§ Order for Second Reading read.
§ 3.59 p.m.
§ The Paymaster-General (Mrs. Judith Hart)
I beg to move, That the Bill be now read a Second time.
This is an important Measure for many people. It will bring help to over 656,000 public service pensioners, to whom must be added almost 130,000 pensioners of the Armed Forces of the Crown, who will receive corresponding increases by Instruments issued under the Royal Prerogative. It covers those who have retired from the Civil Service, the National Health Service, teaching, local government, the police service, the fire service and a number of numerically smaller categories such as the judiciary and colonial governors. All have pensions governed by Statute which are paid either by Government Departments or by local authorities and local authority superannuation funds.
§ Mr. R. T. Paget (Northampton)
On a point of order. The Minister has said that pensioners of the Armed Forces, although governed by warrant, have their pensions controlled by the Bill. That being so, will it be in order to discuss their position on this Bill which, in effect, controls their pensions indirectly, if not directly, as my right hon. Friend has said?
§ Mr. Speaker
This is an old difficulty. Every time we have a Bill on public service pensions hon. Members wish to discuss the pensions of some groups of pensioners outwith its scope. The types of pension covered by this Bill are laid down in the Schedules at the end of it and in previous public service pensions Acts. On occasions such as this, hon. Members have sought to raise the question of the pensions of ex-Servicemen, railway superannuitants and pensioners from the nationalised industries.
I have looked at all the Rulings—I suffered from some of them myself when I was a back bencher. I chose the most generous I could find. On 23rd 1121 February, 1956, Mr. Deputy Speaker Sir Rhys Hopkin Morris ruled:The hon. Member is in order in referring to this matter, but I do not think he would be in order in carrying it too far."—[OFFICIAL REPORT, 23rd February, 1956; Vol. 549, c. 658.]Therefore, incidental references may be made to pensioners not covered by this Bill; but they must be incidental.
§ Mr. Paget
I am most grateful to you, Mr. Speaker, for your Ruling. Would it be in order to ask the Government whether they can assure us that an opportunity will be given to deal with the situation of Service pensioners so that we can refer to their difficulties in detail rather than incidentally?
§ Mr. Speaker
Their pensions are dealt with under a Royal Warrant, but I believe that from time to time opportunities for such debates have been provided. It is a matter for the Minister.
§ Mrs. Hart
I recognise the concern of my hon. and learned Friend the Member for Northampton (Mr. Paget) to discuss Service pensioners other than incidentally. It is a matter for the Leader of the House. I will ensure that my right hon. Friend is told of my hon. and learned Friend's desire to have an opportunity to discuss the matter.
§ Mrs. Hart
I was covering the groups of people who are directly affected by the Bill. I should add that it also covers the pensions of certain former civil servants in India, Pakistan and Burma and their dependants.
The Bill also makes provision for supplementing the pensions of former members of the overseas services, the Sudan Civil Service and the Egyptian Government Service, and their widows and dependants. Indirectly, it may bring help to many others who receive pensions from other bodies in the public sector which have in the past followed the lead set by the Pensions (Increase) Acts.
It is, of course, a costly Measure. Taking into account the associated increases in Armed Forces pensions, it will cost £34 million. Of this sum, £27 million will fall on the Consolidated Fund, and £7 million will be met by local authorities as rate-borne expenditure. We are spending more on this occasion than 1122 in 1965, when the equivalent Act cost £25 million, again including the corresponding increases in Armed Forces pensions. That we have accepted a new commitment of this magnitude at a time when it is more than ever essential to keep expenditure under strict control is a measure of our concern for the welfare of those who will benefit from the Bill, which of course the whole House shares with us.
On timing, I am aware that there has been some disappointment that we have not found it possible to introduce the new increases with effect from 1st January. But the House will wish to know the intervals of time between previous increases in order to make a fair judgment on this point. In fact, the intervals between the operative dates of successive Acts have been as follows:
1947 Act and 1952 Act—5 years 10 months;
1952 Act and 1956 Act—3 years 6 months;
1956 Act and 1959 Act—3 years 4 months;
1959 Act and 1962 Act—3 years 5 months;
1962 Act and 1965 Act—3 years exactly.
§ Therefore the 1965 Act was the only substantial Measure since the war to take effect within three years and three months of its predecessor.
§ Mr. Eric Lubbock (Orpington)
It is no good looking at the periods which elapse between successive Acts unless one takes account of the change in the cost of living in those periods. Would the right hon. Lady give the amounts by which the cost of living increased from, say, 1959? The reason for such a short period elapsing between the 1962 and 1965 Acts was the enormous increase of 11 per cent. in the cost of living.
§ Mrs. Hart
The hon. Gentleman has interrupted me a shade early. I am about to give all the figures, which I am sure he will be happy to have.
Had we been free from financial constraint, we should have been glad to bring the Bill forward a little earlier. But there has never been a time when ample resources were available to satisfy all the competing claims for public money, and in determining the timing of 1123 the Bill we have had to resolve a genuinely difficult problem of social priorities.
On the one hand, we have been anxious to bring forward a really worthwhile Measure to help public service pensioners, towards whom the Government have special responsibilities and on many of whom we are well aware that the increase in the cost of living over the past three years has borne heavily. On the other hand, we have had to weigh their claims against others of high importance from many other quarters which hon. Members from both sides of the House urge upon us. I am satisfied that we could not responsibly propose an effective date earlier than 1st April.
I should say a few words about those not affected by the Bill before going on to more detailed points. Like its predecessors, the Bill does not affect retired employees of nationalised industries and other public service bodies. They do not need to be empowered in this way to provide increases in pensions already in payment.
There is on both sides of the House very deep concern about some of the former employees of the nationalised industries. Railway superannuitants are a particular example. I should, therefore, emphasise that the nationalised industries have the power, without a Bill of this kind, to make whatever increases they feel they can make in the pensions which they pay to their former employees. But no doubt—and this has happened before—they will consider what action it would be right for them to take in the light of the Bill and of the level now provided for the public service pensioners who are covered by the Bill.
§ Mr. Arthur Palmer (Bristol, Central)
My right hon. Friend will appreciate that the nationalised industries' schemes are invariably statutory, and that Ministerial approval is required before changes can be made. Therefore, they come under Government control just the same.
§ Mrs. Hart
They come under a degree of Government control in that Ministerial approval is needed for proposals they put forward. However, they have power to put forward whatever improvements in their schemes they wish to put forward, and are not inhibited in 1124 doing so by a lack of legislative power. That is the essential point. The main provisions of the Bill are set out in Clause 1 and Part IV of Schedule 1. We have given most careful consideration to the best way of allocating the money provided under the Bill. 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, and it has helped to bring the old pensions into a closer relationship with those awarded more recently.
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 not an even 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. 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. It is noteworthy, too, that that is the view of the pensioners themselves. My attention has been drawn by the Public Services Pensioners Council to a resolution adopted at a mass meeting of the council held in London just before Christmas, drawing special attention to the position of the pensions of longest standing.
Against that background, we have thought it right again to provide the maximum assistance to those who have been longest retired. It will be seen from Part IV of Schedule 1 that we propose that all pensions dating from 1st July, 1955, and earlier, shall be increased by 18 per cent. An increase of this size offers a substantial improvement, which I believe will be widely welcomed, certainly by those directly affected. It compares with a maximum increase of 16 per cent. provided under the 1965 Act and with 12 per cent. plus a flat-rate sum of £20 for the over-seventies provided by the 1962 Act.
1125 It should also be compared—and here I come to the point that the hon. Gentle-main raised—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. I can, of course, provide the earlier figures, but perhaps it will be convenient if they are provided later. This means that 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.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
Will the right hon. Lady confirm that the 12.3 per cent. figure takes the cost of living up to December, 1968, whereas the Bill is not to begin until 1st April, 1969, and, therefore, perhaps another 1½ per cent. is likely to be appropriate?
§ Mrs. Hart It takes account of the most recent figures published about the cost-of-living index. It cannot take account of unknown figures between now and April. On the other hand, it is inevitable that the House considers a Bill a little in advance of the actual date of payment, or the date of payment would never arise. Therefore, we can only take account of what we know to be the facts at the point at which we present the Bill.
§ Mr. Lubbock
I am grateful to the right hon. Lady for dealing with my point. However, does she not think that if the increase since the last Act has been 12.3 per cent. we are justified in assuming that it will continue at the same rate over the next three months until the Bill comes into force and that, therefore, we should take a figure of 13.7 per cent., not 12.3 per cent., which we have already experienced up to December?
§ Mrs. Hart
If the hon. Gentleman looks at the monthly cost-of-living-index in the period since November 1967, he will find that a straight line cannot be drawn on the graph to represent increases in the index. There have been fluctuations. Indeed, as we have grown further away from devaluation, we have found that price increases have become of lesser proportions. So we cannot predict, on the basis of past figures, what precisely 1126 will happen in the next three months.
In any case, in giving an 18 per cent. increase for public service pensioners who retired longest ago and are, therefore, in greatest need of help, we are comparing that with the 12.3 per cent. increase since the 1965 Act and, for whatever is likely or is thought to be the increase in the cost of living between now and 1st April, we are still allowing a very ample margin.
I have said that people will have had an improvement in real terms in the value of their pensions. It is certainly the case that the margin is sufficient to ensure that, even if the increase in real terms is not to be represented by the total difference between 12.3 per cent. and 18 per cent. I think that this is quite clear.
Indeed, since the party opposite increased pensions with effect from 1st January, 1963, all those who retired before 1st July, 1955, will, under this Government's two Measures, have had an increase of 10 per cent. in the real value of their pensions, on top of getting full compensation for the increase in the cost of living. It is important to realise that, since 1963, there has been a 10 per cent. real increase on top of the increases in the cost of living. In this Bill, therefore, we are making an important advance in the living standards of our oldest public service pensioners, which the House will welcome.
For the more recent pensions, the size of the increase falls by 1 per cent. a year until we reach those beginning during the year ending 1st July, 1963. Thereafter, the increase falls by 2 per cent. annually, and the most recent pensions to receive any increase will date from 1st July, 1967. In this way, we do, I hope, concentrate the greatest measure of assistance on those who need it most.
A few examples will illustrate the effect of the new increases. A clerical officer who retired from the Civil Service in December, 1954, after 40 years' service, would then have received a pension of £284 a year. This has been increased under the existing Acts to £414 and is further increased under the Bill to £489. The increases total 72 per cent.—and here is a further figure for which the hon. Member for Orpington (Mr. Lubbock) asked—compared with an increase in the Index of Retail Prices, 1127 taking it a year further back than the date for which the hon. Gentleman asked, since December, 1954, of 59 per cent. It is 72 per cent. as against 59 per cent.
A higher executive officer, retiring on the same date with a pension of £490 a year, now has £698, and this is further increased under the Bill to £824, a total increase of 68 per cent.
In another sphere—and this is my last example—a constable retiring from the police force in December, 1958, after 30 years' service, with a pension of £440 a year, is now receiving £534. This goes up under the Bill to £609, a total increase of 38 per cent. compared with a 37 per cent. increase in the prices index since his retirement.
I should like to give a fuller account of the policy underlying the Bill, but before I do so it may be convenient if I give a brief account of its other main provisions.
§ Mr. James Scott-Hopkins (Derbyshire, West)
Will the right hon. Lady confirm that the same principle of giving a greater increase to the older pensioners will apply to the Armed Services pensioners under Royal Warrant at a later date?
§ Mrs. Hart
I am sure that the hon. Gentleman would like a specific reply, so perhaps the Parliamentary Secretary to the Ministry of Overseas Development can give it at a later stage in the debate.
Certain provisions supplementary to Clause 1 are in paragraphs 1 to 4 of Schedule 2. These contain detailed provisions on the method of calculating the new increases and prescribe the conditions of eligibility for them by reference to the pensioner's age, for example. They raise no new points of principle.
§ Clause 2 makes some minor amendments to the 1962 and 1965 Acts, perhaps the most important of which is the removal of the exclusion from pensions supplements under regulations made by the Minister of Overseas Development of former overseas service officers who, on retiring, remained resident in the territory in which they were serving. Before 1965 they could qualify for supplements only if they were living in the United Kingdom. The 1965 Act extended eligibility to those resident in a third country, and we believe that the time 1128 has now come to remove this residential qualification altogether.
§ Clauses 3, 4 and 5 deal with expenses, interpretation and citation, and do not call for special comment at this stage. Parts I, II and III of Schedule 1 list the classes of pensions qualifying for increases. They contain no major changes in the scope of the 1965 Act.
§ I want to devote a few moments to the question of parity. Many pensioners would like to see us apply the principle of parity; that is, to bring up all pensions to the level of those now coming into payment for the first time for the same record of service. This approach has an obvious appeal, but its practical difficulties should not be under-estimated, particularly at a time when traditional grading structures are under examination, and it may become quite impossible to say with any certainty 10 or 20 years after a man has retired what would be the current rate of pay for his grade which, it may be, has disappeared years earlier. This is one of the real problems.
§ Moreover, parity would be very expensive; figures were given yesterday, in reply to Questions. Parity would cost not £34 million, but over £100 million a year, and we could not possibly justify additional expenditure of that order at present, the more so since it would mean going further on public service pensions than we have felt it right to commit ourselves to for the earnings-related pensions to be provided under our new State scheme. It would also represent far more generous treatment than the vast majority of members of private occupational pension schemes can hope to enjoy.
§ In short, it would mean placing public service pensioners in a highly privileged position in relation to the rest of the community, and to do that would not be to keep a proper balance between the conflicting interests of the pensioner himself, the taxpayer and the ratepayer.
I do not think that this conclusion will be seriously disputed—whatever their sympathies may be—by right hon. and hon. Members opposite. I was interested to see that, speaking in the debate on public service and Armed Forces pensions on 9th May last year, the right hon. Member for Barnet (Mr. Maudling) said:
… we are not arguing for parity. We accept that the arguments against parity are
very strong."—[OFFICIAL REPORT, 9th May, 1968; Vol. 764, col. 646.]
§ As a variant on the claim for full parity, we are sometimes urged to introduce parity to a date in the past. The years 1956 and 1960 have been mentioned. As a first step towards full parity this approach might have something to commend it, but I cannot see that it has much virtue in isolation, and apart from a planned movement by stages to full parity. Either a date must be chosen which still leaves all those brought up to it well behind current rates, in which case it would at best give only a limited satisfaction, or else the difficulties of full parity are again involved.
