|Not later than 1st July 1955||25 per cent.|
|After 1st July 1955 but not later than 1st July 1956||18 per cent.|
|After 1st July 1956 but not later than 1st April 1964||14 per cent.|
|After 1st April 1964 but not later than 1st April 1965||20 per cent.|
|After 1st April 1965 but not later than 1st April 1966||15 per cent.|
|After 1st April 1966 but not later than 1st April 1967||10 per cent.|
|After 1st April 1967 but not later than 1st April 1968||5 per cent.|
§ Let me say straight away that I move this Amendment to enable a discussion to be held upon the principles which are embodied in Part IV of Schedule 1 relating to the increases granted by the Bill. I must make it perfectly clear that I do not regard the Amendment as a definitive statement of what ought to be done at the present juncture.
§ I stated in the Second Reading debate, and I think I repeated in Committee, the view of the Conservative Party relating to the public service pension issue generally. We would deal with the older pensions by bringing all the pre-1956 pensions up to the same level as they would have been at had the pensioners retired in 1956, with the appropriate increases since then; we would reduce the age at which increases would be payable from 60 to 55; and we would adhere to the biennial review which we have just discussed. Nevertheless, I think it is right that even though these proposals are not to be written into the Bill—and, indeed, the perhaps most important bit, the 1956 proposal, is out of order under the Money Resolution and cannot be debated—it is right that the House should examine the logical basis, if, indeed, there 142 is a logical basis, for the pattern of increases proposed by the Government.
§ There are five things which the Government could do about public service pensions. First, they could take the view which used to be taken, that no increases should be given and that a pension once awarded was final. That view has been rejected by both parties and plays hardly any part in our thinking.
§ Secondly, they could go to the other extreme and accord the principle of parity, as the right hon. Lady's party promised before the 1964 election, and this is a policy to which I believe the Liberal Party is committed even now. The Labour Party and the Conservative Party, faced with the considerable cost and the difficulties of principle, have rejected full parity.
§ Thirdly, increases could be given so as to relieve absolute hardship; that is to say, increases could be given only to the smallest pensions, the increases being subject to overall maxima so that they did not go beyond the relief of hardship. This was the pattern in some of the earliest post-war legislation.
§ Fourthly, the Government could relieve relative hardship by compensating public service pensioners for increases in the cost of living.
§ Fifthly, the Government could go further than that and increase all pensions by amounts representing real increases in the standard of living of the pensioners.
§ One can detect in the Government's present philosophy as embodied in Part IV of the Schedule elements of all five approaches. I have said that pegging the pension so that it never rose was not part of our philosophy, but this is not wholly right. The cut-off date for the Pensions (Increase) Act of 1965 was 1st April, 1964. Therefore, pensioners who retired after that date have had no increase of their pensions for five years; yet it is not disputed that the cost of living has risen since April by nearly 22 per cent., and it may well be 23 per cent. by 1st April, 1969. This cannot be right. Public service pensioners should not within five years have to suffer an increase of 4s. in the £ in the cost of living without compensation. This is a last vestigial reflection of the proposition that pension increases should not be 143 awarded save in cases of absolute hardship.
I come to the second argument, that of parity. I am sorry that the right hon. Lady has left, since I am about to quote at some length her speech on Second Reading, in which appear to be elements of the Government's argument on parity. I shall quote from not more than a column and a quarter of different parts of the right hon. Lady's speech. She said:
The 1959 Act introduced the graduated scale of increases, varying according to the date of the pension. It was followed with variations in 1962 and 1965 Acts, …
These are the important words:
… and it has helped to bring the old pensions into a closer relationship with those awarded more recently.
If that means anything, it must mean a partial recognition of the doctrine of parity; yet the right hon. Lady later said that the Government, like the Opposition, rejected the concept of parity. She went on:
The extent to which this levelling up process has gone varies in different parts of the public services, but in general it is still true to say that those most recently retired are most favourably placed. While there is no an event pattern over the whole area and, in particular, some of the oldest and smallest pensions have already been brought close to current standards, many of those who have been retired longest are still the furthest behind.
§ There are several phrases there—" levelling up ", "current standards", "furthest behind"—which can be referable only to the level of pensions of those currently retiring. That is what is embodied in the doctrine of parity.
