whatever may be the views of hon. Members opposite, they can but agree that these Conservative suggestions are more far-reaching than, and are an improvement upon, today's Bill. In particular, among those recommendations I welcome the firm undertaking that a Conservative Government will undertake a review of these pensions at intervals of two or three years. This will go some way towards removing the constant fear that, as they grow older, people who are in receipt of these pensions may be subjected to a steady decrease in their standard of living.
This proposal, coupled with the other proposals contained within our policy statement, contrasts very sharply with the lack of any basic reform in the Bill. The trouble is that the Bill resembles other Bills of the past. It makes no fundamental advance in the condition of public service pensioners. It merely adds a sum roughly equivalent to the increase in the cost of living in the preceding years.
The pensioners' best friend is a Chancellor of the Exchequer who can manage the economy in such a way as to retain the purchasing power of any increase in pensions. We must hope for a better record from the present Chancellor in the future. It is all very well to speak with satisfaction of the increases proposed today. Should there be no review, or no increase for another three years, if the future performance of the Government is no worse—and we sincerely hope that it will be no worse—than it was in the last year, the cost of living will rise by 14 per cent. All the more important, therefore, that the Government should introduce at the earliest opportunity measures providing for a biennial or triennial review of the kind which was suggested back in 1962.
§ Mr. H. Hynd
The hon. Member has referred several times to the increase in the cost of living over the last year. Why does not he refer to the increase in the 1405 cost of living over the last 13 or 14 years? What was the need for the 1962 Act, for example?
§ Mr. Morrison
The hon. Member is mistaken. I said that this Bill takes into consideration the increase in the cost of living since the last Bill, but I also mentioned the fact that, as everybody knows, the sharpest increase in the cost of living has been in the last year. This lack of any proposal to introduce a biennial or triennial review is the Bill's greatest shortcoming. I hope that the Financial Secretary will be able to give the House a more definite idea as to when such a possibility will occur.
§ 6.47 p.m.
§ Mr. Eric Lubbock (Orpington)
The hon. Member for Devizes (Mr. Charles Morrison) said that the Bill resembled other Measures which have been produced in the past. What he means is that it is a Tory Measure. That is my main criticism of it. This Measure is no improvement over the Pensions (Increase) Bill introduced by the Tories -in 1962. What has struck me very forcibly during the course of the debate is that we have the same play, the same script, and more or less the same cast. The positions have merely been changed around. The hon. and learned Member for Northampton (Mr. Paget), who was then on the Opposition Front Bench, is now on the Government back benches; you, Mr. Speaker, took a major part in the debates on the last Pensions (Increase) Bill and you are now in the Chair; and the right hon. Member for Sowerby (Mr. Houghton) has been sitting through the debate, mute but not inglorious, on the Government Front Bench. Only my stage directions have remained the same for the time being. I hope that that will not be so for evermore.
I want to remind the House of something that was said in the debate on the last Pensions (Increase) Bill which is very relevant to this one. The right hon. Member for Easington (Mr. Shinwell) condemned that Bill as being "miserably inadequate" and said that it wasnot based on any sound principle."— [OFFICIAL REPORT, 16th November, 1962; Vol. 667, c. 713.]I wish to show briefly that this Bill, measured by the same standards, is also miserably inadequate and not based on any sound principle.
1406 The Chief Secretary made great play with the fact that this was the biggest and most costly Pensions (Increase) Bill ever. He is mistaken. If we measure these increases in real terms we find that they are not as good as those conferred on public service pensioners in 1962. Since he mentioned the figures in that Financial Memorandum I have been doing a little arithmetic and adjusting them for the changes in the cost of living since that date.
The right hon. Gentleman will find that the total increases in the 1962 Bill added up to £23.5 million, made up of £17.7 million, £1.4 million and £4.4 million. These figures are taken from the Financial Memorandum of the 1962 Bill. In the present Bill the cost is estimated at £25T million, but since that date the change in the cost-of-living index has been 10 per cent. and therefore, making the adjustment, the real cost of the present proposals, in January, 1963, terms, is £22.6 million, which is £09 million less than for the previous Act. Therefore I do not think that the Chief Secretary should be so boastful about the expenditure on the benefits which he is offering to the public service pensioners.
§ Mr. Diamond
I do not want to make a big point of this; I did not refer in my speech to other than the costliness, as the hon. Member will find, but the actual cost of the previous pensions was just over £22 million, which is on the wrong side of the hon. Gentleman's argument.
§ Mr. Lubbock
We must compare like with like. I am comparing the proposal with the cost as estimated in the Explanatory Memorandum of the 1962 Measure with equivalent figures for this Bill. It is not possible for me to make a comparison on an actual basis because I do not know what this will be. I am saying that, on a like-with-like basis, these proposals are not as expensive as were the 1962 proposals, and I say that in support of my contention that this is a Tory Bill. It is only partial compensation for the cost of inflation. I shall deal later with this point and I hope that the hon. Member for Bristol, Central (Mr. Palmer), who queried the figures with the Chief Secretary, will be here when I come to that part of my speech.
The chief criticism of the Bill, as that offered about the previous Measure, is 1407 that it is ad hocand arbitrary. That was the complaint on both sides of the House last time. The present Chancellor of the Duchy of Lancaster then called for…a built-in provision for the future of their pension rights.The hon. Member for Walthamstow, West (Mr. Redhead) spoke of…a new, permanent and equitable basis for dealing with this problem in future.The hon. Member for Dundee, East (Mr. George Thomson) mentioned theuniversal agreement on both sides of the House that there ought to be some new method of tackling these problems."—[OFFICIAL REPORT, 9th November, 1962; Vol. 666, cc. 1336–99.]I have deliberately chosen these quotations from members of the present Government, although they could easily be paralleled on this side of the House. It shows how wary the public should be of statements of this nature, because there is no sign of a long-term solution of the problem in this Bill which the hon. and right hon. Members opposite demanded over three years ago.
As to the contents of the Bill, in one respect they are less favourable than those of the 1962 Measure since, as was pointed out on that occasion, additional payments were then made to the older pensioners which brought them up to more than the 16 per cent. maximum provided for in this Bill. Anyone who does the arithmetic will find that £500 a year is the borderline sum, because 12 per cent. plus £20 equal 16 per cent. of £500, and therefore those below that borderline of £500 will receive less under this Bill than under the previous Measure.
It is true that the percentages are larger this time than last, but so also is the cost-of-living increase with which they are designed to deal. I must say to the Chief Secretary that the Treasury is a little disingenuous, because in the handout which I have before me it compares the increase in the cost of living between the operative dates of the 1959 and 1962 Acts with the increase in the cost of living between 1st January, 1963, and the date of introduction of this Bill. This is not a valid exercise at all. Once again let us compare like with like. We must compare the increase in the cost of living between the 1959 Act and the 1408 date of the introduction of the 1962 Act with its equivalent this time.
If the Chief Secretary will look back on what was said by the right hon. Member for Altrincham (Mr. Barber), who was Financial Secretary in those days, he will see that he said that the rise had been just over 9 per cent. at the time of the introduction of the 1962 Measure whereas today it is 10T per cent. Therefore, the five most recently retired groups mentioned in the Bill who are to receive 2 per cent., 4 per cent., 6 per cent., 8 per cent. and 10 per cent. increase respectively will be worse off after receiving their increases than they were on 1st January, 1963, because of the increase of 10T per cent. in the cost of living since that date. Again I make no allowance in these calculations for any inflation that takes place between last mid-October, for which the cost-of-living index figure is last available, and the coming into operation of the present Bill, which I suppose will be on 1st January, 1966, if the Government adhere to the timetable of the last one.
It is not with the most recently retired groups, however, that I and other hon. Members who have spoken are mainly concerned. As the hon. Member for Devizes said, the longer one has been retired, the worses off one becomes. I cannot accept that figure of a 16 per cent. increase for all pensioners who retired before 1st April, 1957, as being at all adequate. The hon. and learned Member for Northampton said that he thought that he had committed his party to the policy of parity, and the Prime Minister said during the last election campaign thatPensions will be reviewed so that they will keep their full purchasing power instead of being eroded as they have been in recent years.I want to know what the Government's view is now on this matter. Do they stick by an undertaking which the pensioners thought they had given during the election, or have they now some other policy? Perhaps they have adopted the Tory policy of periodic grudging handouts based on no objective standard that I can see—a policy, which I am glad to say, the Tories have rejected now that they are in Opposition. I agree with the hon. Member for Bristol, Central that this is the kind of thing that makes 1409 people cynical about politics and politicians.
In connection with the policy of parity which I thought the Labour Party had adopted at the time of the last election, I am extremely disappointed to note that the Money Resolution has been rigidly drawn so that discussion of parity in Committee appears to be stifled. It is important, therefore, that we should have an answer on Second Reading to this question so that we may know where we stand in case we are not ingenious enough to get round the words of the Resolution later. I agree for once with the Tories. I would not expect that the Government could concede full parity at once, in the light of the general economic situation.
We have been told that the cost of parity throughout the public service would be £100 million, but a start could have been made in the way I first suggested last July. I am pleased to note that the Tory Party have since adopted that suggestion that the pensions of those who retired before 1st January, 1956 should be brought up to the level applicable at that date, adjusted for the subsequent Pensions (Increase) Acts. Since the hon. Member for Worcester (Mr. Peter Walker) was not able to give the cost of this proposal, I can tell him now that he will find it in an Answer given to me by the Financial Secretary on 5th February last. It amounts to £7 million. This is a modest sum, but it would be an earnest of the Government's intention to introduce full parity at the earliest possible opportunity, and it would do what we all want, that is, give the largest increases to the persons who retired a long time ago, particularly to those who will come under the Royal Warrant if we are to follow suit with proposals to be made on that later.
The hon. Member for Worcester discussed the idea of a pensions review every two years. I have already reminded the House that, when my noble Friend, Lord Wade, put this forward on 20th November, 1962, when he was a Member of this House, it was pooh-poohed by the Tory Party who said that it would not work, would only introduce one other stage in the machinery of granting pension increases, and the House would still have 1410 to be the final determining body for any increases paid to pensioners.
What is to be the criterion for the increases which the Tory Party propose? If it is to be the cost of living, then, as the Chief Secretary pointed out, some pensioners will be worse off under a review than under the Pensions (Increase) Acts. I do not think that the proposal would entirely commend itself to pensioners on that account. I should much prefer the Government to adopt the policy which is called dynamism, that is, that pensions should be upgraded in line with the current salaries of public servants in the equivalent grade. If we could agree on this principle, it would enable us to take these pensions increases outside Parliament atlogether, thus saving Parliamentary time as well as guaranteeing public service pensioners against the effects of inflation.
When this proposal has been advanced in the past, it has been asked why one should do this for public servants when it is not as yet a common provision of private occupational pension schemes. The answer is that we have already gone some way towards the adoption of my principle, and it has been recognised that comparisons with private industry should not be made because of the very different conditions of employment and remuneration in the public service. In addition, the Labour Party is committed by its election pledge, which, I think, was made expressly in a letter from the chairman of the National Executive of the Labour Party to the chairman of the Officers' Pensions Society dated 14th September, 1964:Pensions will be linked to earnings. This link will mean that pensioners are not only compensated for rising prices but also receive their full and fair share in rising national prosperity.Nothing could be plainer than that. This is why I ask the Chief Secretary to say whether it is still Government policy even though it cannot be done at this stage.
I come now to the people who have already retired and who return for a further period of service. It has been pointed out already that Clause 2 does not help them at all. I refer again to the speech of the Chancellor of the Duchy of Lancaster in the Second Reading debate on the last Bill on 9th November, 1962. He explained the grievances of 1411 these people in lucid terms, showing that the re-employed pensioner could not draw more in pay and pension than he was receiving in salary at the time of his retirement, this being covered by a provision in the Superannuation Act, 1834. The result is that, during the period of his re-employment, the pensioner receives neither the benefit of any pay increases which are awarded nor any pension increases either. The right hon. Gentleman said that they ought at least to have one or the other, for they otherwise have no redress for the rise in living costs during the period of their re-employment.
I make a special plea to the Chief Secretary on this point. The National Plan forecasts a shortage of 200,000 workers by 1970. The best way of closing this manpower gap is certainly not to discourage retired public servants from coming back and doing a further period of work, perhaps in another field of employment.
In short, the Bill is a Tory Bill. It does nothing to remove the long-standing grievances and anomalies which have been discussed in the House on many occasions. It fails to live up to the precise undertakings given by the Labour Party at the last election or to the expectations which they arouse in pensioners, which probably gained them thousands of votes and, as the hon. and learned Member for Northampton said, several seats. It now appears that these promises to public service pensioners were a shabby fraud and there was never any intention to honour them if Labour was returned to power. I am only sorry that my hon. Friends and I have no opportunity to register our disappointment and disapproval in the Division Lobby tonight.