§ It is open to a further serious objection. The combined effect of previous Pensions (Increase) Acts has been to do most for the oldest and smallest pensions. Nobody will want to argue that that was wrong in principle. It was the sense of general agreement in the House that those are the people who most need help. But to proceed on the basis of partial parity would reverse this bias, since the larger of the old pensions would receive increases that were larger not merely in absolute terms but also proportionately larger than those falling due on the smaller pensions.
§ For example, to bring the current level of pension payable to a postman who retired with 40 years' service in 1948—a long time ago; a small pension—up to the current level of a similar pension dating from 1956 would mean an increase of £12 a year, or 4 per cent. The comparable figures for an Assistant Secretary are £229 a year, or 17 per cent.
§ All this indicates that it is easier to criticise the present system of increasing pensions than to devise any simple alternative that is fair both as to various groups of public service pensioners, to all these pensioners as a whole, and to the community at large. It is for this reason that the general shape of the Bill is along well-established and orthodox lines.
§ I know that it is felt in many quarters of the House that public service pensioners should not have to rely on a series of Bills of this nature to protect their standard of living, and that some automatic system of adjustment should be introduced The present system has 1130 brought substantial improvements to many public service pensioners, but it is still far from perfect.
§ Any new system will now fall to be considered in the light of our proposals for the new State earnings-related pension scheme, which were published a few minutes ago. Hon. Members have not had a chance to read the White Paper yet, but there are parts which have a very close bearing on the subject that we are discussing today. Over 90 per cent. of all public service pensioners either already receive a National Insurance pension or will do so when they reach the appropriate age. We can now consider public service pensions, which are occupational pensions of a particular kind, and the pensioner's total position under the new scheme. Now that our long-term proposals in the national field have been formulated and presented we intend to see what better arrangements we can devise for the future.
I can tell hon. Members who have not had a chance to read this part of it that the White Paper outlines a pattern of partial contracting out for occupational schemes, and indicates that in relation to particular schemes in which the Government have a special rôle as employer, we intend
that these matters should be discussed fully with staff interests. In the Civil Service, following the recommendations on various pensions questions by the Committee under the chairmanship of Lord Fulton, a joint committee has already been set up to review the whole basis of superannuation, with representatives of management and staff, including the industrial trade unions concerned. The implications of the new State scheme will be taken fully into account in the course of this review. The position of the Armed Forces will also have to be considered.
§ In parallel with this review we shall see what better arrangements we can make when we increase public service pensions in future.
§ I hope that the Bill will reach the Statute Book well before 1st April, from which we intend that the increases should take effect. If it does, we aim to get increases into the hands of the pensioners as quickly as possible thereafter.
§ Because this is of great interest I shall say briefly what is likely to happen. Pensions paid by my office—if I may wear both a Civil Service Department and a Paymaster-General's hat for a moment—include those of teachers, the National 1131 Health Service and most, but not all, civil servants. Payments are "staggered" over a monthly or quarterly cycle and, given a commencing date for the Bill of 1st April, my office plans to pay increases for these services on the pensioner's first normal pay date after 5th April. This first payment will include any increase due from 1st April.
§ In some more complex cases—mainly pensions revised after re-employed service—final assessment of the new pension rate will need more time, but those concerned will receive the straightforward percentage increases under the timetable I have given, and any further improvement, including any arrears from 1st April, as soon as possible afterwards. Though I cannot speak for other pension-paying authorities, I am sure that all concerned will aim to put the increases into payment as soon as possible.
§ I have attempted to describe briefly the contents of the Bill, its background and the considerations that have led us to introduce it in this form. I suppose that it would be over-optimistic to hope that it will prove to be wholly devoid of controversy, but I believe that it will commend itself to the House as a Measure which fulfills three main objectives.
§ First, it brings a substantial measure of assistance to public service pensioners; secondly, it concentrates that assistance where it is most urgently needed; and, thirdly, given the inevitable limitations within which we are bound to operate, it strikes a just balance between the responsibilities of the Government as an employer and our wider responsibilities to the community at large.
§ We can all be assured that the Bill will bring real help to a substantial number of people who have given splendid service to the community and of whose needs we must be continually aware.
§ 4.30 p.m.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
The Paymaster-General is fortunate in that the first Bill which she brings before the House in her new office and with her new responsibilities for the Civil Service Department is one to which, whatever its shortcomings—and they are many—the House will want to give a general welcome.
1132 Inevitably, of course, our debate will be overshadowed in the Press tomorrow and for some weeks by the comments which will flow from the Government's new White Paper, to which the right hon. Lady referred, but that should not detract at all from the significance of this debate as it affects the subject covered by the Bill. I know that the beneficiaries of the various pensions schemes which the Bill seeks to amend will be following our debate with great care.
Traditionally, Pensions (Increase) Bills have been treated by the House largely as non-partisan. We are all conscious that we share a common responsibility to those who have, in one capacity or another, served the country, a responsibility which we have as employer, which is separate and distinct from any responsibility which the House and the Government may have in any other capacity. Not only do we want to ensure that justice is done to individual State employees: we also want to set an example of good employment practices for the country. These attitudes are shared on both sides of the House.
Although it would be unrealistic and undesirable to seek throughout to maintain a wholly bipartisan approach, I believe that many hon. Members feel an instinctive repugnance at any suggestion that we should engage in an auction for the votes of those who are or might expect to become public service pensioners. But we are entitled to criticise, and it is the duty of an Opposition to criticise, when the Government's performance of their responsibilities falls short either of their promises or of the reasonable expectations of those who have retired from the public service. Where we consider that the Government's policy is inadequate, we are entitled, fairly and within the limitations which I have described, to put forward our own proposals. It is in that spirit that I approach the Bill and the right hon. Lady's speech.
To begin with a general point. The right hon. Lady said that it was a matter of disappointment that the beginning of the payment of the increased pensions was to be postponed until April instead of taking place in January. I thought that she was going to say that it was a matter of disappointment that once again this Bill is little more than another interim Measure, another temporary holding operation. This seems to be a matter 1133 of much greater significance than the possible delay of three months.
The right hon. Lady will perhaps have been reminded that the 1965 Pensions (Increase) Bill was introduced by the Chief Secretary almost with a note of apology, when he said: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 awaiting the outcome of the fundamental review of social security … 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.Earlier, the right hon. Gentleman had referred, as another reason for not being too distressed that this was only a holding operation, to the prices and incomes policy. He said:Many Governments have paid lip-service to the fight against inflation, but the efforts of my right hon. Friend"—he was referring to the right hon. Member for Belper (Mr. George Brown)—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."—[OFFICIAL REPORT, 18th November, 1965; Vol. 720, c. 1353–4, 1353.]That false prophecy makes very wry reading three years and three Prices and Incomes Acts later.
Now, on the very day of the publication of the great new review—as my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) called it in a point of order, by any standards a White Paper of outstanding importance—we are debating yet another temporary expedient. This, again, is a Bill which contains no attempt to establish a coherent body of principle for public service pensioners generally, no attempt to deal with the basic flaws in the existing unsatisfactory system, no attempt to solve the real nub of the hardship problem, the pre-1956 pensioners, many of whom are now very old and many of whom are excluded from the existing National Insurance benefits, no attempt to establish new machinery for an automatic review to end the need for the persistent lobbying of hon. Members which I know many of those who feel impelled to engage in it find deeply repugnant and humiliating— 1134 in short, no attempt to do anything but produce a second temporary, stop-gap Measure of the sort which right hon. and hon. Members opposite never tired of criticising us for when we were in power—
§ Mrs. Hart
I am not clear about something and perhaps the hon. Gentleman can help me. Is he suggesting that the kind of review which will now take place after the publication of the White Paper should have taken place earlier? Is he suggesting that the review is such a simple matter that it could be accomplished in weeks, or that the Government should not engage in very deep and full consultations with Civil Service staffs before making a radical revision of Civil Service superannuation schemes?
§ Mr. Jenkin
I am sorry that I have stung the right hon. Lady to her feet so early in my speech. Anyone who read the passages in the speech of the Chief Secretary to which I referred—and there are other passages in the debates at that time—had every right to believe that, in the Government's view, that was the last Pensions (Increase) Bill which we would see on the present pattern. When the right hon. Lady talks of a matter of weeks, she is demeaning herself. The Government have had four years to do what they were continually telling us to do when they were in opposition.
We were chided in 1965 by Government spokesmen for expecting them to fulfil their promises in one year. Surely, over four years after they took office, we might expect that they should have done something more about it. Public service pensioners—I will come to the White Paper in a moment—have every right to believe that they have been let down and that their expectations have been dashed.
I was very interested in the right hon. Lady's explanation of the pattern of increases. I find the pattern set out in the Bill—this is the first Bill of this-kind with which I have dealt—very puzzling. The last increases took effect, under the 1965 Act, on 1st January, 1966. Since then, the cost of living has increased by 12.3 per cent. to the end of December and is likely to be at any rate over 13 per cent., though the hon. Member for Orpington (Mr. Lubbock) suggested 13.7 per cent., by 1st April, 1135 when the payments will be made under the Bill. Yet instead of the all-round increase to meet that rise in the cost of living since the last increase, we have a repetition of the pattern of graded increases, which is set out in paragraph 4 of the First Schedule.
The right hon. Lady referred to the pre-1956 pensioners. They are getting the biggest increase, 18 per cent., but they still lag miles behind the rising cost of living, which has taken place since those pensions were first granted. While the 18 per cent. is greater than the 12.3 per cent. or 13.7 per cent., it still leaves them a long way behind. Although the percentage increase is larger than the other categories, the actual increase may well be smaller, because one is applying the percentage increase to a very much smaller sum. Far from narrowing the difference between a very old-established pensioner, retired from, say, the Armed Forces, on the 1919 code, and someone who retired in 1950, the difference may be widened.
Looking at the other end of the table, people who have retired since 1st January, 1966, might reasonably expect the cost of living increase to be somewhat smaller than the 12.3 per cent. If one looks at the Bill one realises that it is not only somewhat smaller; it is but a tiny fraction of the diminution in the value of their pensions since they retired. The only people who appear to be getting an increase which will compensate them for the increases in the cost of living in the last three years will be those who retired between July, 1958 and July, 1959.
Everyone who retired since July, 1959 is not being compensated for the increase in the cost of living since the last Pensions (Increase) Bill. Although the right hon. Lady did not say much about this, many of these people have the National Insurance pension and that has been increased twice. The Government have previously argued that if one is relating one's argument to the cost of living, then the National Insurance pension must be taken into account. I do not dissent from that. Even then, look what has happened to some of the recent pensioners.
1136 Take a single pensioner who retired on 1st January, 1966. He had no increase under the earlier Act; this is his first increase. His £4 National Insurance pension has gone up by 10s.—a 12½ per cent. increase which is within one-tenth of a point of the rise in the cost of living since then, but his public service pension under the Bill only goes up 4 per cent., less than a third of the increase in the cost of living. This is by no means an isolated case, and it shows clearly that, even to take account of the National Insurance pension, there are still substantial numbers of pensioners who are not being compensated for the rise in the cost of living since the last Pensions (Increase) Act.
The whole point here is that the 1956 Act represented a turning point in this whole pattern of pension increases, when we abandoned the concept of absolute hardship as the justification for increases, and substituted the concept of relative hardship. We then, as it were, established the principle of what has come to be known as "the escalator". Broadly, and I use the word in its very widest sense, since then pensions have kept in line with the cost of living. Yet under this Bill those who retired between 1956–58 appear to be getting a bigger rise than the cost of living since the last Pensions (Increase) Act, while those who retired more recently are getting less. For those who retired before the 1956 Act, and who, therefore, did not have the advantage of being brought up to that level, although their percentage increase may be larger, their absolute increase, in many cases, will be very much smaller than those of those who retired later.
This appears to be a bizarre and irrational basis. The table in Schedule 1 looks, on the face of it neat, logical and rational. As it works out in practice it seems to be irrational, haphazard and unfair. Those on the lowest pensions get the largest percentage increases, but the smallest in absolute terms. Some others have broadly kept pace with the cost of living; those who retired too late to benefit from the 1965 Act seem to be left very far behind. Their pensions have fallen a long way behind the cost of living.
§ Mr. Stan Newens (Epping)
Is the hon. Gentleman saying that the Opposition would favour a much more generous 1137 increase than has been agreed here? I presume that he would not suggest that those who have been retired longest should get less so that those who retired more recently should get more? In those circumstances, would he be prepared to commit the Opposition to a considerably greater increase in public expenditure than is entailed by the Bill?
§ Mr. Jenkin
If the hon. Member would care to wait he will see what I intend to commit the Opposition to. For the benefit of anyone who wants to know, I will not commit the Opposition to anything to which we have not been fully and openly committed already.
The system which I have described as bizzare and irrational has already given rise to dismay. I have a letter which has been passed on to me from my right hon. Friend the Member for Barnet (Mr. Maudling), written to him by a National Health Service employee who retired in October, 1964. He did not benefit from the 1965 Act, because that was only for pensions payable before April, 1954. He is now getting a rise of only 6 per cent., and yet the cost of living increase since his pension started is about 20 per cent. With National Health Service pensions, the pension is abated by the full amount of any National Insurance pension which the pensioner may have been paid, so that, clearly, is no answer.
A stop-gap, temporary expedient this Bill may be, but it cannot be right even at that; still less can it be right in the light of the pledges on which the Labour Party fought and won the last two General Elections. I will not follow the right hon. Lady into the question of parity. That is a sordid story, which has been debated ad nauseam in the House, and it would waste everyone's time to expose it again. The pledge upon which the Government are perhaps more inclined to rely, because it came from the Prime Minister in direct reply to a question from a public service organisation, was given at the time of the October, 1964, election, when the right hon. Gentleman said:We have also called for public service pensions to be linked to some economic indicator, so that the pensioners are not only compensated for rising prices, but also receive their full and fair share in any rising national prosperity.1138 If the Bill is intended in any way to be an implementation of that pledge, it is not good enough. Most of the pensioners were not receiving—let alone any compensation for the rise in the cost of living—any share in what rising national prosperity there may have been during the last four years. However much one may wish to take a non-partisan approach to this problem, one must take the strongest objection when the results of what the Government do stand in such stark contrast with what they promised when fighting the election.