So in those two passages the Government appear, perhaps inadvertently, to be adopting the principle of parity. Yet in the very next sentence the right hon. Lady shifted her ground to an entirely different basis, that of absolute hardship:
And, of course, as they are among the most elderly, they are the least able to help themselves. Some, the oldest among them, have no National Insurance pension to reinforce their occupational pensions.
It is, therefore, not surprising that the strongest public sympathy, both inside and outside of the House, continues to be expressed for these pensioners.
§ Note, again, the language, the word "assistance". She talks, immediately after, of providing the maximum assis- 144 tance to those longest retired. The word "assistance" is the language of the Welfare State, which I thought was wholly out of place when considering occupational pensions.
However, to do the right hon. Lady justice, she rapidly slid away from "assistance" to rather firmer ground, the cost of living. She said that the increase of 18 per cent. provided in the Bill
'… should also be compared … with the increase of 12.3 per cent. in the Index of Retail Prices since the 1965 Act came into operation on 1st January 1966 … these people will not merely have the purchasing power of their pensions restored to the point it had reached immediately after the passage of the last Act; they will enjoy a further significant improvement in real terms in the value of their pensions."—[OFFICIAL REPORT, 28th January, 1969; Vol. 776, c. 1124–1125.]
§ Therefore, she ran the whole gamut from my first to my fifth point—the five bases of increasing pensions in a column and a quarter.
§ The right hon. Lady has backed every single horse in the stable: "this brings them closer to current standards"—that is the argument based on parity; "our sympathy requires that those least able to help themselves should have the maxi mum assistance "—the language of hard ship and the Welfare State; "increases should be compared with the cost of living"—the concept of relative hard ship; and, finally, "they should bring real increases in the cost of living"—the last argument. She has displayed more muddled thinking in just over a column of HANSARD than most Ministers reserve for a whole Second Reading speech—
§ Mr. Jenkin
The right hon. Lady is entitled to regard it in that way, but we should do better than this. We should establish, as my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) said repeatedly in Committee and today, some firm basis of principle upon which these pensions are to be increased. I should like to suggest how, and the Amendment is the peg on which I hang this.
We should adhere, not solely but primarily, to the firm principle of the cost of living. We should aim to protect 145 pensions against erosion of their purchasing power by inflation. That is to say, the principle is that a public service pension, once granted, and in normal circumstances, should be assured of a reasonable protection against increases in the cost of living.
Where, because of past default, perhaps by Governments of both parties, they have not been so protected, one needs in addition steps to bring up to the appropriate level those pensions which have fallen sadly behind. That is the purpose of my party's 1956 proposal. But once those pensions have been brought up to the appropriate level, the purchasing power of that level should be maintained.
We have already argued that we believe it is wrong to provide for automatic increases. Certainly it would be impracticable to provide for increases at shorter intervals than biennially. It follows, therefore, that from time to time there is bound to be a lag of two years or perhaps a little over two years.
If the maintenance of the purchasing power of pensions is the main guiding principle, I believe that we are, for the first time, on firm ground. I believe that the great majority of public service pensioners would recognise this as perhaps the fairest basis on which to proceed. I believe that they have continually found this curious escalator which has been written into successive Bills difficult to understand. Equally, I believe that they recognise that the demand for parity is a bit unreasonable, though I know that some of the organisations continue to adhere to that.
As evidence for the view that many pensioners accept that protection from inflation is what they look for, I should like to quote from a letter from one of my constituents in November when the matter was being discussed:My own personal view is that the great majority of public service pensioners would be content if they knew that their original pensions were reasonably insulated against rising living costsI believe that that is the main peg on which it would be appropriate for us to hang subsequent legislation.
I should like to relate this to what we have tabled in the Amendment. Like all 146 story-tellers, I should like to begin in medias res. I ask the House to look at the middle of the Amendment,After 1st April 1956 but not later than 1st April 1964, 14 per cent.Every one of those pensions, if the pensioner had attained the age of 60, was increased on 1st January, 1966, by the 1965 Pensions (Increase) Act. Since 1st January, 1966, these pensions have suffered a cost of living increase of 12.3 per cent. to the end of December last, and we estimate about 14 per cent. by 1st April, 1969. Therefore, the increase which we specify in the Amendment of 14 per cent. would restore the purchasing power of those pensions to what it was immediately after the last increase.