§ 7.6 p.m.
§ Mr. Paul Dean (Somerset, North)
I agree with the hon. Member for Orpington (Mr. Lubbock) when he draws a comparison between this Bill and the 1962 Bill and points out that any pensioner on a pension of less than £500 will receive less under this Bill than he did under the 1962 Measure. I shall return to that point later.
We are grateful to the hon. Member for Bristol, Central (Mr. Palmer) for his talk about the reforming zeal of the Tory Party. That is a very good phrase and absolutely true.
§ Mr. Dean
Yes, but I can only repeat that it was a very good phrase, ironical or not. It is one which I shall adopt and one of which the hon. Gentleman will hear a good deal more in the future from this side. In fact, considerable progress was made by the Tory Party. The escalator principle was introduced. The flat-rate addition at 70 was introduced. We have now gone on to put forward new proposals to meet new situations. One of the reasons why hon. Members opposite are so sensitive is that we have produced our new ideas—my hon. Friend the Member for Worcester (Mr. Peter Walker) deployed them earlier—whereas the party opposite seems to have no new ideas on the subject at all, at least for some years to come.
I take, first, the position of older pensioners, those on the smallest pensions and those who retired longest ago. I welcome the Bill as far as it goes, but it does not deal adequately with these people who are the ones most in need. I quite accept that there is a 16 per cent. increase for pensions beginning on or before 1st April, 1957, but we on this side, together with some hon. Members opposite, very much regret the removal or, perhaps I should call it, the freezing of the flat-rate addition at the age of 70. I quite understand the Chief Secretary's explanation that the calculations in respect of the additional 16 per cent. will include the lump sum, but the overriding point is that a percentage increase, however large, gives very little help to those on the smaller pensions who are most in need.
The smaller the pension, the smaller the actual increase. The advantage of the lump sum arrangement introduced in 1962, on the other hand, is that it gives a bigger proportionate increase to people on the smallest pensions. Although I understand the position as the right hon. Gentleman explained it, it is a most regrettable defect in the Bill that this valuable new introduction in 1962 to try to give additional help to those most in need has now been frozen for the future.
As one hon. Member has pointed out, those whose pensions become due after the Bill will not get the increase at all. 1413 We shall find in future that at the lower end of the pension scale there are people relatively worse off under the new arrangement than they would have been under the 1962 Act. I very much regret this decision, and I hope that the right hon. Gentleman will think again about it in the light of the comments which have been made from both sides of the House.
Inevitably there are anomalies and grievances left by the Bill. Every Bill which has been brought forward in recent years has succeeded in getting rid of some of the anomalies, and I admit that this Bill makes some progress in that direction. But many anomalies remain. There is the anomaly mentioned by the hon. and learned Member for Northampton (Mr. Paget) about the non-pensioner, and there are anomalies about those living abroad and widows. I must be careful, Mr. Speaker, in talking about the widows because I may be ruled out of order, but surely the time has come when we should consider whether a one-third pension for a widow is adequate. We have voted ourselves as hon. Members a half-pension for widows. Is there not a case for looking very carefully at this provision, particularly in these days when many women are widows for many years? There are other anomalies in respect of widows, but I will not go into them in detail.
Another anomaly concerns pensioners such as civil servants and teachers who are temporarily re-employed part-time and who suffer an abatement of their pension if their wages or salaries are increased.' I know that the arguments here are very finely balanced, but I wonder whether the point has been examined by the Government and, if so, what their conclusion is. Another question concerns unestablished service before 1949. Have the Government considered dealing with this problem and do they know the initial cost which would be involved?
Another point of great importance which is not covered by the Bill is the transferability of public service pensions. I appreciate the point made by the Chief Secretary about the review which is going on, and I hope that this matter will be considered during the review. In these days we are talking about the vital need for employees of all kinds to be able to carry their pension rights 1414 with them when they change their jobs. There is a feeling in the public service that if a public servant leaves, he often suffers considerable loss of pension rights. If we are urging private industry to produce arrangements which will enable employees to take pensions with them when they transfer their jobs, surely we should expect the public service to give a lead in this direction. Has this point been considered? If so, what conclusions have the Government reached?
I am extremely disappointed that the Government have not taken the opportunity to tackle the problem of public service pensions in a thoroughgoing manner. We have been promised major reviews and fresh thoughts. The Chancellor of the Dupchy of Lancaster has been considering this matter for more than 12 months. I am sure that there will be great disappointment, both in the House and outside, that no manifestations of this review appear in the Bill.
I hope that the Financial Secretary in his reply will tell us how long this arrangement is to last. My hon. Friend the Member for Devizes (Mr. Charles Morrison) mentioned this point. When are we to have the results of the long-term review of public service pensions? How long will the present arrangement continue? If it were not possible to have the results of the long-term review in time for the Bill, and if the Government are standing by the old arrangements, why did they not continue the arrangements for the over 70s which existed in the 1962 Act? If the Government are saying that they have not yet had time to think out a radical change in public service pension arrangements, surely they could have preserved the main features of the previous Act. One of those features, which many of us regard as of great importance, has in fact been frozen at the 1962 level. All hon. Members recognise that new thinking is required on this matter, particularly to try to find acceptable means of relieving hardship among those who retired longest ago on very small pensions.
A number of hon. Members have mentioned parity, and I have no doubt that the Financial Secretary will say something about it when he replies to the debate. In my view, the most satisfactory and realistic way of dealing with the problem is the proposal which was put 1415 forward a few weeks ago in the Conservative Party policy statement to which my hon. Friend the Member for Worcester referred. Here is a realistic and reasonably inexpensive way of dealing with those cases in which the hardship is greatest. By bringing up to the 1956 level, with appropriate increases since, those who retired longest ago, we should deal to a very considerable extent with the hardship which exists, and we should do it for a very modest sum.
The hon. Member for Orpington quoted the figure—which came from the Government—at about £7 million. No more than £7 million would be needed to deal with the heart of the problem for the older pensioners. I hope that even at this stage the Government will consider this modest addition to the Bill, because in the light of the Bill, the sum involved in carrying out this proposal would be less than £7 million. I do not know what the figure would be, but it would be extremely modest and certainly less than the £7 million which would have been the cost of the exercise before the Bill was introduced.
I may be asked why 1956 is selected. The main reason is that it is broadly true that since 1956 the purchasing power of the public service pension has been maintained. We have had some figures from the Chief Secretary this afternoon which I am sure we all want to consider. I believe they will show that if one excludes the National Insurance pension— we are not considering that today; we are considering public service pensions—one will almost certainly find that those who retired longest ago have lagged behind the increase in the cost of living to a considerable extent. This is where inflation has bitten. Elsewhere, broadly speaking since 1956 the purchasing power has been maintained, and in some cases there has been a slight improvement.
We have passed through three phases over the years. The earlier phase was one of immutability—that a pension once awarded remained unchanged. In days when the public service pensions may have been comparatively generous, that was an acceptable principle. We then moved to the idea that pension increases should assist those who were suffering real hardship. Since 1956 we have broadly accepted the principle that the purchasing 1416 power of these pensions should be maintained. I believe that the time has come to establish this as a recognised principle and as an immediate aim which we should try to achieve.
It is said by some people that by at least maintaining the purchasing power of the public service pension we are putting the public service pensioner in a better position than people outside the service. There was weight in this argument at one time, but we are reaching the stage at which a substantial and growing number of people have private occupational pension schemes, and we hope to reach the day when everybody will have the chance to belong to such a scheme.
In these days considerable efforts are being made in various ways to ensure that the purchasing power of the occupational pension is maintained. Before retirement it is comparatively easy and is provided by rising wages and, consequently, rising contributions to the fund. The increase in the scope of investment funds assists to deal with the problem. It is possible in some cases for occupational pension schemes to make from the contributions which are paid some provision for inflation after retirement. In endeavouring to establish this principle in an acceptable way in the public service, we are doing no more than is being done increasingly in a large number of pension schemes which are very similar to the public service pensions.
Half a loaf is better than none. I welcome the Bill for what it does, but I very much regret that the lump sum provision for the over-70s has not been maintained. I also regret that the Government have not taken this golden opportunity to introduce more acceptable arrangements, particularly for those public service pensioners—the oldest of them, and those on the smallest incomes —whose need is greatest.
§ 7.19 p.m.
§ Mr. Norman Cole (Bedfordshire, South)
I echo the words of my hon. Friend the Member for Somerset, North (Mr. Dean) when I say that I am sure that hon. Members in all parts of the House welcome the Bill as far as it goes. Many of us have the reservation that it goes nowhere far enough.
I wish to refer to one point which has not been mentioned in the debate but 1417 which the Chief Secretary made in introducing the Bill. He seemed to think that in considering the Bill we must have particularly in mind that it affected 710,000 people. He seemed to regard that as a point, as it were, against the Bill and something to be viewed with caution. On the contrary, it is a reason why a Bill of this kind should be introduced.
The Chief Secretary also said that we must have regard to the position of the taxpayers. That is true. But many of these pensioners are themselves taxpayers and have been for many years. I cannot think that considering the position of the taxpayers on the comparatively small sums we are dealing with now is justification for denying a person his entitlement to maintain his standard of life by way of a pension.
Throughout the debate, starting with the right hon. Gentleman, hon. Members have talked about maintaining the purchasing power of the pension. The right hon. Gentleman gave resounding figures on this point and on including with it the public service pension. When challenged, he gave figures of the public service pension without the retirement pension being added. This leaves me unimpressed because I think that we should begin to think of these things from a new attitude. That attitude, I suggest, should be that of maintaining the position of the pensioner to a very large extent at the standard of life at which the average worker now lives as compared with 20 years ago.
Why we tend to relegate pensioners to a standard which obtained when they were working but which no longer applies, I do not know. Here are nearly 750,000 citizens who served the nation well in the past—many of them are still doing work—who should share in the prosperity of the nation. I cannot understand the attitude that, if we maintain the purchasing power of the pension, we shall have done our job. It is not right. I do not think that the pensioners will accept it and it is not an attitude we can sustain.
We have had nine Measures of this kind—they are mentioned in the Financial Memorandum—and six of them have been introduced since the war. On one of these earlier Measures, the present Chan- 1418 cellor of the Duchy of Lancaster and I sat opposite to each other in Committee. We argued about figures then. But here we are in 1965 still on the same type of Bill. I suppose that we cannot expect an earlier date, but I regret that the Bill will not come into operation until 1st January. It is three years since the last Measure of this kind and during that time the position of the pensioners covered by the Bill has been getting steadily worse financially. Let us also spare a thought for those who have retired since 1st April, 1964, for they will get nothing from the Bill.
How long will it be before pensioners get some benefit from the results of the review on which the Chancellor of the Duchy of Lancaster is engaged? We have often asked about this review and when it comes I hope that it will incorporate the principle that no longer will it be enough merely to maintain the purchasing power of the pension but that we must also take into account the affluence we are all supposed to enjoy.
It is obvious that the Bill is in this form because the review is coming forward. I am sorry that the Chancellor of the Duchy of Lancaster is not here. I have great respect for his integrity and I would like to remind him that all the time the pensioners are living at an insufficient standard. They are not likely, as far as I can see, to get from the Government the benefit of the beneficial reforms which my hon. Friend the Member for Worcester (Mr. Peter Walker) said would be Conservative policy when we are returned to power, which will not be at a very distant date.
Like its predecessors, the Bill is an entirely mathematical process. It gives the maximum figure of 16 per cent. increase. We are glad that this is particularly helpful to those who have been retired the longest. But where did the magical figure of 2 per cent. a year come from? The cost of living does not always go up according to a mathematical scale. In some years it goes up more than 2 per cent. and in some by appreciably less— although not often. Surely it is not beyond the ingenuity of the Treasury to try to make an escalation in the Bill comparable with actual increases in the cost of living year by year. If that had been done before, the pensioners would probably have been better off than they will be 1419 after being granted this arbitrary arithmetical figure in some cases of 16 per cent. which is the maximum increase.
No one seems to have mentioned so far in the debate the increase of 6d., approximately a 6 per cent. rise from 7s. 9d. to 8s. 3d., in the standard rate of Income Tax. Quite a number of pensioners pay Income Tax. Whether that has been taken into account in the pension escalation process I do not know.
Then there is the question of the particular age of 70. The right hon. Gentleman explained that this age line is not in the Bill but he did not offer any reason why it has been dropped. Are the Government out of sympathy with those who have been retired the longer? Do they not think that those over 70 are entitled to a little extra? To talk about the present extra percentage applying to the extra addition under the 1962 Act is begging the question. I feel that a person over 70 needs a little more help and comfort. Indeed, this principle is recognised throughout the National Insurance Acts. In these, whenever there is any question of escalation of pension as regards men 70 is the particular age. Why does the Bill seek to throw that principle over? It presages rather badly for the review.