This is the heart of the Bill—I mean no pun—and it is a profoundly unsatisfactory one. The right hon. Lady said that of course there were a number of minor anomalies, which have been rectified, such as an increase in the category of pensioners entitled to increases, the extension of the increase to certain classes of overseas pensioner, and the removal of the residence qualification as she described it.
There was no mention of other hard overseas cases. Perhaps the Parliamentary Secretary to the Ministry of Overseas Development will be prepared to deal with these in winding up the debate. I have in mind such things as the hard case of the overseas pensioner who joined an organisation when it was a Government organisation, but which subsequently ceased to be so, and became what is sometimes referred to as a quasi-governmental organisation; such people who joined things like the Nigeria Coal Corporation, the Lagos Town Council, or Achimoto College. There are a number of others who are at present totally barred from getting increases. The Government do not regard them as being public service pensioners in the very limited sense of the word.
However, while we are glad that these minor anomalies are being dealt with, and welcome the adjustments, we regard the Bill as unsatisfactory and inadequate. It is what it is because no long-term, coherent philosophy has yet been worked out by the Government, and no adequate machinery has been established in four years. There is no once-for-all solution for the hardship problem of the very old pensioners.
For the rest of my speech I should like to turn from the Bill, which we shall debate in Committee, and examine what 1139 should be done to bring reason, logic and justice to the tangle of anomaly, unfairness and hardship which characterises the present system. My remarks will fall conveniently into two parts—the immediate changes necessary to remedy hardships and improve the machinery, and the longer-term changes needed to establish a consistent pattern, based on a recognisable body of principle.
The immediate changes are those which my party is committed to, and was committed to at the last General Election. On the longer-term changes, I am making my remarks by way of opening a discussion which I hope will be followed up inside and outside the House on the principles and some of the issues which I shall briefly state.
Our first specific pledge is to regard the 1956 Act for what it was, a turning point, and to recognise that most of the cases of acute hardship represent the pre-1956 pensioners, who, from the time they retired up until 1956, were denied any but the most shadowy compensation for the erosion of the value of their pensions. They are the oldest pensioners, many of whom have no National Insurance pension. Under the Bill, many of them are getting the smallest absolute increases. By bringing their pensions up to the 1956 level, with the appropriate increases since then, we are doing no more than is necessary to do bare justice in their case.
Since the right hon. Lady has made a point of this, I make it clear to her that we in no sense regard this as a first step towards parity. It is a belated act of justice to offset the past erosion of the value of the pensions. Like her, and like my right hon. Friend the Member for Barnet, I see the very strong arguments of principle, quite apart from cost, against trying to introduce parity. The cost of this proposal was given in one of her Written Answers to me yesterday as £5 million or £6 million in the first year, or £9 million or £10 million if one includes the Armed Forces, as I think one would be bound to do.
We are not anything like restoring the purchasing power of these pensions to what it was when they were granted, and no one now expects that. But it is an essential, once-for-all step to remedy the real hardship cases. I regard it as 1140 something of a disgrace that, for instance, the widow of a colonel who retired on the 1919 pay scale should now be enjoying a pension so low that she qualifies for supplementary benefit.
§ Mr. Palmer
I am listening with great care to the hon. Gentleman's argument. But since he says that the new principle—a very good one—was introduced in 1956 when his party was in power, could not it have made it retrospective?
§ Mr. Jenkin
One can always be accused of not having done what one wants to do now. I have not wearied the House, because we have had it all before, with the steady improvement in the pattern of Pensions (Increase) Bills from 1952 to 1962. It is all in the record. We want steadily to go on improving, and that is what I am talking about.
My second head relates to those professions and occupations from which, because of their nature, people tend to retire before the normal retiring age, I am thinking of policemen and firemen, and members of the Armed Forces. Under the present law, they do not receive their increases until they reach the age of 60; until then, their pensions remain what they were when they retired. That principle is retained in the Bill. We have substantial evidence of the hardship it causes, particularly to those who retire over the age of 55, who find it very difficult to obtain employment, though the theory on which the principle is based is that they can find employment. We therefore propose to reduce the age to 55. In a Written Answer yesterday the cost was given as £6 million, and we accept that.
Our third proposal, which is perhaps the most important, is a machinery proposal. We want to establish a regular, biennial review so that public service pensions keep in line with the cost of living. It is interesting to see in the White Paper published today that the Government propose a regular biennial review for the new graduated pensions. They cannot do less for public service pensions.
As the right hon. Lady said, the Bill comes after one of the longest gaps between such Bills. Other hon. Members recognise that it is the gap in which there has been the highest increase in the cost of living since we have had 1141 Pensions (Increase) Bills. Over the five years since the first pension was awarded after the last Act came into force, that is, a pension awarded on 1st April, 1964, to the date when the Bill will come into force, 1st April, 1969, there has been about a 20 per cent. increase in the cost of living.
This is not good enough. These people deserve better than that, and more frequent reviews are essential, particularly to avoid what I mentioned earlier, the humiliating lobbying to which the pensions organisations feel they have to resort.
We gave these three election pledges in 1966, and we adhere to them. I repeated them at the Conservative Party conference at Blackpool, and I repeat them again today, and we stand by them. We recognise that they do not go as far as many of the organisations are pressing us to go. Yet we believe that they are realistic. They are honest, and they will have a high degree of priority when a Conservative Government is returned to office.
§ Mr. J. T. Price (Westhoughton)
I have followed the hon. Gentleman's argument to the best of my ability. Would he care to comment on the fact that during the past three years, during which there has been a delay in publishing a new Pensions (Increase) Bill, there has also been a wage freeze? How would his party deal with the anomaly that would be created if we had an automatic escalator bringing the pensions of all who had retired in the distant past up to parity when, for economic reasons, the Government are responsible for a wage freeze? It cannot be just brushed aside like that.
§ Mr. Jenkin
Far be it from me to try to reconcile the irreconcilable, which is what a great deal of the Government's policy consists of. We have never believed in a statutory wage freeze. If it creates difficulties for the Government, they are the ones who must get out of that.
These reforms, valuable as they will be, will only remove the worst features of a system that is fundamentally very unsatisfactory. I should like to tell the House something of the thinking of this side of the House about how, in the longer term, we might consider the way in which the public service pensions system could be modified and improved 1142 and brought much more into line with current thinking. We are not yet ready to announce firm conclusions. There will, I hope, be a long public discussion about them. But it is right to tell the House something of the sort of matters we have under consideration, and to give some indication of how our minds are moving.
To begin with, it might have been thought that where there is a system distinguished above all for its diversity and complexity, one might work towards a single comprehensive system for all public service pensions. I do not regard that as possible. There are great differences within the different services, and pensions schemes need to meet the particular needs of different services. But it should be possible to establish a pattern of principles publicly spelt out, on which the system could be based. The three broad areas which we are examining are, first, the form of financing of public service pensions, including the question of funding; second, whether the contributions should come from the employee as well as from the employer, whether they should be contributory or non-contributory; and, third, whether there should be a greater harmonisation in the benefit structure.
First, on financing and funding, one answers, in effect, the question, "Where do the benefits come from?". Some schemes are fully funded, with separate investments held by trustees and administered in the normal way. Local government schemes are an example here. Other schemes are notionally funded. The contributions are paid to the Exchequer, books are kept, interest is credited, but the fund does not exist as a separate entity. An example here is the teachers' superannuation fund. Some schemes have no funding whatever but work on a "pay-as-you-go" basis—for instance, in the Civil Service and the Armed Forces.
There seem to be three main considerations in a discussion of the question of funding. The first is the guarantee of performance. A fund's primary purpose is to guarantee that the pensions will be forthcoming. Second, it is necessary in the public service, as everywhere else, that one should know the true cost of manpower. One should know what one's employees are costing, and this should include pension contributions. 1143 Third, one would wish to avoid an undue concentration of power, to which an enormous State-funded pension scheme would give rise.
One might, therefore, draw the conclusion that, where the central Government guarantee the payment of the pension, that is sufficient certainty and no separate funding should be necessary in those circumstances. On the other hand, in the case of an independent authority, with no guarantee, it will be right to have a separate funded scheme with separate investments. Such authorities should not be encouraged to slough off their responsibilities to the Government to get them out of a difficulty should they run into it.
Then the question arises: if one has a central scheme which is not separately funded with separate investments, should there not, nevertheless, be notional funding in order to provide a true cost of manpower? There are those who argue strongly that the answer to that question should be "Yes". Increasingly, one will carry out complicated studies involving large investment decisions, in relation to computers, for example, and if one does not know the true cost of manpower one may well take wrong investment decisions. I add this comment, however. If one is to develop the principle of notional funding, it must be realistic, with a realistic rate of interest credited. At present, it is only 3½ per cent., with consequent deficiencies thrown up from time to time. One would wish to see that put right.
The second question is whether schemes should be all contributory or non-contributory. The Fulton Report deals with that and recommends that all Civil Service pension schemes should be contributory, partly to let the employee feel that he has a share, that he is a partner in providing for his own retirement, and partly to establish a better relationship between employer and employee in the management of the scheme.
At present, about 75 per cent. of public service pensions are contributory and only 25 per cent. are non-contributory. The old attitude which gave rise to the contributory pension was that the employee should be encouraged to save to help himself, and the employer would say, "If you do that, I shall put my 1144 whack in, provided that you stay at work with me loyally to the end of your service". The new trend is to regard a pension as deferred remuneration. But then the question comes: why should a man contribute to his own deferred remuneration? These are difficult questions to which no clear answer can be given. They are very much bound up with the question of transferability of pension rights. However, if it is right that one should look for a single set of principles, and if one finds that three-quarters of a service pension system is already on a contributory basis, one would be right to argue, prima facie, that all should be contributory.
Now, the question of benefits. This, perhaps, is the most difficult area of change, because one would not wish to make anyone worse off. One would, therefore, be bound to make any new system apply mainly to new entrants, so that the process of change-over to a new system would be very slow. Moreover, much will depend on the social security review, the Report on which we have had today. I prefer not to comment on that until we have had far better opportunity to study it. My party is pledged to maintain an important rôle for occupational pension schemes, and, as the right hon. Lady conceded, public service schemes are an occupational pension scheme of some importance.
We consider that the scale of benefits which the public service pension scheme should give should be comparable with commercial practice. I hasten to add that this is, in general, already the case. No major change would be envisaged in that respect, and certainly one would not envisage any significant increase in costs.
I come now to the question of transferability. This is dealt with in the White Paper, and in the 20 minutes or so available to me before the debate I skimmed through as best I could the section on transferability. Ideally, all employments should give rise at the end to a single pension, based on accumulated contributions, with, wherever changes of employment have taken place, a slice of the fund or something equivalent being taken over. That is what is meant by transferability, though it is difficult to extend because there are so many different sorts of funds.
1145 Failing that, there is preservation, and I gather that the Government have hung their hat on that. I hope that they will leave the question open so that full transferability may operate in those cases where it can. In the Civil Service, one already has partial transferability or preservation. An Assistant Secretary over 45 years of age can transfer his pension rights and take his contributions with him. Below that it is not possible. It would be healthy and correct that this right should be extended throughout the Civil Service, as the Fulton Committee recommended. I entirely endorse that view. There will have to be a qualifying period, and during the qualifying period provision for contributions to be returned. Here, however, I make a personal point, realising that I shall not carry all my hon. Friends with me in it.
I do not regard a pension scheme as a sort of "piggy bank". In my view, once one has the right of transferability there should not be an automatic right to the return of contributions instead. I realise that the Government take a different view, but a pension scheme is a pension scheme, and it should not be regarded as a means of temporarily saving and then, when one changes one's job, having one's contributions back again, or, indeed, changing one's job in order to have the contributions back. That seems to be an abuse of the system. However, I recognise that as a personal view, and I shall not pursue it. We must, none the less, get away from what someone described as the new feudalism, the system under which a man is tied to a particular job because he is tied to a pension and cannot take it with him.
I have discussed these issues in general terms, and I emphasise that I make no commitment on behalf of my party in regard to the general matters. I am opening the subject for discussion. I believe that the considerations which I have put to the House represent a worth-while attempt to show how one could introduce for the first time—the Government could themselves have done it if they had given their attention to the matter—a coherent body of principle into a system notable for its diversity, its lack of logic and its internal inconsistencies. I hope that these points will be debated both inside and outside the House with the careful 1146 scrutiny which, I believe, their importance deserves.
We welcome the Bill as necessary to go part of the way to compensate retired public servants for the erosion by inflation of their pensions. We are disappointed that it is just another holding operation when we expected much more, that it does not deal adequately with the older and, therefore, poorer pensioners, that it does not provide for a regular automatic review, that it does not reduce to 55 the age at which increases become payable, and, above all, that it contains no hint of long-term thinking on the fundamental problems of bringing order and principle into the chaotic system of public service pensions.
Our public service pensioners deserve better than that. While we shall not in any way seek to delay the Government's timetable for the Bill, we shall aim to improve the Bill substantially in Committee. On that basis, I shall advise my right hon. and hon. Friends, when the Question is put, that we give it an unopposed Second Reading.
§ 5.9 p.m.
§ Mr. Douglas Houghton (Sowerby)
In the early part of his wide-range speech the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) presented the House with the familiar spectacle of Satan rebuking sin. This is what harms politics, because many people think that the trouble with politicians is that the truth is not in them.
The hon. Gentleman had no right to reproach the Government for failing to find a complete and satisfactory solution to a problem which evaded the talents of his right hon. and hon. Friends for so many years. Neither side of the House can feel proud of our record on public service pensions. Let us be candid about it. This is the tenth Bill in 48 years. It follows the traditional lines of the last 10 to 15 years.
I remember the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) assuring the House 10 years ago that he would apply his mind to a more satisfactory basis of adjusting public service pensions. I am glad to see the right hon. and learned Member for Chertsey (Sir L. Heald) in his place, because I so well remember the severe dressing-down that he gave to his own 1147 Front Bench for bringing forward yet another Pensions (Increase) Bill on the lines which had been so strongly criticised by the House time and time again. It was under the agony of the right hon. and learned Gentleman's strictures that the Financial Secretary of the day made that promise; but he did not come up with a solution.