Moving down the Amendment,After 1st April 1964 but not later than 1st April, 1965, 20 per cent.These were the pensions which were not increased by the 1965 Act. Therefore, they require a larger increase because they have suffered a substantially greater erosion of inflation than the pensions of those who retired earlier and got the 1965 increase. The cost of living increase since April, 1964, is 22 per cent. The increase since April 1965, is about 17 per cent. Therefore, we have chosen the midway point and increased these pensions by 20 per cent.
Similarly, going down the Schedule,After 1st April 1965 but not later than 1st April 1966, 15 per cent.That is halfway between the maximum of about 17 per cent. and the minimum increase in cost of living of about 12 per cent. So it goes on down to the last line. For those who retired between April, 1967, and April, 1968, we suggest 5 per cent., because since April, 1967, the cost of living has risen by 8 per cent. and since April, 1968, it has risen by 4 per cent. Five per cent. is perhaps on the low side; nevertheless it is substantial justice. Under this Schedule only those pensions paid since April, 1968, would not qualify for any increase at all.
The right hon. Lady will appreciate that we are left with the top two lines of the Schedule, and I must explain them. We would prefer our own 1956 proposal, but the Money Resolution has been so drawn that that is out of order and, therefore, could not be selected for debate in Committee, and we did not 147 table it again. Therefore, we go for the second best and say that the old pensions, the pensions which did not have any, or any substantial, increase for a number of years, and which suffered substantial erosion, should now have a once-and-for-all 25 per cent. increase. Then there are those from July, 1955, to July, 1956, where we propose 18 per cent., which the right hon. Lady has written into the Bill, and that is, therefore, unchanged. These two lines would represent a further substantial step towards our 1956 proposal, plus giving those pensioners the cost of living increase to which they would be entitled under the Bill.
I do not shrink from the logic which that pattern imposes. First, older pensioners who have had one or more increases already would in some cases inevitably get a lower percentage increase than would some more recent pensioners who have not had an increase but who nevertheless have been very severely affected by inflation. Secondly, a number of older pensioners would, in a fair number of cases, get a lower absolute increase than would pensioners who retired from the same grade at a later stage. There would be a bigger increase for those with bigger pensions, the more recent pensions; but surely this is exactly was is inevitably involved when one makes the cost of living increase as the main consideration in granting pension increases. It seems that this would be inherent in any scheme which had as its aim not to achieve parity or to relieve hardship, but to compensate for cost of living increases.
I have throughout said that the cost of living should be the main criterion, but there is one other, the fifth point, that if resources are available increases should be higher than the cost of living to allow pensioners, if it is possible, to share in the rising national prosperity. That, clearly, is a factor which any Government must have in mind, but provided that all pensioners are being protected against the erosion of the value of their pensions by inflation—and I emphasise that proviso—it seems fair and logical that increases in real value should apply to all pensioners proportionately to the value of their pensions, and should not be confined to the older, or the poorer, or even the lower pensioner.
148 Public service pensions should not be regarded as an arm of the Welfare State. Other machinery exists for that. These are occupational pensions, and, therefore, in this context should have no re-distributive element in them at all. They should have no element of redistribution, no element of welfare, and certainly no element of assistance.
Many private occupational schemes are able to pay pensioners substantial increases year after year because they are funded and, with wise investment, actuarial surpluses are thrown up in which the existing pensioners can share. It seems to me that we should aim to move in the same direction for public service pensioners, not necessarily to provide funds for separate investment, but to provide a notional funding, with realistic rates of interest, which will enable similar surpluses to be thrown up. I stress "realistic rates of interest". We have at present the teachers' superannuation scheme, on which I believe the Actuary has again reported a substantial deficit because of the wholly nominal rate of interest attached to the scheme.
§ The Amendment and the principles embodied in it could perfectly well be adopted, especially if public service pensions became contributory, for then they would be bound to shed any element of welfare and redistribution. Increases could properly be based on the cost of living, with real increases if national resources allowed.