The hon. and learned Member for Northampton (Mr. Paget), my hon. Friend the Member for Somerset, North (Mr. Dean) and other hon. Members have referred to the position of those on public service pensions who do not draw the retirement pension under the National Insurance Acts. I want to refer to people who do not draw either the public service or the retirement pension and for whom benefit could have been given under the Private Member's Bill introduced by my hon. Friend the Member for Abingdon (Mr. Neave) in the last Session but which, by means of Parliamentary manoeuvring, never got off the ground. I hope that these people will not be overlooked in the review. If ever there was a section of the public deserving the sympathy of all parties, it is the ladies and gentlemen who, because of the fortuitousness of date and age were not able to come under the National Insurance Acts.
I repeat that the Bill is all right as far as it goes. I hope that its paucity 1420 of generosity is an indication that the review which we have been promised for 12 months will come at an early date. There is not much consolation in the Bill for the pensioners and I hope that we shall get rid of the system of taking these regular triennial and biennial Bills in order to bring these pensions up to date. It should not be beyond our power to devise some means which will move pensions up automatically when the cost of living rises by a certain figure. We have been having these Bills regularly for 45 years and it is time for a change. However, I welcome the Bill and will give it my support.
§ 7.35 p.m.
§ Mr. Julian Ridsdale (Harwich)
After listening to the cold and calculating speech of the Economic Secretary to the Treasury I watched a very wry smile on the face of the Chancellor of the Duchy of Lancaster. It was such a combination of Yorkshire and Lancashire that I wondered if he was qualifying for becoming the "Minister of Stonewalling" or the "Minister of Longstopping". His colleagues will not say "Yes" and will not say "No". They just say "Interim".
The Government are putting all the embarrassing pledges of the last election neatly under the carpet, including the £90 million for parity and the £700 million for the national minimum income guarantee, which would have been well above existing pension rates. Then the Economic Secretary has the audacity to attack my hon. Friend the Member for Worcester (Mr. Peter Walker) because he advocates proposals which at the most would cost £7 million. What hypocrisy! What audacity! Attack certainly is the best means of defence. We heard this not only from the Economic Secretary today but from the Chancellor of the Exchequer last night.
§ Mr. MacDermot
To whom is the hon. Gentleman referring? There is now no Economic Secretary to the Treasury. We passed an Act of Parliament last Session abolishing the office.
§ Mr. Ridsdale
I am sorry. I had forgotten the upgrading of all Ministerial positions since the Government came to power. It is the Chief Secretary to the Treasury to whom I am referring.
1421 This is the seventh Pensions (Increase) Measure since the war. The hon. Member for Orpington (Mr. Lubbock) is quite right in saying that in real terms this Bill does not equal the Pensions (Increase) Act introduced by the last Government in 1962.
When we introduced that Act we were accused of bringing in just another palliative, just another ad hoc Measure that was no lasting solution to the problem. That was the sort of description applied by the Chancellor of the Duchy of Lancaster to it. He will now have to do better than that if he wants to qualify for the title of "Minister of Longstop-ping". For this Bill is just another palliative, another ad hoc step and only just keeps up with the very steep rise in the cost of living—10 per cent.—since the 1962 Act. That is 2s. in the £.
With wage increases well ahead of productivity, the Bill does little to protect the public service pensioner from the steep rises which are bound to be ahead. Let us make no mistake—the Chief Secretary and the other Treasury Ministers know very well that the lower wage earners and the pensioners are now being hit very hard by the already sharp increases in prices which have taken place, increases which the Chief Secretary, the Financial Secretary and the Chancellor of the Exchequer know are likely to be even more severe very shortly.
I am sorry that the Government have not been able to do more, particularly after all their promises at the last election. In the light of the reality of those promises, what hypocrisy was the proposal for a national minimum pension well above existing pension rates! What hypocrisy was the promise of parity! No wonder it has been pushed into the background. What a different proposition this is—£19.9 million proposals plus £5.5 million for the Armed Service pensioner —especially when on 11th September, 1964, the Prime Minister said of public service pensions:We have on a number of occasions given a pledge that these will be reviewed so that they will keep their full purchasing power instead of being eroded as they have been in recent years.It is no wonder that when I tried to question the Prime Minister on this subject he passed the Question to the Chancellor of the Exchequer.
1422 The Bill does not do very much to help that class of pensioner which the right hon. Member for Sowerby (Mr. Houghton) mentioned in his speech in 1962, first, those public servants who cannot reckon for superannuation their temporary or unestablished service and, secondly, those who are re-employed pensioners, pensioners who are retired and then brought back for a further period of service. When is something to be done for those pensioners?
I know that I can refer to this subject only briefly and must be careful about saying this, but I hope that I can join forces with the hon. Member for Accring-ton (Mr. H. Hynd) in a deputation to the Chief Secretary, or the Chancellor of the Exchequer, or the Chairman of the Railways Board about help for the railway superannuitants, especially those not in receipt of National Insurance pension. I know from my own personal experience how hard this is hitting some of the more elderly of the railway superannuitants. I will not go any further on this now, because I know that you, Mr. Speaker, were yourself ruled out of order in the debate in 1962.
I do not want to be drawn into the argument between the extreme of parity on the one side and immutability on the other, but time and again when in Opposition right hon. Gentlemen opposite said that there were strong grounds for regarding some relationship between pensions and current pay as a more satisfactory basis for the adjustment of pensions than any of the other criteria which have been mentioned. If that had been their policy, it would have taken much bigger increases than those promised in the Bill to bring past pensions up to the level of currently awarded pensions for comparable grades and length of service.
For the seventh time this is a pragmatic approach not related to any principle. Cannot we find something better which will give greater certainty to those concerned? I welcome the fact that my own Front Bench has suggested reviews and I hope that they will be biennial and not triennial. The problem is how far we are prepared to go to keep the pensions in line with rising levels of income and standards of living. Time and again over the years since 1945 the pensioner 1423 has fallen behind because he has no employer to threaten, no arbitration tribunal to go to and no court of appeal. He can only look to pressure through the House and through his association. I pay tribute to the many retired civil servants who have worked very hard in their associations to bring to the notice of M.P.s the plight in which many of them found themselves. It is only through M.P.s that they can redress their grievances. Every time we repeat the dreary process, while all the time the position of the pensioner grows relatively worse.
If an incomes policy means anything, some place for the pensioner must be found. We know that it is the poor universal pensioner who invariably is the first to foot the bill when wages get ahead of productivity. He pays for the unofficial strike and for the over-zealous trade union leader. He more than anyone else has a built-in interest in the stability of prices and the strength of sterling. Yet every time a Measure like this comes up, we fight shy of building into our fiscal system measures to act as a brake against inflationary policies.
In this Keynesian age, when we do not have the harsh other brakes, would it not be a good thing if there were at least some discipline and some brake which could be applied to the spending Departments, which are invariably inclined to get ahead of what the country can afford and which by that process devalue our currency and make it much more difficult to keep purchasing power what it should be? We could do it if we protected the purchasing power of the pensioner more. I would like there to be a special representative of public service pensioners on the National Incomes Commission. Who now represents their interests on the Commission? The pensioner is entitled to his share. Up to now, he has paid the most and received the least.
Those of us who have a number of Armed Forces and public service pensioners in our constituencies know how anxious the position is. In my constituency especially I have old retired postmen, policemen, and railwaymen, teachers retired on the meagre Burnham scale and widows. The benefits which they will receive from the Bill will be small, because the percentage increases will be 1424 increases on small pensions. Nevertheless, I know that they will be truly grateful even for these small mercies.
But this issue is now becoming a challenge to both sides of the House. In Government or in Opposition, I am certain that we cannot allow the present system to continue. It is demoralising and mean to those who have served their country with brave, loyal and skilled service. If we expect such service and standards in future, it is imperative to alter the system which has been with us for so long. There are overwhelming grounds for accepting the principle of some fixed relationship between pensions and current pay as the basis for the adjustment of pensions. The Government know it; the Opposition know it; the country knows it. It is high time that we carried out such a policy.
§ 7.48 p.m.
§ Mr. Anthony Kershaw (Stroud)
May I say how much I admired my hon. Friend the Member for Harwich (Mr. Ridsdale) for being able to inject such fire and enthusiasm into a debate about what is obviously a rather dreary little Bill? It is a funny little Bill which we have been discussing this afternoon. We had hoped, as some hon. Members have said, that the next time we came to discuss this subject we would have something more interesting to debate. Some of us were not too happy in 1962 when we were on the Government benches and the then Government introduced a sort of holding Measure such as this. Some of us expressed that view, too. It is rather disappointing, after more time has elapsed and after a General Election, with all the brave promises which both parties make, that we should be back to the same dreary round again and, as has been said, with a Bill which is slightly less favourable to the pensioner than the Bill which we were last discussing.
As it is so limited in scope, I need make no apology for trudging over much the same ground as other speakers have covered. It is common ground that we have not a Bill which implements the promises made by the party opposite at the General Election. The right hon. Gentleman the Prime Minister has said, in a letter which has now become public, that one of the things to which he looked forward was the public service pensioners 1425 having their pensions linked to some common economic indicator. There is nothing about this in this Bill, but this is not to say that the right hon. Gentleman the Chancellor of the Duchy of Lancaster is not taking that into consideration in his review which will come forward. It may be that that is the way he is thinking. If that is so we shall perhaps have a chance to welcome it.
But no one can pretend for a moment that this Bill has anything in it of this sort. The Prime Minister went on in his letter to say that he felt that pensioners should receive their full and fair share of a rising national prosperity. No one supposes they are doing that. The Chief Secretary, in introducing the Bill, only went so far as to say that the percentage rises were keeping pace with the cost of living. No one suggests that pensioners are sharing, in a true measure, in the rise in prosperity which those who are employed enjoy today. It is a fact, and I do not bother to quote the statistics because they are so well known to the House, that the level of wages has, percentage-wise, advanced much further than the level of pensions.
During the election, we had promises from the party opposite that they were "favourably disposed" towards parity in pensions. "Favourably disposed" is an equivocal phrase, and I agree that caution was advisable in this regard. But it was clearly designed to give the impression that a move towards parity would certainly be in the programme of the Labour Party if they were elected, as they were.
One argument put forward by the Chief Secretary was that the financial position of the country has changed. He did not say so in so many words, but he referred at some length to the financial position of the country, and there can have been no purpose in doing that unless the conclusion was to be drawn that the financial position of the country meant that its pension policy did not go as far as he would have liked. I rather doubt whether that argument can be substantiated, because the right hon. Gentleman the Prime Minister, when he wrote that letter about full and fair shares in the rise in national prosperity, and when that election pledge was made that the party opposite were favourably disposed towards parity, was estimating that the 1426 trade gap would be £500 million in the last year.
In a speech to the Trades Union Congress in September, 1964, he said that the trade gap would be £500 million. Afterwards he made these pledges about pensions. The trade gap was not that amount. It was only £412 million, so that he made the promises about pensions at a time when he even exaggerated the financial plight of the country. Thus, the insinuation by the Chief Secretary this afternoon that the financial conditions of the country in some way precludes the Government from going as far as they would like is not based on a sound argument.
The consequencies of not fulfilling this pledge, as far as pensioners are concerned, are serious. All pensioners are less favourably placed than others who have wages and salaries. The effect of this Bill will be hardest upon the oldest of the pensioners. They will be the worst off. I know that their increase is, percentage-wise, the highest. But it is an increase on a small pension, as my hon. Friend the Member for Harwich has just said. There are others, in the category of the oldest pensioners, who will not share at all. The house already knows that there are today the widows of junior officers in the Services, over 1,000 of them, who have a pension of £188 a year. This qualifies them to go on National Assistance. They have had no increase in that pension and they will still be on National Assistance.
Those who are on National Assistance, for whatever reason, and who are also pensioners, will find themselves, in their view, defrauded of their increase, because as their pension goes up, their National Assistance will come down. This is an inescapable consequence of putting up some of the basic pensions, but it always makes a most disagreeable impression on those on the receiving end. I have very often heard the Chancellor of the Duchy of Lancaster, among others, complain about this in previous debates about pension increases.
I have one question about overseas pensioners. I understand that the increases do not normally go to overseas pensioners who were domiciled abroad at the date of their enlistment into the public service. I also understand that in some cases 1427 overseas pensioners domiciled abroad at the date of their enlistment but who now live here are not getting increases either. This seems to be an extension of a sort of judge-made law which has crept into the pensions code, on overseas pensioners. I would be grateful if the hon. and learned Gentleman could clear this point up.
There are, then, these specific ways in which this little Bill falls short of what we were led to expect, and of what is needful. There is nothing in this Bill for the very old, for the over-70s. The Chief Secretary said that there was nothing special for the over-70s because the Tories did it. "It is all right now so we can go on and treat them just like the others," he said. I admit that we did a great deal for them but I should not think that the Chief Secretary should use this argument. He said later that it was not the age of a pensioner which it was necessary to consider, but the length of time a person has been a pensioner. In an intervention he said that the reason for not giving the old pensioner something special was that it was quite unnecessary to give them some increase which not all of them would need. He said it would be fairer to spread it about.