We in opposition gave pledges that we would apply our minds to this problem, too. The hon. Gentleman quoted a statement made by the present Prime Minister as Leader of the Opposition just before the 1964 General Election. I ought to remember that letter, because I drafted it. It represents our sincere intention at the time. In 1964 and 1965, when we were in power, we realised that this question would certainly become deeply involved in our review of social security. It was clear that if we were to abandon the two-tier structure—the flat-rate scheme and the graduated scheme—and replace it by a wholly graduated scheme of contributions and of benefits, the occupational pension would have to have a new relationship to the State scheme.
It was comparatively easy in 1960 to deal with the occupational scheme, because it had to be dealt with only in relation to the graduated scheme. So the contracting out arrangements enabled occupational schemes to contract out of the graduated scheme if they fulfilled the prescribed conditions, but that would not be possible under a wholly graduated contributory scheme.
I was the Minister responsible for all this at the time. I felt very keenly indeed that the whole position of occupational pensions would have to be reconsidered afresh in relation to the State scheme as we proceeded with this major review. So, in 1965, we justified introducing another Bill along conventional lines. The Chief Secretary explained to the House why regretfully and with acute disappointment we had yet again to introduce a kind of holding Bill.
It is, I suppose, quite an extraordinary coincidence that we are discussing this Pensions (Increase) Bill on the same day as the publication of the White Paper resulting from the social security review—Cmnd. 3883—and we can see more clearly today than before what this new 1148 relationship has to be. Therefore, if we are to exercise our forgiveness and forgive those on the other side of the House who have trespassed against us, as well as find some excuses for ourselves, we might regard today as the beginning of a fresh start.
It is sad, I agree, that it has to be for the moment the same sort of Bill with the same sort of adjustments and the same absence of recognisable criteria in making them. It is not until the Minister makes a Second Reading speech that we know the foundations of the principles in the Bill. I am not a great devotee of White Papers, but I sometimes think that explanatory memoranda are a great help in enabling right hon. and hon. Members to understand the underlying motivation and the considerations leading to complicated proposals.
I cannot forbear from mentioning that in the 1965 Bill we solved some highly complex problems relating to particular types of cases which our predecessors had declared time and again were insoluble. To give only one example, before 1965 there was no satisfactory solution to the problem of how to calculate the pension increase for a man who had formally retired from a higher position, stepped down to a lower one, and then finally retired from that subordinate position. Whichever way the calculation was done gave rise to anomalies and to comparative grievances. I recommended a solution at the time. Anyone who likes to look up the debates of those years will find it there. In the end, we decided to take a chance on it; and there it is, with no serious consequences.
The Bill must be considered in relation to Chapter 5 of the White Paper and also in relation to recommendations of the Fulton Report on the Civil Service, Cmnd. 3638. The first question—it is one we have been asking for a number of years—is: why is it necessary for the House to have to go through the processes of legislation on the comparatively routine adjustment of public service pensions when wages and other conditions of service are negotiated by agreement and brought into operation through the machinery of consultation and the Whitley Council? This can be out of all proportion.
Wage and salary changes in the public services can be far more expensive than 1149 pensions increases, but they are done through the normal process of wage and salary negotiation. Millions of pounds in extra pay for the public services can be written into public expenditure by that process, but the pension of a Civil Service pensioner cannot be altered by sixpence without a Pensions (Increase) Bill.
The Fulton Committee had something to say about this. I will not quote it in full, because it will be found in page 174 of Volume 1 of the Fulton Report. The Committee hoped that some alternative to the legislative process would be found. It said:We think this to be an unnecessary complication, besides wasting parliamentary time. We do not dispute that Parliament should exercise a proper control over this large element of staff expenditure. But it seems to us that ways could be found of ensuring this that would yet enable changes in the pension scheme to be made more promptly and with less fuss. We recommend that they should be looked for.I hope that this will form part of the consideration to be given to future superannuation arrangements in the public service.
There is also the question of a contributory scheme, which the hon. Member for Wanstead and Woodford mentioned. After my criticism of the early part of his speech, I want to acknowledge that at the end we listened attentively to constructive thought and practical suggestions about the future of public service superannuation. The Tomlin Commission, as long ago as 1931, recommended that the Civil Service scheme should become contributory, and I must take my share of responsibility for the decision not to implement that recommendation. I think that we were mistaken but the Treasury at the time acquiesced in that decision. At the time, there was a disinclination in either staff or official circles to go into a contributory scheme. I think that we were mistaken, because the whole question of the adjustment of pensions after retirement would have been easier under a contributory than under a non-contributory scheme.
There was a time in 1964–65, when the Civil Service was getting a general increase in pay of 4½ per cent. I had some calculations made which suggested that if the Civil Service were to agree to pay that 4½ per cent. for every year towards 1150 a superannuation fund, it would be possible to top up all the pensions of those in retirement to very near parity and to ensure something comparable for all future retirements for quite a few years to come. That might have been a possible solution to some of these difficulties, if we had had a contributory scheme.
The Fulton Committee had something to say about that, too, and recommended that the question of contributory schemes should be considered. We read in paragraph 148 of the White Paper, "Proposals for Earnings-Related Social Security", that a committee has already been set up in the Civil Service to consider this and other aspects of future superannuation.
The principle to be followed under the White Paper—of a periodic review of the level of the State pension—obviously carries with it an implication, although not at the moment a directive, of similar treatment for occupational pensions. Some of the pensions fund people told me long ago not to be afraid of making occupational pensions dynamic. They said that it had to come and that there could be no other satisfactory basis for superannuation. They said that the concept of the immutability of the pension as at the date of retirement, based on whatever previous salary figures or averages were taken, could not endure in an expanding economy, that it was not only a matter of inflation, but of rising standards of which the pensioner was entitled to his share.
We are now on the threshold of important new thinking about the future of Civil Service superannuation and this will range over the whole of the public sector pensions in conjunction with the review of the State pension scheme.
§ Mr. Patrick Jenkin
I am not sure whether I have followed what the right hon. Gentleman is saying. He appeared to me to be advocating not merely keeping pace with the cost of living, but that all occupational pension schemes, State or private, should provide for pensioners to enjoy real increases in their standards of living. Is that, in fact, what he is advocating?
§ Mr. Houghton
I am saying that the basis of an occupational pension, along with the State pension, should be adjusted from time to time during retirement to take account of changing social 1151 and economic circumstances in the country at large.
There are undoubtedly flaws in the Bill. The effective date should have been earlier. It is not enough to say, as my right hon. Friend did, that we are not as bad as "they" used to be, or that we have done better than one year, or have equalled another. Changes have been fairly rapid in the last three years and we have also to acknowledge that the cost of living has risen quite sharply. Indeed, it has been part of the Government's economic policy to keep down private consumption by a combination of measures leading to a rise in the cost of living, and we might as well acknowledge that, too.
However, I do not believe that the cost of living is an entirely satisfactory basis for the adjustment of pensions. Without accepting the ultimate concept of parity, I nevertheless feel that salary and wage movements are a better index. I was always against the idea of a cost-of-living adjustment for retirement pensioners. I believe that the movement of wages would make a much better index for the adjustment of retirement pensions. The cost of living is merely a form of compensation for rises in living costs. It does not concede a real increase in the value of a pension. It does not concede a share of rising prosperity, but wage and salary movements usually do.
§ Mr. Lubbock
The difference between what the right hon. Gentleman is proposing and full parity is that instead of using the salaries of the grade from which the pensioner retires, the criterion is averaged over the whole of the people in employment. Would there be much difference unless the current salary for the particular grade was changing more rapidly than wages and salaries as a whole?
§ Mr. Houghton
I do not know exactly how it would work out in particular cases, whether one would have to take grade by grade, or zones of employment, or a public service factor as a whole. Various alternatives would have to be considered. A good deal of research and calculation would be necessary before finding what might be the acceptable criterion. This is what the Financial 1152 Secretary of the previous Conservative Government undertook to study, but it never came to fruition. Anyhow, I think that cost of living alone is not a satisfactory basis for the adjustment of pensions, for the reasons I have given.
When considering the period over which calculations must be made, whatever criteria are adopted, we must bear in mind that the cut-off date for the last pensions increase Measure was 1st April, 1964. It is not enough merely to consider what happens between the date of one Measure and the date of the following Act. These are tricky points in presentation and this matter will have to be studied in Committee to see where the truth really lies about what has happened since the last adjustments were made and the basis on which they were made.
The cut-off date of 1st July, 1967, this time seems a little hard. Many changes have taken place, even since July, 1967, and I therefore have reservations about this date. I understand that the Money Resolution is sufficiently widely drawn to enable a very full discussion of the details of the Bill in Committee, and I hope that this will prove possible.
It is clear that the Bill is welcomed. We have been waiting for it. Indeed, the Financial Secretary had to give a strong hint that the Bill was on its way when we last debated public service pensions, a few months ago. Had he not given such a hint, he would have had a far rougher ride than he got on that occasion.
The Bill is not only welcomed, but good, though not as good as it might have been. In looking at the past and at the new opportunity which is now given to us to study the wider issues of pensions—occupational and State—the House can feel satisfied that this Measure represents a further step towards a more complete and satisfactory solution of this general problem. We are giving rough justice, and thus an element of justice, to Civil Service pensioners who are deserving of the consideration of the House.
§ 5.33 p.m.
§ Mr. J. C. Jennings (Burton)
As a former headmaster who qualifies for pension, I wish at the outset to declare my interest and so to conform with the rules of the House. I wish, secondly, to make 1153 it clear that I approach this serious problem of public service pensions in a nonparty and non-partisan way. I shall try to be factual and objective.
As the right hon. Member for Sowerby (Mr. Houghton) pointed out, we are considering a problem which has been with us for many years. In my experience in Parliament, there have been successive Measures on the subject since 1955, beginning, in my case, with the 1956 Act. In those days many of us were highly dissatisfied with the approach of the then Government—I admit that they were a Tory Government—and this, too, was clearly shown by the right hon. Member for Sowerby.
I have clear memories of the days when my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) was chairman of the Heald Committee, which was appointed by the 1922 Committee of the Tory Party, and when I was the honorary secretary. We exerted tremendous pressure on the then Conservative Government to take action in this sphere.
I regret that Mr. Speaker is not in the Chair because he would recall how, as a back bencher, he spoke with great skill and sincerity on this subject. We must, therefore, pay tribute to the many hon. Members who have contributed towards finding a solution to this difficult problem. I include the many hon. Members on both sides of the House who in recent months have signed two Motions in an effort to bring the problem to a head.
I welcome the Bill, as I have welcomed every other Measure of its kind. I have, however, welcomed them all with certain reservations, and those reservations apply to this Measure. It is strange that, since 1944, we have had eight Acts on this subject. This will be the ninth. Such a number in 25 years is quite something, yet the problem is not solved. This Measure follows the usual pattern because each one, certainly since the new method of the escalator clause was invented, has had three major defects.
I am being completely non-partisan about this. First, in every case the Measure has been the result of belated or delayed action by the Government of the day. In the interim period successive Measures have been introduced while rising costs have gone on without adjustment to pensions, in effect meaning that 1154 the people with whom we are concerned have been on fixed incomes. Secondly, when an adjustment has been made, it has been only a partial adjustment, and that is the case again with this Measure.
Thirdly, since the escalator clause was introduced, each Measure has contained a cut-off date which has brought grave hardship to many people. In the 1965 Act the operative date was 1st January, 1966, but no increase was allowed for under that Measure for pensioners who came into the Scheme after 1st April, 1964. That meant that any pensioner who retired after 1st April, 1964, had to wait five years, during which time the cost of living went up by about 20 per cent., before getting the benefit of any increase. That was tragic. Five years elapsed and they received no compensation whatever for a fantastic rise in the cost of living.
This brings me to the root of the problem and, since it is well recognised, I will not spend much time on it. The root is the steady creeping inflation which the economy, under many Governments, has suffered. There are four background points in this connection which we should note. The first is that people in Britain—this applies to other countries which have been suffering from steady inflation—who possess economic or political power can protect themselves. Hon. Members will appreciate what I mean—trade union action, strikes, pressure lobbies and so on. These people almost guarantee themselves annual rises to compensate for inflation.
Secondly, by contrast, pensioners and the elderly cannot exert such political, industrial or economic pressure. They rely on hon. Members to create a lobby for them. That is what we have been doing. Year after year we have been trying to exercise pressure on their behalf.
Thirdly, pensions increases depreciate in value almost as soon as they are awarded. The right hon. Member for Sowerby wondered whether it was a remarkable coincidence that we should be debating this Measure today when, only an hour or so before the debate started, a White Paper on "National Superannuation and Social Insurance" was published. If the time was purposeful, it was very clever, and I would approve 1155 the tactics, looking at them objectively. If it was accidental, it was fortuitous and very opportune.
I should like to make one quotation as evidence of what I am saying about pensions depreciating in value almost as soon as they are awarded. Paragraph 117 of today's White Paper states:Thus, while many schemes provide pensions which are adequate at the time of retirement, there is seldom any guarantee that their value will not be eroded as time goes on. Some old people are therefore faced with the prospect of steadily diminishing resources at the same time as their capacity to improve their circumstances is getting less.That is today's White Paper. It shows that the effect on those who retired years ago is especially hard.
That brings me to the hardy annual of the problem of parity. The two Front Bench spokesmen in this debate, the Minister and my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), tended, certainly on my side of the House, to brush the problem of parity under the table. Perhaps it would be fairer of me to say that they dismissed it. For a long time parity has been a controversial question.
My definition of parity is that the pensions of those who retired years ago should be the equivalent of the pensions they would receive if they retired now. Their pensions should be reckoned on that basis. I recognise that when the Heald Committee was set up we were given figures showing that the cost of parity at that time would have been £11 million. Within a short while we were given a new figure of £22 million. The figure this afternoon was given as £100 million. I realise full well that it is impossible for any Government to implement it at that figure.
In the light of that impossibility, however, I want to ask two questions. Why should the standard of living of a pensioner depend upon the date at which he retired? That is what happens. Should he not at least be guaranteed that the purchasing power of the pension at the date when it is awarded will be fully maintained? We must recognise the justice of those two propositions. Pensions Increase Bills are no solution, therefore, to the basic problem.
1156 It is with some diffidence that from the Tory benches I welcome the White Paper. I do not say that I approve of it, because I have not had time to read it. It was issued only 20 minutes before I took my seat in the House for this debate. I have scanned certain parts of it. When I look at the index, however, and at various summaries and paragraphs, particularly on occupational pensions, which interest me and which I have read, I see that today's Bill is probably a holding operation, much as I deplore it and much as I regret it. Seeing it in that perspective against a background of action in the shape of a grand, almost grandiose, scheme in some years' time, I have to recognise that probably the Government had no option that to do what they have done today.