§ I recognise that, however desirable these objectives may be, this case cannot be achieved in the scope of this limited Bill—this self-confessed holding operation, as described by the right hon. Lady in the Second Reading debate. I explained at the outset that our purpose was to give these principles an airing so that we could discuss them rationally on the Floor of the House to see where we should go. I look forward to hearing the reply of the Parliamentary Secretary and shall listen with great interest to what he has to say.
§ Mr. Houghton
First, I congratulate the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) on the splendid work that he has done on the Bill. I occupied his position for many years on pensions increase Bills, and I should be satisfied to have equalled his performance in Committee and on the 149 Floor of the House. He has done a great deal of work on the Bill, and although I have not always agreed with him, I sympathise with much of what he has said.
I shall shortly refer to the sort of mess that we have got into and how difficult it will be to get out of it, but the first thing I wish to do is to dissent from the hon. Member in his opinion that the cost of living would be the most satisfactory criterion for the assessment of the percentage increases to be given. I have never thought that the cost of living was a satisfactory index for increasing either occupational or State pensions. I was always at variance with people who thought that there should be a special cost of living index for old people and that their pensions should be adjusted by reference to it.
When the economy is expanding and standards are rising, something more is justified than mere compensation for rising living costs. This factor has arisen in connection with adjustments of pay, as well as pensions in the public sector. Time and again we have found that the cost of living was lower than the rise in real standards of living. I do not agree that the cost of living is the sole criterion. A number of criteria must be adopted. My right hon. Friend backed about half a dozen horses. That has to be done. They all run around and neigh, and we have to have regard to them all.
§ Mr. Patrick Jenkin
The right hon. Gentleman must know that if he puts his money on the whole field he will never make a profit; the bookies will always win.
§ Mr. Houghton
Horses are always difficult things to quote in any context. Nevertheless, these various criteria have to be weighted. Furthermore, the overriding cost cannot be set aside entirely, especially when there is to be a firm limitation on the rise in public expenditure and the curb has to fall over a wide field and probably come down on some very deserving elements in the community.
One thing about which I am worried in this connection was not referred to by the hon. Member but it is important and rather serious. I am glad that my hon. Friend the Deputy Chief Whip is here. In Committee he seemed to be speaking 150 under his more official title of Lord Commissioner of the Treasury. I can tell him that I would say ruder things to a Lord Commissioner of the Treasury than I would ever say to the Deputy Chief Whip. I have been saying rude things to Lords Commissioners of the Treasury all my life, and certainly I would not stop merely because my hon. Friend, for the time being, has assumed the mantle of Deputy Chief Whip.
Throughout his speech on behalf of the Government in Standing Committee, he referred constantly to the National Insurance pension as being a factor to be taken into account in looking at the overall benefit which retired public servants were getting. In one case that he quoted, he spoke of the increase in the Bill which would bring a pensioner's money to £348, and he continued:… that is to say, 10 per cent.—against a rise in the cost of living of 23 per cent. On the other hand, if one takes into account not only the public service pension but also the National Insurance retirement pension, with the married rate of National Insurance retirement pension the postman who retires at this date will be receiving £729 per annum.Then he went on to say, as the hon. Member for Wanstead and Woodford has said:… the National Insurance pension is an entitlement whereas the occupational pension is not. Neither a right nor a promise is written into the schemes, either in the public or private sector, and since the purpose of succeeding public service pensions increase Bills, under successive Governments, has been basically to relieve hardship, and since that hardship is relieved at the general expense of the taxpayer and the ratepayer … it would be unfair and unreasonable not to consider the total level of income of the public service pensioner."—[OFFICIAL REPORT, Standing Committee F, 11th February, 1969; c. 97–99.]Shades of the means test! We must bear in mind, too, that we had a means test in connection with pensions increases for public service pensioners which was deeply resented and which eventually we abolished. There was also a ceiling on the total pension that an officer may receive—
§ Mr. Speaker
Order. With respect, the right hon. Gentleman realises that this is not a Second Reading or even a Third Reading debate. He must come to the Amendment.
§ Mr. Houghton
Mr. Speaker, I am trying to relate my remarks to the escalator which we find in the Amendment. I think that the percentages in the Schedule have been written down to take account of the National Insurance pension. The Amendment ignores the National Insurance retirement pension and includes percentages which it is proposed to relate to the facts of Civil Service superannuation. That is how I understand it, and that is where the difference lies, I think.