That is a very strange doctrine to hear from an old Socialist lag. It is surprising because the whole of the Labour Party's philosophy about pensions is absolutely egalitarian, absolute equality; give to the rich the same pension as one gives to the poor, whether that harms the poor or not. Even if one cannot afford to give to both rich and to poor without cutting the pension of the poor lower than it should be. Whether that alarms the person who chooses to save and who cannot nevertheless get any more than we give to the spendthrift; whether that alarms the person on National Assistance because his Assistance goes down because his pension goes up; that has nothing to do with it. Everybody must have the same. It is a surprising argument to hear from a Socialist spokesman, that we should not give to the over-70s because all of them do not need it. Well, times change and we must take things as we find them and perhaps we will hear in the review that the basis of the pension policy of the party opposite is going to be given only to those who need it and not to everyone. If this is so I 1428 can assure the Chancellor of the Duchy that, in principle, he will have the support of the people on this side of the House.
This Bill falls short because it does not give the public service pensioner these increases at 55, especially the Services and police. These are very often compelled for health or other reasons to retire before they get to 55, often before they get to 50. For a person to have to wait sometimes 10 or 15 years for the increase in pension while it is difficult to get another job is a hardship and an injustice. I should have hoped that, as we propose, these increases would apply at 55 and not 60.
Figures have been bandied about on the cost of parity. Certainly parity at the present level is, I admit, pie in the sky. I understood from an Answer which the Under-Secretary of State for Defence for the Royal Navy gave me not long ago that if it were extended, not only to the public sector, but to the private sector, which is logical, parity would cost about £1,000 million a year. This is a great deal of money, and I suppose that nobody should idly recommend increases which would involve such sums. But parity up to the 1956 level, especially for certain classes of pensioner, would cost only £5 million. It would not cost very much more than that for all Service pensioners. I should have thought that a gesture towards the goal of parity which was dangled so provokingly before the electorate by the Labour Party at the election should have been made.
It would not be necessary to recast the whole system of pensions to introduce these substantial, but not fundamental, changes in the public service pensions system. I regret that the Bill does not deal with any of the three matters that I have mentioned.
Some of my hon. Friends wished that a biennial review could be introduced. If we are to have a review every two years, the pension might as well be linked to the cost of living, thus saving constant reviews. However, that is a matter of opinion.
During the election the Labour Party raised the hopes of old people who have fears about their future very much in their hearts. Right hon. and hon. Members opposite dangled these hopes before 1429 them and no doubt they won many votes for the Labour Party. The conclusion is—and the old people will come to this conclusion as well—that the Bill is a repudiation of the pledges which hon. Members opposite made 18 months ago.
§ 8.2 p.m.
§ Mr. Bryant Godman Irvine (Rye)
As I think that I have as many pensioners in my constituency as any hon. Member, I am very grateful to have this opportunity of putting one or two points which have occurred to me and which have been put to me by my constituents arising from the Bill. Earlier today I asked the Chief Secretary whether he could explain how it was that people who retired in 1957 were not in a much better position than people who retired for example, in 1950. The right hon. Gentleman explained to me that people who had retired earlier were brought up by earlier arrangements to the 1957 level. I did not understand what he said, and I should be much obliged if the Financial Secretary would explain the point to me.
Perhaps I could put the matter clearly by quoting a letter on this point which I happen to have with me. It says this:It is grossly inequitable that a man who retired in 1957 on a pension very much higher than one who retired in, say, 1950 should receive the same percentage increase. To carry back the 2 per cent. differentials even as far as there was anyone alive to benefit would surely be insignificant financially and would benefit most those for whom the scheme is really intended.That constituent feels that, as the Bill deals with pensions which started in or before 1957, the man who retired in 1960 cannot be brought up to the same level as one who retired in 1957.
§ Mr. MacDermot
Perhaps I can be of assistance to the hon. Gentleman. It is very difficult to generalise in matters like this, but in so far as it is legitimate to do so I think that one can say that the effect of what I may call, roughly, the flat-rate increase basis of the pre-1956 Acts was to achieve, very broadly, a levelling of pension up to 1956. After that came the percentage increases. Of course, there are exceptions and it may well be that the hon. Gentleman's constituent is an exception. These people naturally feel strongly about the matter. But the point which I think my right hon. Friend the Chief Secretary was 1430 making in seeking to answer the hon. Gentleman was that the effect of the earlier Acts was to achieve a very considerable measure of equality.
§ Mr. Godman Irvine
I am very much obliged to the hon. and learned Gentleman. The impression which I had of what happened before 1957 was that somebody who started with a minute pension had been given a percentage increase on a not very great sum which did not bring him up to anything like the level of people who retired subsequently.
I cannot get out of my mind an occasion when I found in my constituency somebody who was invalided out of the Navy in the Boxer rebellion in 1899. He had been given percentage increases of very tiny amounts which were so small that they were ludicrous. If the Financial Secretary can assure me that that is no longer the case, no one will be happier than I. But my constituent does not appear to think that that is the case. I should like the Chief Secretary to look at the way in which the Bill starts at 1957 to see if there may be points such as the one which I have put which are valid and which require further attention.
The second point which I wish to put to the Financial Secretary briefly is this. There are people who have served their country in one way or more throughout their lives. For example, I have a constituent who was a Post Office engineer up to 1933. Then he joined the Royal Engineers and served for a period of about 12 years. Immediately on his discharge from the Royal Engineers he went back to the Post Office engineers, having obtained an exemplary character from the Royal Engineers. He spent the rest of his working life with the Post Office engineers. He is advised that when he gets his pension, owing to his broken service in the Post Office, he is not in the same position as he would have been had he served throughout his working life in the Post Office. That is a matter which should be looked at, because this man has served his country just as well as a man who remained either in the Royal Engineers or in the Post Office engineers.
I should be most grateful if the Financial Secretary could help me on another point. It concerns Clause 2. The 1431 Financial and Explanatory Memorandum says that Clause 2ensures that in all these cases the ultimate pension, including pensions increase, provides an appropriate reflection of the further service rendered.The type of case which arises is this. Someone serves until a particular time when he is supposed to retire but continues in service in perhaps another capacity for a year or two and finally retires five or six years later.
I have a case with me in which precisely that happened. It concerns a man who retired in 1957 after 40 years' service. Owing to staff shortage, he was persuaded to serve another year which gave him an entitlement to pension of 41/80ths of his salary. Having retired after 41 years' service instead of the normal 40 years, he took another appointment in the same department as a clerical officer and was given further extensions of his pension rights. Having served in that way for a further three years, he finally retired. The result of his retiring three years later was that when he retired in 1960 he was given only a 4 per cent. increase on his previous level instead of what he says should have been a 10 per cent. increase if he had been left on the old basis. If his calculation is correct, he is receiving £648 19s. 8d. instead of what he feels should be the right pension of £692 13s. 3d. if he had not served four years longer.
The point which he raised and about which there has been correspondence with the Treasury concerns the original way in which reckonable service was counted. If I understand it, Clause 2 is now designed to deal with precisely that. Perhaps the Financial Secretary could explain to me and my constituent precisely how it will work, because it does not seem very clear either to him or to me. I took an opportunity of sending the Bill to him. After quoting certain parts of it to me, he says:Can you endeavour to get this detailed in such a way as to leave no loophole to the Treasury to make any petty economies at the cost of people like myself who have no power to appeal except through their Parliamentary representative?So if the Financial Secretary could clarify that issue it would help not only my con- 1432 stituent but also me, because this is a point which I am running across on a number of occasions.
I should like the Financial Secretary also to help me on another point. I have been pressing another Department, the Colonial Office. There was a rumour that those who were appointed before 1st April, 1930, to serve were able to benefit from pension increases but those who have been appointed after 1st April, 1930, are not eligible to receive the supplements from these increases. By a strange coincidence I have had a number of cases of precisely this happening. Indeed, other difficulties have arisen from pensions where there are people who have been recruited, perhaps through the Crown Office or the Crown Agents, for service overseas with local authorities and other bodies. There is a difficulty which arises sometimes. They are appointed after a certain date and they do not get the benefit of the increases which they feel they should have. Not only do they suffer considerable difficulty and hardship as a result, but there is also the question of their widows, and the widows of these people are in a much more difficult position.
Another point I should be obliged if the Financial Secretary to the Treasury would deal with is one to which the hon. Member for Stroud (Mr. Kershaw) referred briefly, the question of people who serve abroad or who serve in a number of ways in this country and who sometimes retire at a rather early age. Abroad, people serve in the tropics and not only find that their conditions of service are such that their retirement is, perhaps, earlier than if they served here, but, quite apart from that, the conditions under which they serve sometimes make it necessary to have early retirement. They find that the age limit of 60 is particularly hard. It is hard on people who have retired long before they are 60, perhaps for ill health or for a variety of other reasons.
The final point which I would like the Financial Secretary to have a look at is one I have come across on a number of occasions in my constituency and which causes a great deal of difficulty and hardship. It is the case where somebody has served, for example, in one part of the Commonwealth and is there recruited to serve in another, and because they are 1433 recruited abroad and sent direct to the next place they are not eligible for any of the arrangements which we are discussing today. Had they come back to this country and been taken on here their situation would be quite different. There are a number of cases where precisely that sort of difficulty has arisen, and I have been involved in a great deal of correspondence on this topic, having had so far no satisfaction, and I think there is a very real ground for complaint here for the Financial Secretary to look at.
§ 8.15 p.m.
§ Mr. Geoffrey Rhodes (Newcastle-upon-Tyne, East)
I intervene for just five minute!) in this debate. I have been sitting here for about an hour and heard a battery of speakers from the other side. My constituency contains the headquarters of the Ministry of Pensions and National Insurance, and quite apart from the normal number of public service pensioners that we find in every constituency I have perhaps a disproportionately large number of them. I have discussed the implications of this Bill with them, and although I think there would be some disappointment in terms of the total sum involved, I am sure that this Measure will be widely welcomed by the public service pensioners who live in my constituency.
The main burden of the argument raised by three of the speakers I have heard this afternoon is that the Government have not been generous enough. This has been a blanket criticism, and there have been particular criticisms of particular ways in which, it was argued, the Government should have been more generous. It seems to me always in these matters that the degree of generosity of the Government is not something which can be measured in absolute terms. It is relative to the current economic position of the country and I would argue that, in terms of the economic situation which this Government have had to face during the period since the General Election, coupled with the legislative Measures which were taken in relation to pensions as a whole some time ago, this Government have shown an exceedingly sensitive conscience about the pensioners, and, indeed, this Measure is relatively generous. I believe it will cost about £20 million more a year.
There was one point by an hon. Member opposite upon which I should like 1434 some clarification. He seemed to argue that these increases had been partly eaten away by earlier acts of the Government in relation to increasing the standard rate of Income Tax. I think I am correct in saying that before one can become eligible to pay and to suffer from this increase in the standard rate of Income Tax one would have to have an income of some £700 or £800 a year, and to be showing excessive concern for the position of pensioners on that kind of income is rather odd, I think. I am rather more concerned about those pensioners in my constituency whose income is much smaller than that, and many of them benefit substantially from this Measure.
Another point raised by hon. Members opposite was that, of course, some part of this increase has been eaten away by the rise in the cost of living since last October. This is the current argument being peddled by Conservative spokesmen generally about pensions, that the pensions increases have been eaten away by the rise in the cost of living. This is patent nonsense. It is perfectly true, of course, that in the first six months of this Labour Government there was a quite sharp increase in the cost of living, although I am pleased to say that since last April there has been a marked levelling off in the cost of living, and if this is the effect of the policies carried out by the Government and an indication of the kind we may expect over the next two or three years, I would welcome it. I would go on to argue, if it were in order and if there were time, that a substantial increase in the cost of living in the first six months of this Government was very directly connected with the economic developments from the Government's predecessors.
But it really is not true, and we cannot allow hon. Members to get away with it, that the whole of the increases in pensions carried out by this Government since the last election have been eaten away by the cost of living. It is perfectly true that some of this has been eaten away. I would certainly agree that pensions in future must be more closely linked with the rise in the cost of living than they have been in the last 13 years.
There is one point which does trouble me a little. I have a number of pensioners who compain that they have not 1435 been able to draw increased benefits till they are 60. They would prefer to do so at 55. I think it is true in the public services generally that retirement pensions are drawable normally at the age of 60. I think that this also applies to Members of this House. No? Then I am wrong on that point. But I would not have thought this criticism valid except in the case of those who by the nature of their public service have been forced to retire early on the grounds of health, due to service overseas. I have a number of constituents who have retired largely through ill health contracted as a result of service overseas. I am not sure how this Bill covers them, but with this exception I would welcome the general improvement and I would welcome an improvement in this respect if necessary.