Parity has always been rejected on the ground of costs, but in the debate on the 1965 Bill the Chief Secretary to the Treasury referred to the radical review of the social security system which was being carried out, and which, he saidwhen 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."—[OFFICIAL REPORT, 18th November, 1965; Vol. 720, c. 1353.]That was in 1965.
In 1969 we are only now getting the White Paper, and there are months, and probably years, of discussion before us. Nothing has been done in the three years since the Chief Secretary made those observations, but in the meantime there have been price increases all round. In the light of all this, it is a remarkable coincidence that the White Paper has been published at the same time as today's debate.
Let me turn to my own party. We have had a highly constructive and thoughtful speech from my hon. Friend the Member for Wanstead and Woodford, which showed that my party is giving tremendous thought to this subject.
§ Mr. Jennings
If I am being goaded, I must be partisan; so the hon. Member should keep quiet and let me continue objectively.
My party has fixed 1956 as a kind of fulcrum around which the whole pensions scheme and the plan for the future will turn. I asked my hon. Friend and my party months ago to cost our proposals. Speaking from memory, I think that the cost would be between £5 million and £6 million in the first year and £10 in the second year or subsequent years.
§ Mr. Patrick Jenkin
It is between £5 million and £6 million excluding the Armed Forces and £10 million including the Armed Forces.
§ Mr. Jennings
I was thinking of the £5 million—£6 million for public service pensioners.
I should like my party to look at this again. Of course, it is not a step towards subsequent parity, but in practice it is. As time lengthens, I should like the fulcrum point to move also so that we move up at least in our conception of partial parity at 1960 or 1962.
I quarrel with the Bill, as did the right hon. Member for Sowerby, concerning the operative date. It is a bit mean to fix 1st April and not 1st January when there has been such hardship. It is all very well for the Minister—I am sorry that she is not present—to compare the intervals between Bills. The interval between the last Bill and this one has been accentuated by a tremendous rise in the cost of living, which was not equalled during any other interval between similar Bills. I must warn the Minister and her colleagues that if my Front Bench does not put down an Amendment to alter the operative date to 1st January, some of us on the back benches will.
The escalator in the Bill interests me. The Minister was very clever. She took a descending scale from 18 per cent. At the bottom half, from 1963, the steps dropped by 2 per cent., whereas previously they had dropped by 1 per cent. It is different if one starts at the bottom of the escalator and goes up. In respect 1158 of a pension up to not later than 1st July, 1963, the steps go up by 2 per cent. After that, they go up by only 1 per cent. Yet the purpose of the Bill is to help people who have been retired the longest. I do not know whether my logic is wrong, but if the steps went up throughout by 2 per cent. those retired the longest would get far better treatment.
In the light of the friendly criticism which has been made today, the Government should have second thoughts. They should try to improve the Bill in Committee, and I wish them good luck in doing so.
§ 5.51 p.m.
§ Mr. Arthur Palmer (Bristol, Central)
It is always a pleasure to follow in debate the hon. Member for Burton (Mr. Jennings), because he has great sincerity and knowledge on this subject. One of the problems of following him on public service pensions is that it is very difficult to disagree with him.
I congratulate the Government and my right hon. Friend the Paymaster-General on introducing the Bill, but I did not think that my right hon. Friend was very convincing about the date of application of the Bill. She argued for 1st April instead of 1st January, which would seem to be the common sense date, on the ground that there had always been a gap in time of a certain size between successive Acts and that the gap on this occasion was no greater than usual. But one should not try to construct an eternal principle by averaging out past expediences. I hope—and here I agree with the hon. Member for Burton—that the date of application will be looked at again in Committee.
The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) made a most interesting and generally constructive speech from his Front Bench. I was, however, surprised that he devoted so much attention to parity for the pre-1956 pensioners. I know that this is an important subject from the human point of view, but many of the pre-1956 pensioners will soon be well into their eighties. If they were to be helped, they should have been helped a long time ago, and, as I suggested in an intervention, the time to do it was when, in 1956, the Conservatives introduced the principle of the sliding scale for the first time, I think.
1159 The hon. Gentleman was not giving away a great deal. I know that he intended to be helpful, but it did not seem to me that he was over generous in talking about parity for the pre-1956 pensioner alone. If we are to deal with parity, we must come forward from 1956.
§ Mr. Patrick Jenkin
As I pointed out to my hon. Friend the Member for Burton (Mr. Jennings), we recognise that this proposal will be expensive. It will cost £10 million. That is not peanuts. It indicates that there are many people who need help.
§ Mr. Palmer
The normal span of human existence being what it is, they could not now be helped for long. If they were to have been helped, it should have been done a long time ago.
May I say as one who takes a considerable interest in the affairs of the nationalised industries, and particularly the electricity supply industry, that the Bill is eagerly awaited and welcomed by many besides public servants as defined in the Bill and, for that matter, members of the Armed Forces who are indirectly covered. There are pensioners and prospective pensioners in the nationalised industries who have to look to the precedent set by Pension (Increase) Acts such as this Bill will become for their own pension increases.
My right hon. Friend the Paymaster-General said, rather loosely—I do not know whether she is conversant with all the facts—that it was always open to the managements of the nationalised industries to make their own arrangements There are two answers to that. First, in the nationalised industries, particularly in the electricity, gas and road transport industries, a considerable number of pensioners were formerly employed in pre-nationalisation municipal undertakings. If nationalisation had not come about, this Bill would have applied directly to them. Therefore, there is bound to be an administrative link between Pensions (Increase) Acts and many pensions paid out by the nationalised industries.
Secondly, the nationalised industries' pensions schemes are statutory schemes and any changes proposed in them are subject to ministerial approval by law. 1160 Nationalised industry pensioners are bound to look to Pensions (Increase) Bills, as do direct public service pensioners, because it is only when a Pensions (Increase) Act sets a precedent that the Departmental Minister responsible will consider seriously any application by the management of a nationalised industry for a change in pension levels. Therefore, it is no good seriously arguing, as my right hon. Friend did, that the nationalised industries could make the change at any time on behalf of their pensioners if they wished to do so.
As I say, the virtues in this Bill will be welcomed by many thousands of pensioners outside the public service. Its defects will be equally deplored by them. The first virtue of the Bill is that it exists at all. Secondly, the higher starting scale rate of 18 per cent. is a step forward. The continued preservation of the sliding scale principle is welcome. These are all good things in the Bill.
The principal defects are these. First, there is no gesture of any substantial size towards the principle of parity. I was puzzled by something which my right hon. Friend the Minister said, namely, that it was administratively difficult to deal with the pension of a person who retired, say, 10 years ago or more in relation to the pension of someone in comparable work who retired more recently.
My right hon. Friend said it was very difficult to do it because we could not compare necessarily over a span of years grade for grade, because jobs and designations changed. I have never been able to see that this is a real problem. I should have thought it quite possible to average out salary or wage advances, construct an index, and then apply it. It is not really necessary to work it on an individual basis of grade for grade.
The second greatest defect of the Bill—and it is still a tremendous disappointment to many of us—is that, once again, as my right hon. Friend the Member for Sowerby (Mr. Houghton), who spoke with great knowledge, just now said, it is worked on the "sufficient for the day" principle. Once again, it seems it has been a question of adjustment by the Government in response to outside pressures, so that they think that now they must bring in another Pensions (Increase) 1161 Bill, that the time is about ripe for it, and they will go by the models of the years gone by. This is a bad system. That has been acknowledged by my own party, certainly when it was in opposition, and it is acknowledged by the Conservatives, now that they are in opposition, to be a bad system.
To refer again, for a moment, keeping myself in order if I can, to the pensioners in a nationalised industry, the electricity supply industry. They are very conscious of the bad present system because the Electricity Council and the staff unions in the electricity supply industry have had before the Government, through the Ministry of Power, for about three years now a domestic scheme of their own, a scheme which is intended to break away from this piecemeal approach. It is a scheme which, to put it shortly, is intended to insert in the standard staff pension fund, actuarially funded, an anti-inflation device—
§ Mr. Deputy Speaker (Mr. Harry Gourlay)
The hon. Member was quite right when he said that he may refer incidentally to those schemes, but he must not pursue them in so much detail as he is doing.
§ Mr. Palmer
You create for me a certain difficulty, Mr. Deputy Speaker, but I will do my best to keep in order.
That scheme could well be a model in future for legislation of the character we are now considering; a scheme by which pensions would automatically increase, after retirement, by a stated amount; the pension five or ten years after retirement would automatically be greater than it was at the time of retirement. There are several arguments for it. An obvious one is that in a full or nearly full employment society there is cost-inflation with rising wages and salaries and also rising prices.
Moreover, it is when a pensioner has been retired for 10 or 12 years that his expenses really begin to mount, because illness is more common then, his health is not as good, it is not as easy for him at that stage to take up part-time employment. Furniture is beginning to wear out, clothes have to be replaced, and so on. So the principle of having for the worker, on a contributory basis, an actuarially arranged pension which increases 1162 automatically after retirement is, in the modern age, the soundest principle.
As I say, this is the kind of principle which one nationalised industry in my knowledge, and both sides of that industry, is anxious to introduce. The proposal has been in front of the Government, which, in practice, means in front of the Treasury, for, I think, three years. As yet the Government are unable to make up their mind. What the Government say is that before agreeing to a scheme of this kind they have to see how it is to be fitted into the promised general review of social security.
§ Dame Irene Ward (Tynemouth)
Is this not rather peculiar? I have had questions on the Order Paper, and two today, about increased pensions for electricity and gas industry pensioners. Is it not a rather peculiar answer, that answer which always comes back to me, that this is a matter for the boards of the industries, while when a board, as I understand the Electricity Council does, wants to introduce a scheme it cannot get on with it because the Treasury then intervenes? This, to me, does not make sense. I should like to know which is what and what is which.
§ Mr. Palmer
If the hon. Lady is in order I shall possibly be in order in answering her for a moment. I think that the answer is that these nationalised industries' schemes are statutory schemes and depend on Ministerial approval before they can be properly dealt with.
So I am arguing that this kind of principle, which as I say, one nationalised industry—electricity—is seeking to introduce, should be applied generally. We now have before us the social security White Paper, so we can look at the prospect possibly of giving to the electricity supply pensioners permission for their change fairly soon.
I conclude by saying I am disappointed that the Bill is still on the old standard model. In view of everything which my hon. and right hon. Friends who now sit on the Front Bench used to say when they were in opposition—and I used to say it with them, though I was out of the House at the time—I should have thought that it would have been possible for it to have been an enabling Bill which would have given the Minister, possibly 1163 by regulations, power to make adjustments in public service pensions at, we will say, two-year intervals. I cannot for the life of me see why that should not have been done. I should have thought that had that principle been introduced into the Bill it would still have dovetailed into any new principles of national social security which are proposed by the White Paper. It would have dovetailed just as well as this present legislation on the former model.
With these criticisms made, I certainly sincerely and heartily welcome the Bill as a measure that will give much-needed relief to many.
§ 6.8 p.m.
§ Mr. Rafton Pounder (Belfast, South)
At the outset of the very few remarks which I intend to make I wish to say how much I, too, like my colleagues on this side of the House, welcome the Bill, although, of course, as has already been said, there are quite a number of shortcomings in it.
The hon. Gentleman the Member for Bristol, Central (Mr. Palmer) raised a very significant issue in his last remark. Not only are we not having public service pension increases at regular intervals, but also these increases are dependent not only for their timing but for the amount of pension increase, upon the generosity and/or the whim of the Government of the day. I accept that we have perhaps grown accustomed to the situation whereby the whole range of pensions, including public service pensions, the ordinary State retirement pension, the Armed Forces pension, are anomaly ridden, but what I find so grievous is that there seems to be so little effort to try to take some of the warts out of the existing legislation.
We hear a great deal these days about the restructuring of our social service benefits system. I for one look forward with the greatest interest to this restructuring when the time comes, but here, with this Bill, there was an opportunity, even though it is a Bill limited to a somewhat specialised category of pensioners, to make an effort, so to speak in isolation, towards solving the restructuring problem. This Bill, like its predecessors, merely upgrades the previous 1164 Acts and thus perpetuates what has become a traditional triennial pattern.
In 1965, on the last occasion when a Bill of this kind was introduced, the Chief Secretary, when presenting the Bill for Second Reading, referred to the increase being a concession rather than a right. I find this disturbing, since he went on to say that the Bill was aimed at dealing with the problems of hardship rather than of legal liability. I cannot, however, dispute that that was so at that time, and it is still so today. Coming back to the argument that we are trying to restructure our concept of social service benefits, this surely would have been an opportunity to include a Clause to the effect that this is a pension increase as of right, rather than to go through the procedure every time as if there were a begging bowl needed for the passage of such legislation.
I know that debates on the occasion of Pension (Increase) Bills are non-partisan, and I have no desire to break with that tradition, but it is no use right hon. and hon. Members opposite contending that, on the subject of parity of public service pensions, there was not a pretty substantial hint that parity would be part of the Government's programme, both in 1964 and in 1966. I do not make the bold statement that an election promise has been broken, but there certainly was a hint, and in your country, Mr. Deputy Speaker, as in mine, there is a phrase that a nod is as good as a wink to a blind man.
The right hon. Lady, in introducing the Bill, presented formidable arguments against the conception of parity. Apart from the cost argument, about which I shall say a word in a moment, I cannot believe that it is beyond the actuarial skills of Whitehall to devise a system whereby parity can be made realistic and workable. She spoke about the regrading of the Civil Service promotional scales, and I accept that this may well happen, but surely one job can be equated with another, whether or not the scale is altered. I find it hard to accept that it is beyond the wit of man to devise the system of parity which, in our hearts, we would all like to see.
I would point out to the hon. Member for Orpington (Mr. Lubbock) that, even on an occasion such as this, hon. Members may express a personal opinion as distinct from a party opinion.
I hold passionately to a belief in the principle of parity. I know that the cost is about £100 million. The cost of the Bill is about £34 million, and there is, therefore, a shortfall of £70 million. That is, by any standards, a sizeable figure, but hon. Members can surely cast their minds back to an occasion virtually 12 months ago to the day when a Bill was introduced to spend just such a figure of £70 mil ion on the nationalisation of bus companies.