If I am right about that, it is a mistake. If there is to be a discount because a large number of public service pensioners are receiving the National Insurance retirement pension, what about an addition when they do not? That is the logic of it. In addition, the older pensioners to be dealt with under the Amendment would get more, together with a great many of the very old ones who are not receiving the National Insurance retirement pension. Moreover, among those men who have retired recently or been compelled to go before they reached the age of 65, there are many who are not receiving the National Insurance pension. It is a great mistake to get the occupational pension mixed up with the national retirement pension, at any rate at this stage. Very shortly something will have to be done to bring them together in some harmony. All occupational schemes and the State scheme must be brought into some relationship. But that is not a matter which arises in the Bill.
The escalator does arise in the Bill, and the Amendment proposes to improve the escalator in some material respects. I remind hon. Members that those who entered the Civil Service and other public services after July, 1948, have a deduction from their Civil Service pension to take account of the payment of the National Insurance pension.
The hon. Member said that he does not shrink from the logic of the Amendment. I think that I would shrink from it. The escalator is constructed on previous escalators, and there is often a great advantage in sticking to what has been started. When I was in the Government I had to consider a new escalator. There are reasons for variants at particular points. There were stages at which substantial salary and pay in- 152 creases were given, arising from Royal Commissions or from pay research unit exercises, and one could perhaps relate the higher level of remuneration at which some people were pensioned with the remuneration of those pensioned in the year before. But this is a dangerous exercise, because it creates a greater feeling of anomaly than is created by following the rhythm of the escalator which we find in the Bill for the third or fourth time. People understand it better and accept it.
Perhaps the only justification for some action out of line would be for the pensioners who retired early, but one would probably have to carry the escalator further back still to look at dates earlier than 1955 if one were to do the job properly.
Let us appreciate that there is nothing scientific about this; it is rough justice to the extent that there is justice in it—and indeed there is a considerable element of justice in it. I do not, therefore, feel that I could support the Amendment, although it has a good deal of logical argument and reasoning behind it.
We cannot, however, part with the Amendment feeling entirely satisfied that the Government and the House have done what should be done in present circumstances, I do not feel particularly joyous about what is being done, because I do not think it is enough and because the whole process is becoming horribly mixed up with such other considerations as the National Insurance pension, which cannot be relevant to what we are doing as employers in adjusting occupational pensions. Unless that is being done generally and there is some scheme whereby a harmony between occupational pensions and the National Insurance pension is generally understood, it is a great mistake for the Government to be doing it in special relationship to public service pensioners. Nevertheless, on the escalator in the Schedule, notwithstanding the additional benefits which the Amendment would bring, the public service will feel comforted that this is being done now and is following the lines of the previous increases which were intelligible and gave a sense of fair dealing as between one group of retirement pensioners and another. Therefore, if it comes to the 153 point, I will vote against the Amendment and support the Clause.
§ Mr. Oram
Like my right hon. Friend the Member for Sowerby (Mr. Houghton), I begin with a compliment to the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin)—I hope that he will not feel overwhelmed—on the clarity with which he pointed to a certain logic in the Amendment. I recognised that the first two lines of the proposed new escalator were an attempt by the hon. Gentleman to do what he had been unable to do, because of the nature of the Money Resolution, in respect of what is called 1956 parity. But it was not so easy to recognise the purpose or theme of the rather strange-looking series of numbers which followed the first two lines. However, the hon. Gentleman has done his homework and has linked his theme to the cost of living. He wishes to take that as the main, and perhaps the sole, criterion.
Much of the debate on the previous Amendment was on the general proposition about the need to protect pensioners from inflation. It will be recognised that, in the undertaking which I gave and which has been underlined by my right hon. Friend, the Government have gone further in that respect than any previous Government. We can therefore discuss this Amendment in the context of, so to speak, catching up with history. This is apparently what the hon. Gentleman wishes to do. It is a sort of back-dated compensation for cost of living changes in earlier years. Now that the hon. Gentleman and his right hon. Friends do not have the responsibility for finding the money, he has stated a case for doing something which they failed to do when they were in office.