There is one thing which was said by an hon. Member opposite with which I agree, that the bargaining strength of those who are retired is relatively weak, relatively low. It is perfectly true that they have no bargaining power any longer. Because there is always a tendency for the pensionable income gap, the gap between pensionable income and average earnings in industry and commerce, to widen, I think that a sensible policy would stop that gap from widening, and when the hon. Member said that we should seek increasingly to adjust pension income to average earnings in industry I would agree with him, although I think that if he was trying to make party political capital—I am not trying to do so—I could show many examples where such a gap was widening rather than closing in the last 13 years.
I hope that with the erection of social security which the Government are undertaking attention can be given to this problem, but given the current economic situation, and given the circumstances in which this Bill is brought in, I would maintain that it is a relatively very generous Bill, and I think it is a Bill which will be welcome. When the economic situation improves, as I think it will as a result of the measures taken by the Government, I hope that this Measure will be looked upon as something of a temporary expedient, leading to far wider-ranging improvements in pension incomes for the public services and others in the years ahead.
§ 8.22 p.m.
§ Mr. G. R. Howard (St. Ives)
I apologise for not hearing a great deal of the speeches because I had a long standing meeting to do with the fishing industry, and I had to attend it, and therefore I have not been able to listen to a great deal of the debate.
I hope I may be permitted just to draw attention once again to one or two points and particularly parity and the recruiting aspects of the problem. We all know of the differences there are, for instance, between the pension of the retired chief petty officer and that of a far more junior man, who is better off than his senior who had much greater responsibilities during his service. The effect of this is to cause the older men to dissuade their sons from going into the Service, and this is very important when we are recruiting, and it is a problem which should be looked at. I would like to take up the plea of thinking in future of the age 65 instead of 60. If and when there is a review I shall be pleased if this is considered.
I hope the hon. Member for Newcastle-upon-Tyne, East (Mr. Rhodes) will forgive me for not following him but this is not a matter for party political cracks. It is something far more important than that, and it concerns so many people in this country. Like many other hon. Members, I have many of them in my constituency, and I should like to press once again for consideration to be given to pensions being linked with the cost of living direct. I think this is the fairest and best way of dealing with the matter, because it would inhibit people who ask for large pay rises automatically if they thought this would cause a rise in pension to keep pace with the increase in the cost of living. As many hon. Members have pointed out, these poor unfortunate people have no great power themselves. There is very little they can do except bring their plight to our attention.It is then up to us to help them.
We have heard lately, as a result of the unfortunate affairs in Rhodesia, about compensation which will be paid to civil servants who, by reason of the events in that country, will return home. There is another aspect of this which I wish to bring to the attention of the House. A friend of mine, who gave many years' valuable service in a senior position 1437 before the independence of Ghana, is now suffering through no fault of his own because of suddenly receiving a note from the Ghana Government saying, "You will have this much deducted from your pension". He has no redress at all. He is losing all the time and there is absolutely nothing he can do about it.
I urge the Government to consider the plight of people who have given great service overseas, in Commonwealth and other countries. When this sort of thing happens to them—when, through no fault of their own, they are financially affected in this way; because they have lost their jobs as a result of a country becoming independent or whatever the case might be—Her Majesty's Government should consider the possibility of making up their losses so that they do not suffer. I welcome any increases in pensions, but I hope that the few points to which I have drawn attention will be considered, especially if and when a review takes place.
§ 8.26 p.m.
§ Mr. J. Enoch Powell (Wolverhampton, South-West)
As has been said a good many times during the debate, the Bill, with the exception of some minor though welcome features, is the mixture as at 1962. It sets out, in the same way as the 1962 Act, to allow for the fall in the value of money which has taken place since that Act came into force at the beginning of 1963. The extent of that fall has been approximately 10 per cent. Incidentally, about half that total fall took place since the change of Government a year ago.
This erosion of about 10 per cent. in the value of their pensions has, of course, been suffered by all public service pensioners who were drawing their pensions at the beginning of January, 1963. However, the House will have noticed that, in common with the two previous Acts, that loss in purchasing power is not made good uniformly to all pensioners who have uniformly suffered it. On the contrary, while the so-to-speak average figure of a 10 per cent. increase applies to those who retired between 1959 and 1960. those who retired afterwards will have appreciably less than the loss in purchasing power made up: they will have to wait for further such Measures as this —if there are to be further ones—for that 1438 loss to be recovered in due course under what has been called the "escalator principle."
On the other hand, those who retired before 1959–60, and who under this Bill will receive more than a 10 per cent. lift, are having made good to them the lag in adjustment of the purchasing power of their pensions on previous occasions. I was, therefore, interested and rather amused at the quite natural selectivity practised by the right hon. Gentleman the Chief Secretary when he intervened during the speech of his hon. Friend the Member for Bristol, Central (Mr. Palmer) and compared the total pension increases which various persons had received with the fall in the purchasing power of those pensions during the time that they had been in payment. The cases he took were of people who had gone on pension between 1956 and 1958. Of course, had he come further towards the present he would have found that the comparison was less favourable.
§ Mr. Powell
In that case we are ad idem.
What is more important and what has been the burden of the majority of speeches today is that had the right hon. Gentleman gone back into time he would have found many instances, though not occurring uniformly, where a pensioner who had been on pension for a considerable number of years had suffered an erosion in the purchasing power of his pension which this Bill will not make good. It is there, among the pre-1956 pensioners, that the anomalies and injustices still exist which ought to be put right. Measures to do this would be a perfectly natural continuation of the successive improvements—not just improvements in detail but improvements in principle—which were introduced by Pension (Increase) Acts under the previous Administration.
May I remind the House of what some of those were? The Pension (Increase) Act, 1956, removed the limitation of increases to the smallest pensions, which had been maintained up to that time. Then the 1959 Act removed the upper limit which, till then, had been kept on the amount of pension increases. And the 1962 Act introduced the feature which in this debate has been referred 1439 to with approval from both sides—the additional payments for the over-seventies.
Thus, it would only be a natural continuation of this series of improvements in principle which we have seen in the last 10 years or so, to go further and to take steps to remove the anomalies and injustices which still exist.
It was for that reason that, at the last election, the Conservative Party proposed that in future the increases should become payable not at age 60 but at 55—something which would be particularly beneficial to Armed Forces pensioners and to those classes of civilian public service pensioners who normally —indeed, almost invariably—retire before the age of 60 and, in many cases, live on their pensions before they reach 60.
We believe that even that, although it would be important in its effect, is not sufficient and that the time has now come when yet a further step should be taken. We believe that this step should be, in effect—and this is the purpose of it—to eliminate the remaining anomalies among the pre-1956 pensioners.
In theory, perhaps, this could be done by examining each pension or group of pensions and ascertaining the degree of erosion due to the long period of varying inflation which has elapsed in each case; but I think that it would be a more sensible and practical approach to this problem simply to put the pre-1956 pensioners on the 1956 basis and then apply the increases which have taken place since then and which are likely to take place in future. This, too, would manifestly be of particular importance to those in civil or military employment who retire relatively early, since it stands to reason that among the pre-1956 pensioners there must, on the whole, be more who are Service pensioners or pensioners from employments with an early retirement age than from employments where it is normal to retire at the age of 60 or after.
These two measures, which we on this side believe are now fully due, would greatly help these important classes of pensioners. They are not measures which can be regarded as rash or ill-considered. I hope that when the Financial Secretary to the Treasury replies he will be able, 1440 as only he can with the resources of his Department behind him, to indicate the cost which would be involved at present in carrying out these improvements. The best estimate that I have been able to make with the resources available to me is that they could be achieved well within a cost of £10 million, and we on this side of the House attach concern and priority to this object such that we certainly would not allow £10 million to stand between us and the introduction of these important reforms which I stress again are a natural continuation and prolongation of a long series of improvements in principle of the treatment of public service pensioners which have taken place under Conservative Administration.
The hon. Member for Bristol, Central quoted the old doggerel line aboutThe Devil was sick, the Devil a monk wou'd be;The Devil was well, the Devil a monk was he.and it struck me that the cap fitted precisely, but not on this side of the House; that it was on the other side of the House that the fit was exact; that it was on that side of the House where the vows which they made when they were sitting here had been so speedily forgotten; that, as my hon. Friend the Member for Worcester (Mr. Peter Walker) observed at the beginning of this debate, if anyone had said a year or so ago that the Pensions (Increase) Bill which the party opposite would be bringing in now would take no account whatsoever of any of their professions and statements made while they were on this side of the House, he would never have been credited. Indeed, even against the background of the party opposite, their behaviour in this matter is a quite peculiarly flagrant and cynical disregard of the pledges which they have made.
The hon. and learned Member for Northampton (Mr. Paget)—[Interruption.]—[An HON. MEMBER: "Listen to the frogs."]—no, that would be —who explained to the House why he could not be with us at the close of the debate, when speaking in this House on 14th July reminded my hon. Friend the Member for Bournemouth, West (Sir J. Eden) of the history of the Byzantine General Belisarius, I reflected how appropriate that historical 1441 recollection was in the mouth of the hon. and learned Gentleman, for the House will recall the tragic end of that great General who, after serving through many years into old age his masters the Byzantine emperors, was eventually sent to languish, worse than on the back benches, actually in a prison in Constantinople. So it was very much Belisarius who was addressing us and reflecting on the consequences of the previous campaigns which he had undertaken as representing, and on the orders of, the leadership of his own party.
He said, and one certainly cannot complain of either the clarity or the candour with which the hon. and learned Gentleman spoke in that debate of 5th March, 1964:… what we can do … is to accept the principle of one pension for one service regardless of when it was rendered.That was a crystal-clear definition of the principle commonly known as parity. He went to to say:That principle should be adopted.Then came the very interesting personal passage, where he said:Perhaps I have no particular high personal ambition. I do not flatter myself that I have any great ability for a great rôle. Nonetheless, if, next year"—that would be in 1965—I find myself at the Dispatch Box with the opportunity to announce the adoption by the new Government of the principle of one pension for one service, whenever it was rendered, I shall feel satisfied that my career has been worth while. There is nothing nearer to my heart than this. It is justice and real good sense and I believe that it would make a major contribution to our recruitment problem."—[OFFICIAL REPORT, 5th March, 1964, Vol. 690, c. 1560.]
§ Mr. Powell
Yes, they all cheered.
In case there should be any misapprehension about the circumstances in which, a few months before the General Election, the hon. and learned Member made that statement, he reminded the House on 14th December last that he hadhad the task of being the spokesman for the Labour Party at the Dispatch Box on the last two Army Estimates and of making this pledge in most specific terms, which was that we would take the first opportunity to raise the pensions of the retired Service people to what they would have been had the man retired upon the latest pay scale.1442 Once again that was a crystal-clear definition of what is commonly meant by parity. The hon. and learned Gentleman continued:I was authorised to give that pledge, and one does not give a pledge of that sort in a casual way. It was discussed first of all, with my right hon. Friend the Secretary of State for Foreign Affairs"—I think that since then we have had a change in the identity of the holder of that office—who was at that time in charge of defence. It was discussed with the then Leader of the Party, Hugh Gaitskell. When I came to make the pledge at the Dispatch Box, the present Secretary of State for Defence was sitting beside me on both occasions. I had consulted him before speaking and he expressly approved what I had said afterwards.So far as I can see, this is as clear and emphatic a commitment as any party in opposition can make."—[OFFICIAL REPORT. 14th December, 1964; Vol 704, c. 76.]I would respectfully agree with that: It could hardly be a clearer or more definite pledge.
§ Mr. MacDermot
In the passage which the right hon. Gentleman has just read, very fully and very fairly, can he point to any words that constitute a specific pledge? All that my hon. and learned Friend said was that he personally was committed to it. He wanted to see it and he hoped that one day he would have the chance to announce it before the House. But he gave no pledge.
§ Mr. Powell
Does the hon. and learned Gentleman think that someone standing at the Dispatch Box and speaking for his party—and the hon. and learned Member for Northampton was the spokesman for his party—can say, "This is the right and honourable thing to do and I look forward, if I have office in an Administration, to introducing it" without making a pledge on behalf of his party?
§ Mr. Jennings
Does not the Financial Secretary agree that the specific pledge was contained in the wordsI am authorised to give this pledgeby the hon. and learned Gentleman standing at that Box.