I do not want to inject a controversial argument All I say is that, while £70 million may be a large sum of money, there is no reason why the money cannot be found if we want to find it. We should get our priorities right in public expenditure. I regard money spent on pensions, whether in the public service or in a wider field, as money well spent.
I would like to mention a specific anomaly, although I do not know how it can be overcome. A constituent of mine, who is a retired Post Office official, telephoned me at the weekend to tell me that he had retired at the end of a given month after 40 years' service. His pension was calculated on the actuarial scale for that time, which was, I think, 40/80ths of the average of the last three years' salary. A couple of months after he retired a salary increase backdated for about six months, was granted. By virtue of his retirement two months before the increase became effective, he lost the increased pension calculation which he would otherwise have received. Instead of taking fixed dates, such as 1st July or 1st January, could there not be introduced a sliding scale when increases are in the pipeline and are virtually signed, so that these increases which become operative subsequent to retirement, but relate to a period when a person was working can be taken into account?
May I elaborate on a point which is near to my heart and which was hinted at by my hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jen-kin), and it concerns the category of person known as the quasi-Government 1166 employee. In the Pensions (Increase) Act of 1962, colonial servants were graded for the first time as public servants, and were thus permitted to derive pension benefits under the Act. On that occasion, and in 1965, no provision was made for the quasi-Government employee working in a semi-Government institution abroad. My hon. Friend mentioned certain West African authorities, including the Achimoto College and others, but this is not a problem which is confined to West Africa.
Despite representations on the point in 1965, and I read only yesterday the Committee procedings on this subject, nothing was done to provide pension benefits for this category, and the Bill makes the same omission. I hope that the Parliamentary Secretary, in winding up, will not reiterate the argument which he previously advanced, that only Crown servants can benefit under the Bill and quasi-Crown servants are not in this category. When a group of persons has been recruited largely by Crown Agents on the same salary scales and on the same conditions of service as an ordinary colonial servant, it is reasonable that such persons should be included within the framework of pensions made available in 1962 to colonial servants.
I conclude with a point which arises directly out of the situation of the quasi-Government employee, namely, his widow. Many such employees contributed specifically to pensions for their widows on the understanding that their widows should be treated on the same basis as the widows of Government servants. This has not happened. I ask the Government to include, between now and the Committee stage, a Clause to take account of the quasi-Government employee, since I believe that this is an anomaly which could be rectified without too much difficulty.
§ 6.18 p.m.
§ Mr. Thomas Steele (Dunbartonshire, West)
I cannot help but admire the enthusiasm of the hon. Member for Belfast, South (Mr. Pounder), but he was expecting too much when he thought that perhaps the Bill was the proper medium for a comprehensive review of the social services.
The hon. Member went on to speak about the Post Office official who had retired, and suggested that the dates 1167 should not be fixed but should be according to a sliding scale. My experience is that no matter which date is fixed, there will always be people falling outside it; and this could still have happened to the Post Office official.
I appreciate the difficulties about parity. In the industry from which I come there have been many changes in the descriptions of the classes over the years, and I understand the problems which apply. The basic reason we have not had anything from the Government about parity is that they cannot make available the necessary money. The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) made it quite clear that he would not commit his party to that principle, and, when dealing with his own policy and suggesting the year 1956, he told us that it would cost £20 million, which, in his view, was a lot of money. I cannot see the Opposition accepting the advice of the hon. Member for Belfast, South.
I am sorry that the hon. Member for Burton (Mr. Jennings) is not with us, because I want to pay tribute to him for his work on pensions. However, I feel that he is being much too optimistic in his view of the Government White Paper which is published today. I have not had the opportunity of reading it, Mr. Speaker, and, during your absence from the Chair, there has been a general discussion about it. The impression coming from the hon. Member from Burton was that something would be done to avoid the problem of retired people who see the value of their retirement pensions diminishing over the years.
The problem is not answered in the White Paper, because it can only deal with those who are in employment and will retire some day. Our problem is with those who have retired and who, over the past years, have seen their pensions falling heavily in value, when they contributed to them in the hope that those pensions would look after them in the evening of their days.
The hon. Member for Wanstead and Woodford surprised me by choosing 1956. Surely it would be more relevant to take 1958. The National Insurance Scheme came into operation in July, 1948, and there was a proviso that a person had 1168 to be in the scheme for 10 years before he qualified for the State pension. I would have imagined that the period up to 1958 would take into account all those who had not been able to be in the State scheme, and in any general discussion of retired people, my sympathy is with those who retired prior to 1958 and are not getting the benefit of the State scheme.
In the past, the question of who are public servants has been raised on a number of occasions. Mr. Speaker, you will know immediately that I am about to venture on to thin ice. However, my right hon. Friend referred to it in her opening remarks, so perhaps I may be permitted to mention a speech by my right hon. Friend the Minister of State, Department of Health and Social Security, who was at the time at the Ministry of Transport. On 25th March, 1965, he replied to a debate at 7.36 in the morning, and perhaps he was not as clear as he might have been.
In reply to a point about people who were employees of nationalised industries such as gas boards and electricity boards, my right hon. Friend said:It is true that these pensioners have had the same increases as have been granted to public service pensioners, on the ground that many of them were formerly employees of local government bodies and, therefore, had a claim under the Pensions (Increase) Acts."—[OFFICIAL REPORT, 25th March, 1965; Vol. 709; c. 1072.]I am glad that the hon. Member for Tynemouth (Dame Irene Ward) is here, because she was present on that occasion and interrupted the Minister to ask him whether he was aware that many employees of the gas and electricity boards were employees of private enterprise before nationalisation. The point that I want to make is that they, too, have benefited from any increases. The increases which will follow the passing of this Measure will give increases not only to those in the nationalised industries who formerly were employed by local authorities, but those who were in private enterprise as well.
That is why I regret very much, as do many of my colleagues, that the Bill does not cover a wider spectrum. It brings out a very important point. I have studied the new Post Office Bill and looked at the pension and superannuation Clauses in it. They give no indication of what is to happen, because they are enabling 1169 Clauses. It will be interesting to see what happens when the Post Office becomes a statutory body like a nationalised industry, whether its new pension scheme will be contributory or non-contributory, and how pensions will be affected by future Pensions (Increases) Bills.
A number of hon. Members have tended to indicate that Pensions (Increases) Bills have not always given increases to pensioners in excess of the increase in the cost of living. I have taken out some figures, and they are rather interesting when one takes account of what has happened in individual cases. A Civil Service pensioner who retired on 1st January, 1951, at 60 years of age with a pension of £500 per annum, is a good example. There have been a number of increases since that time. He received £50 under the 1956 Act, which was 10 per cent. of his basic pension, increasing it to £550. Under the 1959 Act, he got 12 per cent. on his gross pension, increasing it to £616. Under the 1962 Act, he got 12 per cent. on his gross pension and, because he was then 70 years of age, he received £20 extra, bringing his total pension to £710.
Under the 1965 Act, he received another 16 per cent., which meant an increase of £114, and then his pension was £824. In other words, from 1951 to 1968, his pension increased from £500 to £824. I have made a calculation taking into account the increase in the cost of living. Comparing £824 with £500, the difference is roughly equivalent to the increase in the cost of living over that period of time.
I am fortified in my argument because, having examined the debates that have taken place in this House, it is clear that those increases which have been given over the years take into account not only increases in the cost of living, but also increases in the prosperity of the economy and the fact that retired people are entitled to this increase in benefits.
It may be, taking the man who retired in 1951, that he is getting more than those who have recently retired. This is in accordance with the desire of Members of the House generally. We want to see the older pensioner who has suffered most getting something today which is not only equivalent to increases in the cost of living, but is something more, so that he 1170 will get the benefit of increases in the economic prosperity of the country. Those who have retired later have got some benefit by increases in salary which mean an increase in pension. Therefore, this is fair all round.
Are we being fair to those pensioners? My right hon. Friend mentioned three points, the last of which interested me. She said, "What we are doing here is being fair and maintaining a just balance to the community at large." My problem is whether we are.
For public service pensioners, in the figures that I quoted we are not only being fair; we are being generous. I do not grudge them this at all. But I look at what has happened in other sections of the community. Take the man in outside industry in a contributory pension scheme who, in 1951, retired with a pension of £500 a year. When I quoted this figure in a magazine some time ago I was criticised for using it, because many of these people retired with very much smaller sums. However, I took this figure because the calculation was easy.
In that particular private pension scheme there was an award in 1956 when this man got nothing; an award in 1961 when he got 6 per cent., £30; an award in 1963 which gave him £84; and an award in 1966 which limited any increase to £75. Therefore, that man now has a pension of £689 a year.
We have a Civil Service pensioner and a man in an outside contributory scheme. The Civil Service pensioner is, at the moment, getting £824; the other is getting £689. Therefore, I ask: are we being fair to the community? This new increase will give the Civil Service pensioner another £148, with the result that he will have £972.
The man outside to whom I am referring is a railway superannuitant. The problem is getting the British Railways Board to give him an increase. Up to the time of the new Transport Act we could go to the Government and ask them to take responsibility, because any money that had to be found for these railway superannuitants had to come from the Government, they being responsible for the deficit under which the railways were running. Therefore, any money given to these people could have come out of the deficit.
1171 Now a new scheme of transport has been put through this House. We will be told, as we were told by the Minister this afternoon in opening the debate, that the responsibility was the Board's. I envy my hon. Friend the Member for Bristol, Central (Mr. Palmer) who can go to the Electricity Council with faith and knowledge that it will be able to do something about the problem. However, the people that I represent, railway super-annuitants, will be told by the Railways Board, quite frankly, "We do not have the money."
If we are to be fair to all sections of the community, I think that we ought to say to the Railways Board, or to the Government, that this is not good enough and somehing ought to be done about it. I hope that when my hon. Friend winds up he will be able to give some indication to the British Railways super-annuitants that they will not always be left out in the cold when these pension schemes are put through the House.
§ 6.35 p.m.
§ Dame Irene Ward (Tynemouth)
First, I apologise for not being here to listen to the opening speeches from both Front Benches. I am sure that you, Mr. Speaker, are aware that there is great pressure of work on all Members of Parliament. I could not free myself in time to be here for the opening of this important debate. However, I am grateful to you for calling me now to speak.
What I am about to say will not be based on mathematical calculations, because I am not particularly good at figures, although a great many have been bandied about. However, I have for many years, as indeed have you, Mr. Speaker, followed the welfare of the people covered by the Pensions (Increase) Acts.
I wish to say a few things about what I have heard put forward this afternoon and what is in the Bill. I feel very sad that the people who today are on the lowest rates of pensions do not seem to benefit very much, because the Bill, as has been pointed out, follows the usual pattern. I can see how difficult it is, and I can see, now that at last we have the White Paper, that the Government do not want to complicate their plans for 1172 the future. That is all very well for people either in middle age or in the first flood of retirement, but for those who have been retired many years it is no consolation to say that in future—which may be by the beginning of the next century—things will be much fairer and more just.
I believe that something ought to be done for the older people. I cannot see why this situation could not be met to a certain extent by increasing the £20 bonus, if I may so call it, that was introduced by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) in the last Pensions (Increase) Act introduced by the Conservative Administration, because a great many people will now have reached the age of 70 at which this £20 was established. If that were bumped up to a reasonable figure many of the older pensioners would at least gain something more to help them with the future years.
I hope that the Parliamentary Secretary will answer a specific point. I get a bit tired in Parliament of all the generalities and the paraphernalia of indefinite points, some of them very clever, but which do not answer the points put forward by hon. Members. Why cannot we bump up that £20 for people reaching the age of 70 who are covered by the Pensions (Increase) Bill? Why cannot there be a substantial increase to help those whom the House in general is most anxious to help? If the Parliamentary Secretary will answer that and give an undertaking that the Government will investigate the matter, I shall be very glad.
I have had an opportunity to look at the White Paper only briefly and to read about the new arrangements which will start goodness knows when. There is an indication that the Government are considering having a review of pensions every two years. I am very interested in this, because many years ago I followed the lead given by the Liberal Party, which put forward a proposal to this effect. This was when a Conservative Government were in power. I voted for an Amendment which the Liberals moved; as far as I know, hon. Members of the Labour Party—who were then in opposition—also supported the Amendment.
1173 I get very tired of politics which are not honourable and realistic. I do not mind people saying, "You cannot have this" or "This cannot be done", or, "In the context of the national economy we cannot have this, that and the other", but I hate the business of voting one way when in power and another when in opposition—following the precept of "Never the twain shall meet". It does not satisfy me that this proposal is mentioned in the White Paper because I surmise that many more "two years" will pass before its provisions are embodied in legislation.
The Government, who were then in opposition, followed the lead given by the Liberal Party in respect of a specific Amendment which is now supported by my party. It is time that my party supported it; I can say what I like about my party now because its spokesman, who made an excellent speech on the Bill, was not in the House at the time to which I am referring, so what I say cannot be taken as any criticism of him.
It is interesting to see young, active men debasing things that people like me were keen about many years ago. I hope that my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) will not mind my saying that I am pleased to know that the Conservative Party now supports my proposal. I wish that it had done so when the Liberal Party advocated it and I supported it. I always say that it takes 10 years to win a battle, but for pensioners it takes about 50 years before anything can be won, in terms of altering the general structure of the scheme.
Since the Government approved of the proposal when they were in opposition why cannot they embody it in the Bill and get it put into operation, thus relieving the anxiety of hundreds of thousands of our people whose cost of living is rising every day and who have no means of increasing their incomes to meet it?
The third question to which I want a specific answer concerns the nationalisation problem. I put down a Question to the Ministry of Transport about railway super-annuitants, in whom I have always taken a great interest. I am grateful to the hon. Member for Dunbartonshire, West (Mr. Steele) for raising the question of the new position of the Railways Board. I was thankful that I managed even to get a 1174 Question put on the Order Paper, because it at least showed that it was in order and that there must be some Ministerial responsibility. I know that it was in the original Act, because that is the way in which we were able to argue the question, but I should like to know whether it is still in the Act.
I suppose it must still be in order to discuss the question of railway super-annuitants, or my Question would not have been allowed. Although I shall almost certainly be told that this is a matter for the Railways Board it would not be a bad idea if we had an all-party deputation—I am keen on all-party deputations—to the Chairman of the Board. If he will be frank he should be able to tell us the position concerning the railway superannuitants, and if he cannot get anything out of the Treasury the House of Commons can descend on the Treasury. I always like to idea of descending on the Treasury, because it is the nigger in the woodpile and I get furious with it.