I agree with my right hon. Friend the Member for Sowerby (Mr. Houghton) that in these matters the cost of living is not the only criterion. Indeed, the hon. Member for Wanstead and Woodford admitted as much. All sorts of other factors come into our consideration of the effect of the Bill and earlier Bills.
The hon. Member for Wanstead and Woodford, in his opening remarks, quickly disclaimed any intention of being serious about the Amendment. He said that he did not expect it to be written 154 into the Bill. It was merely a peg on which to hang an analysis of Part IV of Schedule 1. At one point it seemed as though it was a peg on which he wanted to hang an analysis of my right hon. Friend's speech on Second Reading.
Quite apart from the case the hon. Member deployed this evening, we have to face what the Amendment would do. The hon. Gentleman pointed to one major weakness, or what I regard as a major weakness although he was not clear whether he so regarded it or not. That is the effect of proposing to apply a higher percentage increase, 20 per cent., to pensions of 1st April, 1964, to 1st April, 1965, than are proposed for the older pensions between July, 1955, and July, 1956, where the figure is 18 per cent. This kind of arrangement, as he recognised, would in general reverse the trend of previous Acts and reverse the trend intended under the Bill from giving the largest percentage increases to the oldest pensioners. My right hon. Friends and I have insisted at various stages that we regard this principle as important. Those who have been longest retired are in many cases those in greatest need, and we should seek to help them.
I assure the hon. Member that there are a great many other quite indefensible anomalies which would creep into the whole range of pension awards if we adopted the figures he has put forward. He knows that there are plenty of anomalies within the present situation. We had them quoted on Second Reading and in Committee. I assure him that this Amendment would increase those anomalies considerably. If there were time I could give a great number of examples. I note that he is nodding his head at one point and shaking it at another as an indication that he accepts that that would be the effect of the Amendment. He does not want to have the detail which could be put forward to illustrate the weaknesses of his Amendment.
Since he has indicated that in relation to this Amendment there are serious anomalies which would be imported into the operation of the Bill, I think we should leave it at that. I am sure the House will wish to turn the Amendment down.
§ Mr. Jenkin
I thank the right hon. Member for Sowerby (Mr. Houghton) and the Parliamentary Secretary for their kind words. I find this Bill a great education and I have enjoyed their contributions. I said at the beginning of the Committee stage that we had every confidence in and respect for the Parliamentary Secretary. I know that my words were justified. We are glad to have the Paymaster-General again with us. Perhaps now I had better get within the rules of order.
The Parliamentary Secretary would like to have pointed out the great many anomalies which would have arisen if the Schedule proposed in the Amendment were adopted, but I have provided sufficient prophylactic against that by saying that I moved the Amendment as a peg on which to hang the principal argument of the philosophy by which increases should be awarded. I had hoped that we would have had a discussion on the philosophy, on how future Governments would proceed. We are always striving to do better in this matter. I do not taunt the Parliamentary Secretary with past failures. He was moderate in his taunting of us. We are trying to establish a coherent philosophy and a basis of principle upon which the very disparate pension schemes which are covered by these Acts can be dealt with, a basis of principle which would have some unity behind it and on which we could rest with confidence.
I have suggested that it should be the cost of living with, where appropriate and where possible, some real increase in standards of living. The Parliamentary Secretary, by talking about those who have been retired the longest and about those in the greatest need, still seemed to see the public service pension schemes as containing what in the last resort I believe they should not contain—an element of redistribution, an element of the Welfare State. These schemes are not the vehicle for that. I very much welcomed what the right hon. Member for Sowerby said in that regard. There is other State machinery for dealing with 156 that. We should ensure that the public service pension scheme, as I said on Second Reading, adheres to the best commercial standards in private occupational pension schemes.
If we could secure that the whole range of schemes conformed with that sort of pattern, the difficulties which successive Governments have experienced in trying to get some order into these schemes would be overcome.
However, we have aired this matter. We have had a useful debate—indeed, a useful series of debates—on these matters. I have no doubt that our debates will be studied carefully by those outside. When the next Government, of whichever party it is composed, deal with this problem—not, I hope, another holding operation—there will be a body of constructive thought which will be a most valuable guide for the future.
I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 55 (Third Reading), and agreed to.
§ Bill accordingly read the Third time, and passed.