§ Mr. Powell
It so happens that fortunately we are not solely dependent 1443 even upon the extraordinarily—[HON. MEMBERS: "Fortunately?"] Yes, fortunately. Hon. Members opposite have the intention of getting out of this in any way they can. They thought they would get out of it if Belisarius was on the back benches. It is for that reason that it is fortunate that we are not wholly dependent upon the spokesman whom they sacked, for the validity of their undertaking or their views, and are not obliged to concern ourselves with the strange and rather shabby exchange which took place between the hon. and learned Member for Northampton and the right hon. Gentleman the Minister of Labour at the end of the debate on 28th July, when the Minister of Labour said:there seems to be some conflict of opinion as to whether the pledge, or alleged pledge, was given with full authority."—[OFFICIAL REPORT, 28th July, 1965; Vol. 717, c. 596.] That adjective is interesting—" with full authority ".However, I want to call other witnesses. I want to call as witnesses hon. Members, as they then were, of the Opposition who are now members of the present Administration, who have not been dropped, who have achieved, presumably, at any rate some part of their ambitions. First, let me look at what the present Minister of State for Education and Science, the hon. Member for Walthamstow, West (Mr. Redhead) said in the debate on the previous Pensions (Increase) Bill. He said:The further back in time that payment of pension commenced, the larger is the gap of disparity.That is what I have been saying to the House. He also said:Full compensation for the loss in real value of pensions is clearly not achieved even by the provisions of the Bill …The hon. Gentleman was on to the point. He made it part of his case against the 1962 Act that full compensation for the loss in real value of pensions was not achieved the further back the payment of pension commenced.
But the speaker who was really explicit in this matter was the right hon. Gentleman who is now Chancellor of the Duchy of Lancaster, who said in that debate… in respect of each year that we look back, the pensioner is compartively worse off than the person of equivalent grade who retires subsequently.1444 If he were as well off that would be once again what is known as the principle of parity.
The right hon. Gentleman then went on to say:Is that a fair or rational basis? Should a man who retires in one year have a life pension lower than the man who retired the year after? This is what the existing system results in."—[OFFICIAL REPORT, 9th November, 1962; Vol. 666, c. 1334–95.]The right hon. Gentleman was asking questions. He was criticising the Bill. He asked whether it was fair or rational that in respect of each year that we looked back the pensioner was comparatively worse off than the person of equivalent grade who retired subsequently.
What answer did the right hon. Gentleman expect to be given to that question? Was this a Latin interrogative num which expects the answer "No"? Was that the meaning that the right hon. Gentleman expected public Service pensioners to give to his rhetorical question? Did he imagine that the organisations which naturally study with care every word spoken on behalf of one party or the other on this matter would say, "There is one thing clear. The hon. Member for Sowerby is against parity."? Of course they would not.
They would say "He is criticising what the Tories are doing. Why does he criticise it? Why is he saying, ' It is not a fair or rational basis.'? It is because it does not provide parity. It is because each year we look back the pensioner is comparatively worse off than the person of an eauivalent grade who retires subsequently". So, naturally, when they had heard what the hon. Member, as he then was, had to say about the 1962 Act and when they had heard what the hon. and learned Member for Northampton had to say in the debate of 1964 and when they read the sentences, which have been quoted in this debate from the Colonial Secretary and the Prime Minister, they naturally took that as a clear asseveration and undertaking by the party opposite that their policy was to introduce the principle of parity and they were in effect committed to doing that. If it was not intended to convey that, what was it all about? What was the point of the statement?
1445 In the course of this debate—the Chief Secretary, when he opened it, had a feeling that it might come to this—two subterfuges have been adopted by the Government to get out of their quandary. The first was to add in the social security benefits, to say that one is really not talking about public service pensions in isolation—that is not it at all—but about the total sums—
§ Mr. Lubbock
I apologise to the right hon. Gentleman for intervening, but, before he leaves the subject of the undertakings; to public service pensioners given by the present Government, I want to ask him this question. Does he recall that, at the time of the last election the public service pensioners' organisation issued a leaflet to all its members saying that the policies of the Labour and Liberal Parties were quite satisfactory because they believed in parity? Was any denial of that statement issued by the present Government?
§ Mr. Powell
That point had occurred to me, and I was coming to it a little later. Anyhow, a number of other people formed the natural conclusion and attached the natural interpretation to what hon. and right hon. Members opposite had been doing and saying. However, let us look at the argument which has been produced over and over again—I thought that the hon. and learned Member for Northampton tried to catch hold of it at one point—that we are not really talking about public service pensions in isolation but about the total sum which a person who has served the State receives in one form or another from the State. Putting it all together, adding the National Insurance pension to the public service pension, they say, it does not look all that bad; indeed, in many cases one can say that the total payments have increased by more than the cost of living.
This is complete subterfuge and evasion. We are concerned with the duties and moral obligations of the Government towards people who have been their servants in respect of the payments promised to them for that service. This is a wholly distinct matter from any other payments or, for that matter, benefits of any kind which may be conferred upon them and upon others by 1446 State action. Hon. and right hon. Members opposite do not really believe this argument themselves. If they truly thought that they were entitled to add in the increases in National Insurance Pensions, why did they introduce a Bill designed almost precisely to counterbalance the fall in the purchasing power of the public service pension since 1962, considered in isolation? If they had really taken their own argument seriously, they ought to have taken those other benefits into account when deciding the increases which ought to be written into this Bill. Moreover, even if they were relevant, which they are not, these payments from other sources, these social security payments which the Chancellor of the Duchy of Lancaster is reviewing and reviewing and reviewing, are in many cases not paid at all to public service pensioners, and certainly not paid to those who have suffered most from the long erosion of the value of their pensions.
Then, as a last attempt, we are told about the Tory legacy and the economic situation. There is a simple question here. The hon. Member for Orpington (Mr. Lubbock) has, in substance, already posed it. If they saw what the Tory legacy was —my hon. Friend the Member for Stroud (Mr. Kershaw) made perfectly clear that they knew and, indeed, exaggerated it, for what it was worth—why were they not careful to explain that what they had said hitherto could not, for that reason, hold good, or, at least, that its execution must be indefinitely deferred? Then when they came into office, even if they had to say, "Circumstances are now different for the time being from what we expected ", they could still, and surely they should still, in honour have done what the hon. and learned Member for Northampton said—they should have reaffirmed in principle the pledge which they had given.
I believe that the hon. and learned Gentleman spoke no more than the literal truth when he said that the Labour Party are in office today because of this pledge which they were understood to have given. I was very interested in the personal experiences which the right hon. Gentleman the Minister of Defence for the Royal Navy had at Brighton, Kemp-town. He reminded his hon. Friend the 1447 Member for Brighton, Kemptown (Mr. Hobden)—this was in the debate of 14th July—of theunusually large number of public service pensioners he counts among his constituents in Brighton".The right hon. Gentleman continued,As it happens, some of these constituents are well known to my wife and myself. He may not know that during the election, by helping with postal votes and transport, we claim to have contributed at least five pensioners' votes to my hon. Friend's slender majority of seven."—[OFFICIAL REPORT. 14th July, 1965; Vol. 715, c. 742–43.]Let the House consider what would have been the attitude of those pensioners if they had known that within a year of coming into office the party would have repudiated the pledge of parity which had been given and which had been repeated on the party's behalf and would have introduced a Bill precisely in line with the previous Conservative Act which the Labour Party had derided and attacked as inadequate.
What happened in that division and in many other divisions is that not five but dozens upon dozens of public service pensioners took at face value the undertakings given by the Labour Party, which have been repudiated this evening. When the right hon. Gentleman and his wife go again for the postal votes or with transport to take the public pensioners to vote, they will not have the same luck.
§ Mr. Geoffrey Rhodes (Newcastle-upon-Tyne, East)
Before the right hon. Member for Wolverhampton, South-West (Mr. Powell) sits down—
§ 8.58 p.m.
§ The Financial Secretary to the Treasury (Mr. Niall MacDermot)
When preparing for the debate I read the reports of the previous debates on Pensions (Increase) Bills and I was struck by the non-partisan character of those debates. As the hon. Member for St. Ives (Mr. G. R. Howard) said, speaking from his experience of these debates, which is long, we do not attempt to score party points in this kind of debate. Certainly I thought that his remarks accorded with previous practice.
1448 But he explained to the House when he began his speech that he had only just come into the Chamber and had not been present throughout. Had he been here he would have known why the somewhat partisan atmosphere had been created on what he was commenting. Personally I regret it. I do not think that this is a subject which gains from being made the subject of partisan party politics. [HON. MEMBERS: "Oh."] I will answer hon. Members opposite in their own vein later in my speech, but I want to make it clear at the outset that I do so with reluctance.
This is not a subject which gains, nor will public pensioners gain in the long run, if we break this long tradition of making this a non-party matter and if we try to turn it into a partisan and party matter. The reason why it has always been treated in the non-partisan fashion is that we realise that we have a peculiar responsibility to all these public service pensioners. As has been said often—it was said again today—we are concerned with people who have no powerful union to represent them and no powerful body to negotiate on their behalf. There are, of course, valuable associations which speak for pensioners or for sections of pensioners, but they are not in any true sense negotiating bodies and cannot be negotiating bodies.
The people for whom they speak have devoted many years, if not the whole of their working lives, to the public service and they look to us as hon. Members, and particularly to back bench Members, for support and protection. Many hon. Members on both sides of the House have devoted a great part of their parliamentary life to furthering the interests of public service pensioners. Mr. Speaker, as we have been reminded, was once prominent in this respect. We have heard from many such Members during the debate.
It was for me a somewhat bewildering task, approaching this field as a newcomer, as I did when I came to the Treasury, to try to understand its underlying philosophy. I fear that the truth is that with the many changes which have been made in public service pensions since the war the whole of this scheme has got into such a tangle that it is a veritable Gordian knot. Even if I had 1449 the philosophical skill of the right hon. Member for Wolverhampton, South-West (Mr. Powell), which I have not, I would find it impossible to resolve the philosophical basis for these Acts. One of my predecessors as Financial Secretary, Jack Simon, as we knew him then—he is now much more eminent—evidently found himself in the same difficulty, and he said that he had reached the conclusion that there was no underlying principle to Pension (Increase) Bills and that it was purely an empirical matter to be decided on the balance of conflicting interests.
It is clear to anyone who has listened to the debate and read reports of similar debates in recent years that there is a general dissatisfaction in all parts of the House with this excessively empirical approach. It is felt that there should be some more clearly recognised and clearly defined philosophy of pensions increases, some better way of tackling the problem, perhaps some better machinery than these recurrent Acts of Parliament. The hope was expressed, as my right hon. Friend said, at the time of the 1962 debates that that Act would be the last Measure of its kind to be brought before Parliament. I am disappointed, as I think all hon. Members concerned in these matters are disappointed, that that is not so. Such disappointment has been expressed on both sides of the House today.
But this particular criticism comes singularly ill from the Front Bench opposite. During the years they were in office they brought forward many Pensions (Increase) Acts and although they introduced some innovations which, on the whole, were welcomed by hon. Members on both sides, and some of which at least were the result of earlier pressures from both sides, they never succeeded in finding any solution in depth. They have, of course, now a natural impatience. They now expect us to make good in one year what they failed to achieve in 13 years.
In some matters we have been able to do so but we are ready to admit, as my right hon. Friend has already explained, why it is that we are not able to do so in this field in one year. Hon. Members who are familiar with the subject know full well that, while it is easy to criticise, it is not easy to find a workable and generally acceptable solution, 1450 quite apart from the particular objections which there are to particular solutions. There is one general difficulty and that is that the problem cannot be considered in isolation.
One or two hon. Members, indulging, I think, in a little wishful thinking, have wished that it would be possible to separate this problem and review it in isolation. I think they know in their hearts that it is not really possible to do so. Any radical alteration in the system of public service pensions increases raises vital and difficult questions on the relation ship between public service pensions and National Insurance pensions on the one hand and occupational pensions in the private sector on the other.
As the House knows, a comprehensive review of the social services is being undertaken. It would accordingly have been quite futile for us to have tried to make a radical review of the system of public service pensions increases until the results of that comprehensive review were available. I was asked by the hon. Member for Worcester (Mr. Peter Walker) whether this subject forms part of the general review. I must make it quite clear that it does not.
The position is that we hope that the general review will throw up new ideas and point to a solution of the problem of the relationship between National Insurance and occupational pensions as a whole. If we are to succeed in finding any move towards what has been spoken of as a dynamic principle in pensions policy, this is something that has to be done.
Clearly, it would be folly to try to make a review of this subject in anticipation of the general review and it is when the general review is available that we shall be able to review this problem and then to consider to what extent and in what way we can introduce these principles which have been spoken of by years by hon. Members on both sides.
§ Mr. Peter Walker
Could the hon. and learned Gentleman also answer my second question, which was when he expects the general review to be completed?
§ Mr. MacDermot
No, I cannot give a date. My right hon. Friend the Chancellor of the Duchy of Lancaster has frequently been pressed for an answer and it is not one I can give.
1451 But I can now answer the rhetorical question put by the right hon. Member for Wolverhampton, South-West as to what my right hon. Friend said in these debates in earlier years, when he was referring to the principle of parity. Of course, if the House is having a general discussion of the principles of public service pensions increases, this is always a matter which will be questioned and raised, but for the right hon. Gentleman to try to extract some political party pledge out of the almost rhetorical questions my right hon. Friend asked is beneath his intellectual capacity.