What have the Government arranged with the Treasury about the railway superannuitants?
§ Mr. Speaker
Order. The hon. Lady was not here when I ruled, rather generously, that incidental references could be made to the railway superannuitants, but that the matter could not be pursued in detail.
§ Dame Irene Ward
I have pursued all the detail I need to, Mr. Speaker. I cannot remember whether you had reentered the Chair, Mr. Speaker, when we discussed the question of the electricity and gas employees. I had a Question on the Order Paper today about them, and the hon. Member for Bristol, Central (Mr. Palmer) made a long speech about them, during which I made an intervention. I have not yet received an answer to my Question. It takes longer and longer to obtain an answer if a Question is not reached. The House of Commons cannot be patted on the back for increased productivity, because its life gets slower and slower.
I am willing to bet that I will be told that this is a matter for the electricity and gas boards. I accept, that, but the hon. Member for Bristol, Central has put all sorts of ideas in my head. He was very knowledgeable. He said that the 1175 Electricity Council had a great scheme. He did not go into detail, and I cannot do so because I do not know enough about it. The hon. Member said that the Council had a magnificent scheme, but that it could not obtain the agreement of the Treasury.
As a Member of Parliament, I object to having Ministers tell me that this is a matter for the nationalised boards if something is going on behind the scenes with the Ministries. I shall be very angry if the Council is prevented by the Treasury from going ahead with the scheme which it wants to bring forward I hope that we may be given a definite answer on that matter.
Those are three specific questions to which I require specific answers. I know that we cannot discuss the Royal Warrant, but I want to mention the word ''widows" because it is always useful to have things in HANSARD. I therefore mention the question of widows under the Royal Warrant. I should like to know how the Government react to their situation. Widows have had a raw deal.
One hon. Member opposite, in his eloquent speech, asked what the Conservative Party had done. I agree that my party was much too complacent and did not do what I would have liked it to do. I say that; I do not mind saying it, and I will go on saying it. But in its defence, I would point out that the difference between the Conservative Party and the Labour Party is that it is very difficult to get promises out of the Conservative Party. During all my years in the House my trouble about those living on small incomes is that I have never been able to get my party to give pledges. But the Labour Party gives all its promises and pledges during the General Election, and then we cannot get them implemented when it comes to power.
In my part of the country, since I represent not only Tynemouth but Whitley Bay, where there is an above average number of retired people, I was heavily "put through the hoop" at the last election, when I was confronted with Labour Party documents and candidates' speeches. The Officers' Pensions Society, among others, thought that it would get something out of a Labour Government. 1176 All these people thought that the Labour Party would be far better than the complacent Conservative Party. Now, they have learned their lesson. Although I do not often agree with the Liberal Party, because I pay no attention to it, I did support its ideas on this, but it is not in a position to implement what it said at the General Election and the Labour Party is now retreating from its own election promises.
I would much rather have my party uncommitted, because it can always, with luck, twist and say, "Come on, come on". I think that my right hon. Friend the Member for Kingston-upon-Thames went a little way when he introduced that £20 bonus. It did not go far, but it was a small move forward. He was rather pleased about it, because I paid him a compliment in our debate on the Bill.
But the people who thought that a new heaven and earth would dawn in their standards when the Labour Party won the last election must be very disillusioned. I have not read the White Paper, but I know that it will take years and years, as the Government have been honest enough to say—
§ Dame Irene Ward
I do not intend to, Mr. Speaker, but many hon. Members have quoted from it; although I have it here, I do not intend to do that. In any event, it will probably be 10 years before we get this scheme. In any event, we will not get it, because, by that time, the Conservatives will have won a General Election. I hope that those who support the Conservative policy will be pleased about this. The new Conservative policy will, I think, be very good indeed.
I hope that I can have specific answers to the questions which I have put to the Government.
§ 6.55 p.m.
§ Mr. Stan Newens (Epping)
Like many other hon. Members, I have reservations about the Bill, but it is to be welcomed if only as an overdue stop-gap measure. It is necessary at this time to recognise that it was a considerable temptation for the Government to put off an increase indefinitely, particularly in view 1177 of the way in which hon. Members opposite had been whipping up blanket hostility to increases in public expenditure and at a time when it seems to be the conventional wisdom that never-ending cuts are the main way to solve economic problems.
I wish that right hon. and hon. Gentlemen opposite would say publicly that they consider it necessary to raise public expenditure not only in this but in other spheres, because it would be much more honest if they recognised this and told the public instead of trying to stir up opposition, which people often misunderstand.
I hasten to add that the Bill does not meet all the requirements of the situation. I regret that the operative date will not be 1st January. The public service pensioners have already waited too long. They now have a further two months to wait, and it would have been a better Bill with an earlier date.
The escalator provides for a graduated scale of increases under Part IV of the First Schedule, and it would have been much better, as the hon. Member for Burton (Mr. Jennings) said, if the escalator could have continued at 2 per cent. all the way through. Although pensioners who retired before 1st January, 1955, will get an increase of 18 per cent., had the 2 per cent. escalator been in operation throughout, they would have got even more. I have some knowledge of the position of teachers and know that many of those who have been retired the longest are in a very difficult position.
For example, had we carried the 2 per cent. increase right through for each year, a qualified assistant teacher who retired in 1946 and was entitled to full pension would have received £600 instead of the £561 which he will now receive. A head teacher in a group 3 school who retired in 1946 would have received £656 per year instead of the £615 which he will now get.
This would still be a long way from providing such a person with the pension which is received by someone retiring in an equivalent position in 1968. An assistant teacher who retired in 1968 would receive £725 and a head teacher in a group 3 school £981. There seems still to be a considerable amount of leeway, and I have a great deal of sympathy for those who retired a long time ago. 1178 With regret, I do not think that the Bill goes far enough to bring them up to a reasonable level.
Those who retired after 1st July, 1967, will have been retired, as the hon. Member for Burton said, for almost two years by the time the Bill comes into force, which means that by not providing them with any increase we are helping to perpetuate the problem of those who have been retired longest falling way behind. In this case it is particularly regrettable that the operative date should have been put forward.
It should be pointed out that things are not necessarily cheaper for older people. They must pay the same rents, rates and food prices. Many of them are in a particularly difficult position. The new doctrine of selectivity, to which I am strongly opposed, means that those who have provided for their old age, whether privately or through pension schemes, often have their standards of living undermined by means tests. We are introducing more and more means tests with the rent rebate scheme, the rate rebate scheme, the supplementary—
§ Mr. Newens
Many public service pensioners find it galling to see themselves being deprived, because of their pensions, of the right to certain benefits which are available to other members of the community.
I should have liked the principle of parity to be adopted, even if it could not be immediately implemented. In this respect, I take issue with both Front Benches and I hope that this problem will be carefully considered. We shall always be facing this situation until we grasp the nettle of the difficulty that people who have retired for a long time have to make do with a standard of living which is lower than that of others. I see no reason for that.
The Minister mentioned the increase of 12.3 per cent. in the cost of living since the last Act. While that increase is not as great as is the pension increase for those who retired before 1st July, 1955, if during the course of the next three years the cost of living continues to increase at a somewhat similar rate the real value of the pensions, even for those who are now to benefit most, will 1179 soon be falling below the standard of 1965 once again.
I agree with those who have said that the present system of dealing with increases for public service pensioners is totally unsatisfactory. I was glad to hear the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) say that it was repugnant to both sides of the House to engage in a kind of auction for the votes of public service pensioners. However, I recall that last year the Opposition took advantage of a Motion, signed by the hon. Member for Burton, myself and others, to initiate a debate for narrow party political purposes. We should remove any opportunity for either party to do that in future, for both parties and politicians generally are increasingly being regarded by the public as totally insincere and totally unreliable as a result of tactics of this sort. It is high time that hon. Members refrained from indulging in such operations, and it is certainly time that the system of altering public service pensions was changed so as to prevent the opportunity in that respect.
One of the reasons why the change has not been made before is that the public service pensioners have been largely unorganised. No one would argue that people in employment should be subjected to this kind of system, but people in employment normally have organisations to represent them. The public service pensioners are now getting organised, and a great deal of good work has been done by the Public Service Pensioners Council. Although pensioners can never hope to have the same power of leverage as those in employment, unless a change in the system is made they will make a tremendous fuss. For that reason, I was delighted that my right hon. Friend mentioned that the White Paper which has been published today outlines tentative plans for reviewing the methods of determining public service pensions. I am delighted that we are now moving towards reform, although I regret that we have not done it much more rapidly.
Despite all its faults and inadequacies, I welcome the Bill. Although I still have considerable sympathy with those retired railwaymen mentioned by my hon. Friend the Member for Dunbartonshire, West 1180 (Mr. Steele), other sections of the population will not be helped if public service pensioners do not receive the increases which they need. But the achievement of the increases should enable us to draw attention to the discrepancies which will then be created and to the need for dealing with other sections, such as the railwaymen.
The Bill has gone some way to meet the needs of the situation, but there is no room for complacency. I hope that reforms of the system as a whole will be put through at the earliest time so that this will be the last occasion when public service pensioners will have to rely on this out-dated method of meeting their just needs.
§ 7.7. p.m.
§ Mr. Eric Lubbock (Orpington)
I can remember the hon. Member for Epping (Mr. Newens) concluding with a similar sentence his speeches on this subject in 1965 and 1966 and yet here we are doing it all over again. While I welcome the thought that this might be the last occasion, I am not as optimistic as the hon. Gentleman.
I remember the right hon. Member for Sowerby (Mr. Houghton) saying in the 1962 debate that everyone would now agree that at last it was time for a fundamental review of the machinery by which public service pensions were awarded. He hoped that before the next occasion for such a Bill arose, the Government would have given serious thought to the development of alternative methods. That was seven years ago, but the methods are still identical, although the exact form of Pensions (Increase) Bills has been modified over the years. We have had the experiment of the £20 bonus and now we have had the escalator, designed to give slightly more help to those who have retired longest.
I agree with the hon. Member for Epping that this is the whole point. This is why we have criticised the arrangements for increasing public service pensions. Everyone knows that the teacher, or policeman, or servant of a local authority, who retired many years ago is far worse off than the person who has done exactly the same job but who retired yesterday. The hon. Member for Dunbartonshire, West (Mr. Steele) was not quite right to say that we were being 1181 too generous to public service pensioners with Bills like this in comparison with railway superannuitants. He should have said that in a civilised society pension arrangements for people in the nationalised industries or in commercial employment should be raised to the standards at which we are aiming for public service pensioners.
I would have pointed out to the hon. Gentleman, if he had still been here, that the occupational pensioner in private employment can normally expect to obtain two-thirds of his final salary, whereas the civil servant, who has, in effect, paid for his pension throughout his working life, because his salary takes into account the amount of the benefit he receives in comparison with an outside occupation where there is a private scheme, receives only 40/80ths of his terminal salary as a maximum. Therefore, many people in private occupational schemes are much better off immediately after they retire, even if they do not have the prospect of increases later.
The hon. Member for Epping is absolutely right to say that the only way to cope with the problem of the decreasing value of the pension is by introducing parity, and I am sorry that neither the Government nor the Official Opposition have yet seen the light on this. I dare say that if they took a sounding of backbench opinion they would find that the majority of hon. Members were in favour of the public service pensioners' case, like the hon. Member for Tynemouth (Dame Irene Ward), who has fought for parity over many years, the hon. Gentleman, and many others I can think of who would not accept any lesser solution, however it may be wrapped up by the right hon. Lady in the review she has outlined in connection with the White Paper published today.
Everybody pretends that the Bill is generous. As I said to the right hon. Lady during her opening speech, let us look at the change in the value of money since 1st January, 1966, when the last Act came into effect, and make a comparison with the equivalent figures for the period between 1962 and 1965. As she rightly said, the latest figures available from the Ministry of Labour show a 12.3 per cent. increase in the cost of living since the coming into force of the 1965 Act. I have worked out that if 1182 inflation continues at the same rate it will have increased by 13.7 per cent. by 1st April, when the Bill comes into operation, which, I think, is an all-time record since Pensions (Increase) Bills were first used as a means of adjusting public service pensions. At any rate, during the past three interim periods the increases have been 7 per cent., 8.4 per cent. and 11 per cent., so they are gradually going up.
We must look not at the period that has elapsed since the last Pensions (Increase) Bill, but at the size of the change in the cost of living over that period. That is why it is important to underline this factor in considering whether the amounts provided for in the Bill are large enough. It is true that they are marginally higher than was the case under the 1965 Act. But the table in Schedule 1 shows that all those who retired after 1st July, 1959, are receiving less as a percentage increase than the rise of 13.7 per cent. in the cost of living, and will therefore find themselves worse off in real terms than they were three years ago, immediately after the 1965 Act came into force.
The right hon. Lady said that we could expect a lower rate of increase in the cost of living between now and April than we have experienced over the past three years, because, she added, the effects of devaluation had worked themselves through the economy and we were reaching a period of more stable prices. I do not believe that. I should like her to look at the cost-of-living index between November and December, which was the largest since devaluation. If anything the cost of living is rising ever more rapidly.
We read of increases in every sector, the latest being the proposal of British Railways to surcharge those who travel on peak-hour trains. Big increases in prices are a daily news item; in fact, they are practically not a news item any more. My approach to the subject of increases in the cost of living between now and April is probably conservative. It may well be that on 1st April we shall find that the increase is not 13.7 per cent. since the last Act came into force, but something even larger.
I mentioned that people who retired after 1st July, 1959, will not derive any benefit in real terms as compared with what they received on 1st January, 1966. 1183 Those who retired in earlier years will be slightly better off, but not by as much as the right hon. Lady gave the impression that they would be. If my figure of 13.7 per cent. is correct, the maximum amount by which anyone can benefit in real terms is 4.3 per cent., which is the difference between the 18 per cent. maximum in the Schedule and the 1.7 per cent. change in the cost of living. I hope that the right hon. Lady has been able to follow my arithmeic.
We must also remember that those people who will in effect receive 4.3 per cent. in real terms started off from a much lower base, and that the working population has enjoyed a much larger real increase in its income than 4 per cent. over this period. The result is that the pensioners to whom I am referring are still continuing to lose ground in relation to the rest of the community, for all the pious phrases we hear about enabling them to share in the generally increasing standard of living of the people as a whole. I do not think that this could by any means be described as a very ample margin, which was the phrase the right hon. Lady used.