§ Mr. Powell
Was the Chancellor of the Duchy of Lancaster saying that he was in favour of parity or against it?
§ Mr. MacDermot
I know of very few people who have said that they are not in favour of parity. We all would love to be able to introduce it. But the question is whether one can introduce it, to what extent and when. One hon. Member opposite claimed that the Opposition at least have the political honesty to admit that they are against parity. I do not know who he was speaking for but he was not speaking for the hon. Member for Worcester. If he was speaking correctly for the Opposition, then apparently the hon. Member for Worcester, speaking from the Front Bench opposite, was not. What the hon. Member for Worcester proposed and what I understood him to commit his party to was the introduction, at once on his party's return to power, of parity to 1956.
Many questions have been asked during the debate. I cannot answer or deal with all of them, but I will deal with as many as I can and, if I fail to deal with any particular issue, perhaps the hon. Members concerned will get in touch with me and I will try to help. I will confine myself to dealing with some of the more general issues which have been raised. In the latter part of his speech, the right hon. Member for Wolverhampton, South-West sought to spell out some broken party pledges. Let me remind him of what his hon. Friend the Member for Burton (Mr. Jennings) said earlier. The hon. Gentleman reminded the House of the official party policy on this subject which was put out by Transport House. 1452 The hon. Gentleman always speaks very fairly on these subjects and I do not think that he approaches them in a partisan spirit. The quotation which he made was:While a Labour Government would not be able to accept parity in full or at once for financial reasons, it would be prepared to give careful and sympathetic consideration to any proposals made.If hon. Members think that they can spell out a breach of electoral pledge from that, they are using a little misplaced ingenuity.
§ Mr. Jennings
I am grateful to the hon. and learned Gentleman for his remarks about me. However, I made the separate quotations, one from Transport House and one from the present Prime Minister, in order to show the confusion of thought and the contradictory policies being put out.
§ Mr. MacDermot
There was no confusion of thought. The Prime Minister was referring to the same sympathetic consideration which would be given to the underlying principle, but there was certainly no kind of pledge of the sort which hon. Members opposite are trying to build up in order to knock down.
As for my hon. and learned Friend the Member for Northampton (Mr. Paget)— I regret that he is not here, but he has explained why he could not be present— as I stated in an interjection in the speech of the right hon. Gentleman, if anyone looks fairly and carefully at the actual words that my hon. and learned Friend used, speaking from the Dispatch Box opposite, he will see that it is quite plain that he did not purport to make any pledge for the party and did not make any pledge on behalf of the party. What he did was to commit himself personally to being in support of this solution and to express the wish and the hope that when a Labour Government came to power, they would be able to introduce it. Incidentally, he was limiting it to the Armed Forces. He certainly did not give any pledge. He was not authorised to give any pledge. I have no doubt whatever that he was personally authorised by the two of my right hon. Friends to whom he referred to do that which he did, namely, commit himself personally. That is as far as he went.
§ Sir Henry Studholme (Tavistock)
Is the hon. and learned Gentleman aware 1453 that I have in my possession a copy of a letter which the hon. and learned Member for Northampton (Mr. Paget) wrote to one of my constituents saying, "If, as I hope, I am the next Secretary of State for War, I shall see to it that parity is given to cases like yours."?
§ Mr. MacDermot
In politics we all have to put up with some unrealised hopes, but we cannot convert our hopes into pledges.
I will turn to the criticism which has been levelled by hon. Members opposite that we have not introduced measures to which the hon. Member for Worcester pledged his party earlier today, namely, parity to 1956, making pensions payable from the age 55, and establishing a system of regular periodic reviews. The hon. Gentleman was asked whether, before committing himself to this new course, the Conservative Party had costed its proposals. I have undertaken many debates with the hon. Gentleman, but I have never seen him so embarrassed as he was at that moment, and rightly embarrassed when we remember all the righteous indignation levelled by hon. Members opposite when it was suggested that we had failed to cost our proposals. After all their propaganda of how their proposals were costed, here he was, giving a pledge on behalf of his party to do that which they had failed to do during 13 years. He had to admit that he had no notion of what the cost would be. What he said was, "We will be only too pleased to find out what the cost is." Later in the debate the hon. Member for Orpington (Mr. Lubbock) sought to come to his assistance and said that, as a result of a Question which had been put down, he could tell him what the cost of his proposals would be and that it would be £7 million.
§ Mr. Peter Walker
As the hon. and learned Gentleman says, I have debated with him many times and he is normally much fairer than this. It is not a fair interpretation of what I said at all. I did not say that I had no notion at all of the cost. Of course, I had a notion of the cost. I said that I did not have details of the cost, as would be revised by the interpretation of this particular Bill. If he reads the report in HANSARD yesterday he will see that this is made quite clear. The original estimates which 1454 we made on this were approximations of £5 million to £8 million. What I did not know was the detailed cost of what was considered.
§ Mr. MacDermot
I am sorry if I misrepresented the hon. Gentleman. He said, "We will be only too pleased to find out what the cost is." This is a very remarkable position for hon. Gentlemen to be in when they are pledging their party to new measures, to be introduced as soon as they get back into power. It is also a peculiar posture in which to find the hon. Member for Worcester, when we remember his strictures, levelled against us on the subject of public expenditure.
Here he is, apparently prepared to support a commitment of his party, which is open-ended, and of which he does not know the cost. The hon. Member for Orpington was right about the cost of these proposals, at the time when the Question was asked, which was last July. Since then we have had this Measure, and, assuming that the House is going to pass it—and I think we can make this assumption because hon. Gentlemen on both sides are supporting it—the cost is enormously increased. We have to add not only 16 per cent. to the cost of that increase, but 16 per cent. has to be added to the total pensions involved. The total cost now of the two measures together, we are advised, would be £15 million. Taking them separately the cost of parity to 1956 alone would be £11 million, the cost of the reduction of the entitlement from 60 to 55 would be about £5 million, but there is an overlap between the two of about £1 million; so the two together total £15 million. This is half as much again as the right hon. Member for Wolverhampton, South-West estimated it would cost. Both the right hon. Gentlemen and the hon. Member for Worcester said that they believed that the cost of these reforms were ones which should be given priority. They were the actual words used by the hon. Member for Worcester. Priority over what? Do the right hon. and hon. Gentlemen mean that we ought now, in our present economic situation, to be bringing a Pensions (Increase) Bill, of which the total cost would be £40 million? If so they should say it.
§ Mr. MacDermot
That is different again. His hon. Friend was criticising us because we are not doing it now. I understand from what the right hon. Gentleman is saying that he admits that it is not something which we can or should do now, but at some unspecified date in the future when we have more resources available for this purpose. I ask him, does he think that it is something which we can and should introduce now? If so he must face up, with that responsibility which he usually shows in such matters, to the public expenditure aspect. Either it is a proposal additional to what we are proposing, or it is in substitution. If it is additional he is going to raise the cost of this Bill to £40 million.
Is that what he is suggesting we should do? If he is not going to make it additional, he will have to deduct £15 million from the pensions increases provided for in the Bill, which total £25 million. It would drastically reduce the percentage increases for which provision is made. If this criticism is levelled against us, we are entitled to know what is the Opposition's proposal.
§ Mrs. Anne Kerr (Rochester and Chatham)
My hon. and learned Friend mentioned the figure of £40 million. May I suggest that by cutting out one Polaris submarine from our defence programme we would save at least £60 million? I should like to see the money saved by doing that used for our pensioners.
§ Mr. MacDermot
I was not seeking my hon. Friend's solution to this problem, which I think I could have anticipated. What I was seeking was the solution of hon. Members opposite. I shall be very surprised if I learn what it is. [Interruption.]I was a little surprised that the right hon. Member for Wolverhampton, South-West should enter this debate, but when I remember the contributions which he has been making in the House and outside on the matters for which he is officially responsible I can understand why it is that he is, not relegated, but perhaps, promoted to be Opposition Front Bench spokesman on this subject.
§ Mr. Powell
It is why the hon. and learned Gentleman finds me taking a 1456 personal interest, and on behalf of my party, in the well-being of Armed Service pensioners.
§ Mr. MacDermot
I thought that that might be the case until I heard the right hon. Gentleman's speech, which had remarkably little to do with the position of Armed Service pensioners.
I should make it clear that we cannot introduce and are not putting forward the proposal in the Bill for parity to 1956, first, because of cost. As I have said, it would result in a quite unacceptable increase in the total cost of the Bill. Secondly, as has been stated repeatedly and I think accepted by all hon. Members, the Bill is intended as an interim Measure. It deliberately follows the pattern of previous Bills. It is a holding operation—and we hope and believe that it will be non-controversial for that reason—until we are in a position to bring forward proposals for a more radical solution.
To make a proposal which, even in this limited sense, introduced the principle of parity would raise very great and deep questions of principle.
§ Mr. Lubbock
I do not expect the hon. and learned Gentleman to give the figure now, but could he have a calculation made of the net increase, because this £40 million paid to the public service pensioners will be subject to tax? I should like to know what the actual cost to the Exchequer would be after making allowance for that.
§ Mr. MacDermot
I do not think that that is a calculation which can be made. All estimates given in these matters are in gross terms, and they always have been.
I turn to the second proposal, namely, the reduction of the age qualification to 55 years. The pressure for this reduction comes, of course, from groups of pensioners who are particularly affected. It comes especially from Armed Forces officers. But the principles of Pensions (Increase) Bills apply to all pensioners, and it has not been thought right, and we certainly do not think it right, in a Measure of this kind to try to single out a particular group or groups of pensioners for preferential treatment.
As has been said, the reason for the 60 years age limit is well known, namely, 1457 that it is the minimum pensionable age for the vast majority of civil servants, teachers, people employed in the National Health Service and local government employees with 40 years' service. The result is that the majority of them are eligible for increases as from their retirement date.
The arguments against reducing the age limit are equally well known. People under 60 years of age can normally be expected to find further employment and thus offset by work at current rates of pay the reductions in the value of their pensions and the increases in the cost of living. I know that there are—we all know from constituency cases—particular cases of people who are in difficulty over this matter, the difficulty particularly of the elderly, the more elderly officers retired from the Army who may have difficulty in finding other employment. But, generally speaking, I think it is fair to say that even in that class of people the vast majority of them do find employment and find it fairly readily. In these circumstances it does not seem right to use the limited public funds which are available to help a class of people who are relatively in a better position to help themselves. It would not fit in with the general design of the Bill, which is one to relieve hardship, nor, for that matter, with the national need to encourage all who can to help fill the manpower gap.
I should make it clear to my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Rhodes) that people who retire due to health reasons, or, for that matter, subsequently become disabled after retirement are entitled to pension increase.
The next main question raised was why we have not repeated the provision for a flat rate increase for pensioners over 70. We gave extremely careful thought to this, whether we should repeat or roll forward the £20 increase, which, when it was introduced, was a novel proposal, in some ways a regression to older methods of pensions increase, and which, when it was introduced, had a mixed reception in the House. Some Members approved of it; others were more neutral. My right hon. Friend the Chancellor of the Duchy, speaking from the Opposition Front Bench, described it as a new feature welcome in some respects but not perhaps 1458 wholly defensible from the point of view of principle.
I think that the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) who introduced it was guided by two main considerations. He had an extra amount, as it were, to spare over and above what was needed to make good the direct increase in the cost of living. He wanted to help the older pensioners, and he would have been in difficulties if he had tried to enlarge the maximum percentage increase, because then he would either have had to extend the 2 per cent. steps back beyond 1956 or else increase the size of the steps, and either of those courses, for highly technical reasons which I need not seek to explain now, would have produced many anomalies.
We are now, of course, not similarly restricted, because another three years have elapsed, and we came to the conclusion that if, as proved to be the case, we were able to afford more than a straight cost of living increase, it would have been met by an increase of 12 per cent. for those who retired before 1st April, 1959, and we thought the better and fairer way of doing it was the one we chose, namely, by granting two extra steps of 2 per cent. for the pre-1959 retirements.
The reasons for this are that the £20 flat-rate increase operated in a rather haphazard way. It would have helped many who had retired comparatively recently—say, at 65—and not given help to many retired far longer but who had not yet reached the age of 70 but retired with a considerably smaller pension in real terms and whose pension would have suffered far more from the effects of inflation when they reached the age at which they would be dependent upon it.
Secondly, I should tell the House that I do not think that the £20 increase was generally welcomed by the pensioners. I had the pleasure of receiving a deputation from the Public Service Pensioners' Council earlier in the year, and I ask them specifically about this matter, and they were not keen to see it repeated. I got the impression from them that they felt and that their members felt that it savoured of charity. What they pressed for was a higher percentage 1459 increase for the earlier retired. I am not suggesting that we have been able to go as far as they wanted. They put certain specific figures to me higher than those we were able to give, but the method we have chosen is the one they suggested. Having a repetition of the £20 flat-rate increase would benefit relatively few people in the immediate future whereas the Bill gives immediate help to those more in need.
§ Mr. Dean
I see the hon. and learned Gentleman's point, but would he not agree that for those on very small pensions even a percentage increase of 16 per cent. is likely to be less advantageous to them than a lump sum increase, and is this not shown by the fact that if we compare this Bill with the 1962 Act the pensioners getting pensions below £500 are getting a smaller increase on this occasion than they would have in 1962?
§ Mr. MacDermot
That is quite true. I gave way a little too early, because I was just coming to that point.
I realise that some people might well criticise the provision on the grounds the hon. Member has stated, namely, that the flat-rate increase would give some help to the poorer pensioners, and this is true, but this is a criticism which can be levelled against any movement away from a flat-rate increase, which always gives the most help to the poorest pensioners, but I think it is generally accepted in all parts of the House that it is right to move away as was done by the party opposite in 1956 from the First World War system of flat-rate increases to the more modern one of percentage increases.
I would say in answer to the hon. Gentleman that it is sometimes forgotten that our system of percentage increases is superimposed on and operated on the pensions as increased by earlier Measures. Earlier post-war Measures did discriminate in this way in favour of the poorer pensioners and those who suffered from that discrimination are naturally complaining about it still. We have heard that case argued already today. I would say that that discrimination can be defended, and, of course, it is defended, on social grounds, but the relevance of it here is that that preferential treatment 1460 given to the poorer pensioners in the earlier post-war Acts is repeated and extended by the percentage increase system.
Let me give an example. Since 1950 the cost of living has gone up by 80 per cent. A postman who retired in 1950 with 13 years' service would have got a pension of £50. Under the Bill that will be increased to £126, together with the earlier Measures—a total increase of 153 per cent. compared with a cost of living increase of 80 per cent.
Compare him with a senior executive officer who retired at the same time with 40 years' service. He would then have been entitled to a pension of £500. That pension will now be increased not by 153 per cent. but by 69 per cent., to £845. The effect, therefore, is that the poorer pensioners are still doing better in relation to their original pensions than the better off pensioners. I think that that is the result which most hon. Members wish to achieve.
It is pointed out that the Bill does not provide for those who retired since the cut-off date and that those pensioners also have to some extent suffered from the rise in the cost of living which has occurred since then. That, of course, is true and it is equally true that the Bill provides no relief from it. However, all classes of the community, even those who are fortunate enough to be able, other than by Act of Parliament, to secure an increase in their incomes to compensate for inflation, will have to accept a time lag. Generally speaking, those who retired most recently have done so with higher pensions, geared to higher rates of pay. This increase, which is 6.5 per cent. since the cut-off date, compares with an increase of 5.3 per cent. between the cutoff date and the introduction of the 1962 Act.
My hon. Friend the Member for Gateshead, West (Mr. Randall) asked me to consider whether the cut-off date could be brought forward. I will certainly look at that again but I cannot hold out any real prospect that we will be able to move the date forward.
A number of hon. Members have again raised the question of whether we should not have built into our system some kind of automatic increases or reviews. This is a point of view with which I have a 1461 great deal of sympathy, but I must again point out that this is an interim, temporary Measure and that it would be wrong to try to introduce some permanent new machinery until we have devised and decided upon the permanent policy.
There are certain difficulties and drawbacks about the various solutions which have been proposed, but I need not go into them in detail now. The one most commonly spoken of is that it should be tied to the cost of living index. A great many pensioners who are benefiting under the Bill would benefit much less if it were just tied rigidly to the cost of living because a lot of them are doing considerably better than the mere increase in the cost of living.
Other proposals are that it should be tied to average earnings, that there should be regular periodic increases, and so on. We were also asked that there should be automatic reviews; say, every two or three years, and one hon. Member suggested every year. I should explain that there is, in a very real sense, a continuous review of this subject. I admit that I was a little sceptical—as no doubt most hon. Members are when they hear this—when I first heard about this and wondered what it meant in practice. In fact, there is a section at the Treasury which, with great skill, goes into these matters and is carefully watching the whole time the position of pensions in relation to the other factors, in particular changes in the cost of living. As soon as the gap has widened to a point when it is felt that the matter should be brought to the attention of Ministers, that is done.
I appreciate that we have been under a good deal of pressure on this matter since we came to office. I assure the House that I was already deeply involved in this subject and in the preparation which led to the Bill long before I personally had been subjected to any pressure on the matter from hon. Members. It is absolutely true that this matter is under continuous review and I am doubtful whether it would assist to try to write the sort of provision that has been suggested into the Bill. As I say, in certain circumstances pensioners might be worse off with a rigid period of review. In any case, it is not a matter cm which we should seek to legislate at the moment.
1462 My hon. Friend the Member for Accrington (Mr. H. Hynd) raised the position of railway superannuitants. I must be careful to try to keep in order on this matter. All I need say is that the nationalised industries already have the necessary legal powers to pay and, when necessary, to increase pensions. There is, therefore, no need for further provision in the Bill. The industries are commercial undertakings which must be free to take their own decisions and it would not be appropriate for us to seek in Parliament to impose obligations on a particular nationalised industry to pay particular pensions.
I appreciate my hon. Friend's great concern in this matter and I assure him that I share it. There are few hon. Members with more railway superannuitants in their constituencies than in mine, and I therefore share by hon. Friend's concern. The boards of the industries are now considering what action they should take in the light of this Bill. If the Railways Board proposes to my right hon. Friend the Minister of Transport an appropriate scheme of pensions increases for its staff, I can give an assurance that authority to implement it will not be withheld simply because the railways are at present incurring a deficit which has to be financed by the Exchequer. I do not think that it would be proper for me to go any further into it than that, as it is a matter for which my right hon. Friend the Minister of Transport is responsible.
I was asked a number of questions about overseas pensioners. The hon. Member for Stroud (Mr. Kershaw), whom I do not see here at the moment, raised a particular point about people who, when recruited, were domiciled abroad, and were now resident here. It is true that they are not covered under this Bill, as they were not covered under other Bills, and at first sight I do not see the strength of the argument why they should be.
I can understand the point of extending our Pensions (Increase) Measures to people who were recruited in this country and who went to serve overseas and draw a pension from the overseas country, but if someone is recruited not from this country, but at the time of recruitment is domiciled abroad, and for whom the British taxpayer has no responsibility, why should the British taxpayer have to 1463 pay him a pension increase in respect of his service abroad simply because he has come to live in this country? I am prepared to consider further argument on the matter if the hon. Gentleman cares to write to me about it, but I must say that that is my immediate reaction.
The hon. Member for Rye (Mr. Bryant Godman Irvine) asked me to explain the provisions in the Bill about re-employed civil servants, and I shall seek to do so briefly. There is no problem where civil servants are paid a separate pension for their further service, nor is there now where they serve on in the same grade. The problem arises where they are reemployed in a lower grade, and it falls, and has fallen, into two categories—first, where they are re-employed at a lower salary, and, secondly, where they are re-employed at a salary which has crept just above their earlier retiring age salary.
Where they are re-employed at a lower salary, their pension at present dates from, that is to say begins at, the date of the final retirement. Civil servants must, and teachers may, get a pension based on their earlier higher emoluments before their first retirement. The effect of these two provisions together is that they do not get the benefit of pension increases, and it may be, and often is, the case that, as a result of a further service, from the point of view of their pension they are no better off than they would have been if they had never been re-employed. They cannot be any worse off because there is a provision in the 1959 Act to ensure that.
The present rule which has given rise to dissatisfaction was based on a fear that if they were given the benefit of pension increases they might be better off than civil servants who served on in the same job, but in fact it has proved in practice to occur very rarely. We propose, therefore, to make the pension begin at the time of the original retirement, but calculated on the basis of the total number of years actually served. The effect of this is that they will get the benefit of the Pensions (Increase) Acts.
In the second case, where the salary has crept just above the earlier retiring age salary, the pension now is based on the final emoluments, that is, what he 1464 was earning at the time of final retirement, and again cases will occur where he is no better off than colleagues who retired at the same time and have never been re-employed. We propose, in effect, the same solution, and the effect of this change, apart from removing what has been quite a long-standing grievance, will be to provide a very real incentive to further service.
The hon. Member for Rye asked me two or three other more specific and particular questions, and perhaps it will save the time of the House if I write to him about those.
The hon. Member for St. Ives (Mr. G. R. Howard) asked about the position of pensioners resident in Rhodesia. This is of some immediate and topical interest to the House, and I should perhaps say a word about it. It is intended that pensioners who are covered by the Bill and who are resident in Rhodesia should continue to receive their pensions and to receive the increases under the Bill. The machinery is likely to be that a Rhodesia account will be established in London. Pension-paying Departments should send payable orders which can be drawn on this account, direct to the pensioners through the post. The pensioners will then, we hope, be able to cash the orders at their local banks, which will clear the transaction with the account in London, and appropriate instructions are being issued to the pension-paying Departments.
I suggest to the House that although this is an interim Measure—a holding Measure—it compares very favourably with previous Bills. Judged by any standard the percentage increase in the Bill will stand comparison with its predecessors. If we look at it, first, in relation to the cost of living we find that since the operative date of the previous Measure the cost of living has risen by 10 per cent.—since 1st April, 1963. The maximum increase under the Bill is 16 per cent.—that is, 6 per cent. higher. Under the 1962 Act the comparable figures were 9 per cent. in respect of the cost of living and 12 per cent. for the maximum increase—which was 3 per cent. higher although there was then also a £20 increase; under the 1959 Act there was a 6.4 per cent. increase in the cost of living and a 12 per cent. maximum increase—5.6 per cent. higher, and 1465 under the 1956 Act an 11 per cent. cost of living increase and a 10 per cent. maximum increase, which was 1 per cent. less.
Some people would say that this does not give the proper picture, and that we should compare it with the increase in the cost of living since the cut-off date of the previous Act. Making that comparison we find that under the 1956 Act the cost of living had risen by 6½per cent. since the previous cut-off date, and the maximum increase was 10 per cent.; under the 1959 Act the cost of living had risen by 24 per cent. and the maximum increase was 12 per cent.; under the 1962 Act the cost of living had risen by 16 per cent. and the maximum increase was 12 per cent., and under this Bill the cost of living had risen by 17 per cent. and the maximum increase is 16 per cent.—closer than had been achieved by any previous Bill.
At the time when the 1962 Bill was introduced my right hon. Friend the Chancellor of the Duchy of Lancaster, speaking for the Opposition, described it as the best Pensions (Increase) Bill so far—generous words compared with some that we have heard today. The right hon. and learned Member for Chertsey (Sir L. Heald) whom I was glad to see here earlier today, said thatone cannot properly overlook the fact that this Bill "—the 1962 Bill—if Pensions (Increase) Bills are the way that we have to do it, cannot possibly be described as anything but a generous application of that method."—[OFFICIAL REPORT, 9th November, 1962; Vol. 666, c. 1339.]What I say to hon. Members is that this is no less generous than that Measure was. In spite of the very tight public expenditure discipline that we have had to impose we have found room in the programme for a Measure which is not only the most costly ever introduced, in real terms—and I am sorry to tell the hon. Member that again his arithmetic is wrong, but he was very understandably misled by the confusing way in which the financial effects of the different Bills have been put out; in his 1466 last intervention, in relation to the present Bill, he omitted to add the £1.4 million, but on this occasion he made the mistake of adding the £1.4 million in the previous Bill, because it was already included in the total of £17.7 million. I will go into the figures later but I can assure him that this makes a greater increase in real terms than did the previous Bill. Not only that; we believe that it is distributed in a fairer way, benefiting most those who have been longest retired. It gives the highest maximum percentage increase ever awarded and gives that percentage increase on the largest base. It applies to the largest number of people —710,000, compared with 615,000 in the previous Bill. It rectifies a long-standing grievance about re-employed civil servants. And all this is done on top of the action that we took in the last Session to give the largest increase ever under the present National Insurance system to the National Insurance pensioner.
We put this forward for good reasons, which have been explained, as a temporary Measure, or an interim Measure, pending a deeper review of the pensions increase system than is now possible. As such we have no cause to be ashamed of it, and we commend it to the House.
§ Mr. G. R. Howard
While thanking the Financial Secretary for the answer which I am sure would be very much appreciated by those concerned in Rhodesia, may I ask whether he will bear in mind the other case which I put to him of Civil Servants from Ghana and the matter of the automatic deductions from Ghana? Are the Government doing something to make them up?
§ Mr. MacDermot
I shall be glad to look at that but as I listened to the hon. Member the thought struck me that there was not much that we could do about it.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Howie.]
§ Committee Tomorrow.