I did not think that her examples were very impressive. I took one of them down, and I should like to run through it, at the risk of being tedious, because it illustrates my point very well. When I am taking the right hon. Lady's example and not producing one of my own the House can be certain that I could have picked out an example that would have supported my case much better, and that she would not choose one that would help me in my argument.
According to the right hon. Lady, a constable who retired in 1958 after 30 years' service would have received £440 starting pension. She said triumphantly that he would now get £609, an increase of 38 per cent. since he retired. Then, as the coup de grâce to anyone who might be disposed to disagree with her, she said that the increase in the cost of living over the equivalent period had been only 37 per cent., so that, if I took down the figures correctly, such a policeman would now be 1 per cent. better off in real terms than he was at the date of his retirement in 1958.
§ Mrs. Hart
The hon. Gentleman is being a little unfair. I gave three 1184 examples, taken down the scale from the top to the bottom, to give an absolutely objective picture of the effect of the Bill. The hon. Gentleman is choosing one. I gave two others which gave a very different picture. I was not trying to present a picture that would in any degree give a false impression of what the Bill would do, so he should at least withdraw his remark that I was selecting examples which supported my case. I was trying to give an objective case.
§ Mr. Lubbock
I think that the right hon. Lady can make that point herself. Is she disagreeing with the figures? Have I got them down wrongly? Was the increase in the constable's pension 38 per cent. while the cost of living increased by 37 per cent. over the same period?
§ Mrs. Hart
Yes. That is exactly what I said, but I also quoted two other examples, one of a person who had an increase of 72 per cent. compared with the increase in the cost of living of 59 per cent., and the other of a higher executive officer who had an increase of 68 per cent. compared with the cost of living increase. I gave three examples right down the scale.
§ Mr. Lubbock
Very well. So the right hon. Lady is saying that the higher executive officer has achieved some improvement in his real standard of living over this period. I feel sure that there are a lot more constables than higher executive officers. Perhaps we should have tables showing the whole spectrum of public service pensioners. I should be interested if the right hon. Lady could set out not only the three examples which she gave, but the equivalent for a teacher, for instance, or a clerical officer.
§ Mr. Lubbock
Unfortunately, I do not write shorthand and I was able to take down only one example. I am sorry if the one I happened to choose was the least favourable to the right hon. Lady's case. It was purely coincidental. Although I was scribbling hard, I could not manage to take down details of the higher executive officer's case.
To conclude a consideration of the policeman's case—if I shall not upset the right hon. Lady too much—presumably, 1185 the figure of 37 per cent. is the increase in the cost of living between the date of his retirement and the latest figures, which came out in December, so the right hon. Lady is not taking into account what I regard as the inevitable further increase in the cost of living between now and 1st April next. Therefore, this policeman will not be 1 per cent. better off in real terms. He will be literally worse off in purchasing power than he was at the time when he retired in 1958.
Moreover, he will continue to receive £609 for at least three years after 1st April, if one is to go by previous experience, and during that time the relentless march of inflation will continue, so that, inevitably, he will be worse off during those three years than he was immediately after his retirement. He will not have the 3½ per cent. norm which the Secretary of State for Employment and Productivity applies to the working population. He will probably find his standard of living declining by 3½ per cent. a year.
I do not wish to weary the House with quotations going back to 1964, but, having mentioned the right hon. Lady the Secretary of State for Employment and Productivity, I should like to remind the House, in passing, of the letter which she wrote to the Tunbridge Wells group of the Civil Service Pensioners' Alliance prior to the General Election in 1964. The right hon. Lady now holds high office in the Government. It is interesting to consider the way in which Ministers' views have changed since their assumption of office. Here is what the right hon. Lady said:Our policy is to relate the pensions of those in retirement to the level of pensions currently granted for comparable grades and length of service, and a Labour Government would move as quickly as possible to this end. I hope that this reassurance will set your mind at rest.I suppose that it did. Probably, many people in the Tunbridge Wells group of the Civil Service Pensioners' Alliance voted Labour on the basis of that letter.
I was interested to hear the right hon. Gentleman the Member for Sowerby tell us today that he drafted the famous letter which the Prime Minister sent to a member of the Civil Service Pensioners' Alliance. It has been quoted so often in our debates that I shall not weary 1186 the House by repeating it again. Clearly, the right hon. Member for Sowerby and the Secretary of State for Employment and Productivity, to say nothing of the hon. and learned Member for Northampton (Mr. Paget), all thought that this was the Labour Party's policy before 1964, and they, presumably, had good reason for so thinking. There have been remarkable changes in their thinking since.
The right hon. Lady tells us that, after four years of hard work, the White Paper has been produced and we must consider our attitude to public service pensions in the future in the light of the arrangements to be made for State retirement benefits. I agree that it would probably be unwise to consider these matters in isolation, but I think it unsatisfactory that, after those four years of work, the right hon. Lady should now produce a scheme which deals with ordinary retirement benefits without at the same time giving attention to the question of public service pensions, save that she has come to the definite conclusion—if I understood her aright—that parity would not fit in with a State scheme of this kind.
The only objection the right hon. Lady mentioned was that difficulties would arise from changes in the grades of civil servants and others who might be affected by the principle of parity. That is a fairly easy problem to overcome. All one has to say is that, where a particular grade has disappeared, the parity will be measured by taking into account a group of employees instead of the one single occupation. In this way, one could, perhaps, take the point which was made by the right hon. Member for Sowerby, who seemed to suggest that, instead of relating the pensions of public service pensioners to the level currently operating for a certain grade, one should average them out over a much wider field.
Obviously, we cannot go in detail into the implications of the White Paper. Apart from questions of order, there has not been time to study it. However, I notice that it is the intention of the State scheme that adjustments should be made—this is paragraph 33—not only for changes in price levels but also for changes in general living standards.It seems, therefore, that there will be at least an element of parity in the State scheme.
1187 In paragraph 101 the idea of the biennial review is raised. This would deal with the point made by the hon. Lady the Member for Tynemouth, in her excellent speech. I was grateful to her for reminding the House of the work done by our old friend Donald Wade, now Lord Wade, who first introduced the suggestion by an Amendment proposed to the 1962 Bill, although the then Chief Secretary to the Treasury, the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said:I do not find this proposal at all attractive ".—[OFFICIAL REPORT, 20th November. 1962; Vol. 667, c. 1159.]The Conservative Party has changed its mind and has come round to our way of thinking, as it sometimes does. Although the hon. Lady was right to say that, when Liberals put things in their election manifestos, readers will know that we may not be in a position—or we were not after the 1964 election—to implement those pledges, it is striking on how many occasions our thinking has an effect on the formation of policy of another party so that ultimately it is put into effect, even though not by members of my party—at least until now.
What my noble Friend did in 1962 was of considerable importance, and I am glad that the Conservative Party has now come round to thinking that, if one could have regular biennial reviews instead of leaving the question to the whim of the Government of the day, we could, as the hon. Member for Epping put it, begin to take some of the politics out of the question of determining public service pensions.
I am rather worried to read in paragraph 101, however, that the biennial review would not necessarily take into account all changes in the levels of earnings which have taken place since the last increase. The sentence is:The actual amount of improvement on each occasion, beyond the inflation-proofing, must be left for decision by the Government of the day, which will need to take into account such factors as movements in earnings levels, changes in the standard of living of the community as a whole, and the general economic situation.If ultimately the Government decide how much to award, why have this biennial review at all?
1188 There are still to be no fixed rules by which the pensioner will be able to calculate his entitlement to an increase at the end of the two-year period. Therefore, we will not entirely eliminate the sort of political battle that leads up to every Pensions (Increase) Measure or has done in respect of every such Measure since I first came to the House. During such periods the various pensioners' associations write letters of complaint to hon. Members, visit Ministers in deputations, we have Supply day debates and, finally, after a long period, the Government introduce a Bill which one supposes must to some extent have been influenced by the representations which they have received. Will not the same thing happen, with the exception that the biennial review will be only a further stage in this process?
§ Mrs. Hart
It may help the House if I clear up this question of the biennial review as it is expressed in paragraph 101 of the White Paper. It means that the existing generation of pensioners will no longer have to apply pressure on the Government of the day and on political parties and hon. Members to persuade the Government that the time has come when a further increase should be awarded. They will now be assured that every two years—following, of course, the introduction of special cost-of-living indices for pensioners, about which the House already knows—there will be a biennial review which takes full account of, and completely compensates them for, any changes that have taken place in price levels during that two-year period.
Beyond that—and this is a matter in which there must be a certain flexibility—it must still be for the Government to decide how far the increase should not only take into account changes in price levels, but other factors, and this must be in relation to the general economic position at the time. It means, therefore, that a great deal of the matter will be taken out of politics, and this is important for the present generation of pensioners.
§ Mr. Lubbock
I am grateful to the right hon. Lady for that explanation. What she described will undoubtedly be an improvement on the present situation, because the lobbying and politics will 1189 be taken out of the timing of these increases. Nevertheless, they will not necessarily be taken out of the amount involved, because we will still have an area for argument about, for example, the extent to which pensioners should be compensated above the amounts which are necessary to counter the effects of inflation and whether they should go all the way to meet the changes in earning levels of the working population since the last bienniel review took place. I agree that this will be an improvement and will take quite a lot of the argument out of politics and into the formal machinery, and that this will be an improvement.
It is interesting to note that paragraph 148 says:… a joint committee has already been set up to review the whole basis of superannuation—This is in the Civil Service—with representatives of management and staff, including the industrial trade unions concerned. The implications of the new State scheme will be taken fully into account in the course of this review.What terms of reference have been given to this committee? Do its members have guidelines on which to work or are their terms of reference as vague as those set out in the White Paper? If I were a member of this committee and I were told, "You must design a new scheme for the superannuation of civil servants and take into account what is said in the White Paper", I would describe that as vague.
What sort of scheme are the Government aiming at? The Minister will recognise that she and her colleagues must decide the type of superannuation scheme at which they are aiming in broad terms and so enable the committee to work out the details. Merely to provide something as sketchy as paragraph 148 is unsatisfactory. No doubt the right hon. Lady has tried to keep the White Paper as short as possible. Presumably she was not able to set out the full terms of reference of the committee, but the House should be informed in the near future exactly what the committee is being asked to do.
§ Mrs. Hart rose—
§ Mr. Speaker
Order. We cannot debate the White Paper in detail. We are discussing a Measure which is concerned with public service pensioners.
§ Mr. Lubbock
Perhaps the Minister will explain the position on another occasion.
It seems that after four years, during which the comprehensive social security review has been proceeding, this Measure represents a rather small mouse. We were promised that public service pensioners would, at the end of the review, have all their difficulties solved. Although the right hon. Lady has managed in the White Paper to deal with the State scheme, we appear otherwise merely to have been told about a committee which has been established. When public service pensioners have digested the White Paper they will, unless there is something important in it which I have not spotted, be extremely disappointed at this aspect of the matter.
They will, of course, be pleased about the Bill on the principle that half a loaf is better than no bread at all. They will also be pleased with the principle of the biennial review, but they are bound to be unhappy, following the rosy promises that were made by the Labour Party prior to the last General Election, that all that they have is the committee to which I referred.
§ 7.36 p.m.
§ Mr. A. H. Macdonald (Chislehurst)
I see no reason why the hon. Member for Orpington (Mr. Lubbock) should not criticise the Bill, if he feels inclined to do so. It was, however, a trifle ingenuous of him to have selected only one example to support his argument. It was not surprising that when we examined it we found that it was an example unfavourable to the Bill and favourable to his course of action.
I could not agree with much of what the hon. Gentleman said because I am still not entirely convinced about the merits of the principle of parity. However, he made a just point when he remarked that many private pension schemes are significantly superior to public service pension schemes. I hope that my right hon. Friend has borne that in mind; and I shall return to this matter later.
I am at something of a disadvantage because I have noted with admiration that almost all hon. Members have found themselves able to listen to the debate and make notes of the salient points and, 1191 at the same time, read the White Paper which has just been published and quote appositely from it. I am unable to perform that feat. You will be glad to learn, Mr. Speaker, that I shall not discuss the White Paper, much as I would like to do so.
From the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) and from my right hon. Friend the Member for Sowerby (Mr. Houghton), who seemed to know the White Paper by heart, we had some interesting remarks, and I hope that when we come to debate the document there will be ample opportunity—perhaps it will be a two-day debate—to enlarge on the interesting thoughts which were set out in their speeches.
I will confine myself to the Bill. The hon. Member for Wanstead and Woodford felt a little inhibited from criticising the Measure in full strength because he did not want to give the appearance of party political opposition to the Bill. I hope to be around when he does not feel inhibited and feels disposed to do a hatchet job on the Measure, because to me the Bill is something of a disappointment.
Since I was elected to Parliament the House has debated the subject of public services pensions on three occasions, and I have been privileged to catch your, eye, Mr. Speaker, in all three debates. Those three debates were introduced with suggestions that a review body should be set up. I understand why Private Members' Bills take that form, but I felt disposed to oppose such suggestions, arguing consistently I hope, that a periodic series of reviews of the level of public service pensions is in no way superior to a periodic series of Acts. I argued that there should be one permanent Act to deal with this problem once and for all, as many others have argued.
This Bill represents something of a lost opportunity. It is a commonplace that many of us argue that the level of pension, when originally granted, represents the value thought to be appropriate, and that the £ s. d. in which it is expressed at that time are fortuitous. It is being expressed in £ s. d., but the actual denominations are really the amounts which denote the value of the pension at that time. Many of us have 1192 said that as the cost of living rises there should be appropriate increments to restore the pension to its original value. That seems to be the first fault in the Bill because it is called a Pensions (Increase) Bill. Yet at any rate a part of the nominal increase set out is not an increase in real terms but a restoration of the pensions to the value at which they stood when originally granted.
I acknowledge that my right hon. Friend endeavoured to indicate during her speech how much of the nominal increases were real and how much were merely restorative. Unfortunately, that was just at the moment when we had those rather tiresome interruptions from the hon. Member for Orpington, and I found myself unable to follow the thread of what was being advanced. I shall have to read that in HANSARD.
It is a fact that we do not have, as many of us had hoped to see, some automatic procedure for dealing with this problem continually. We are seeing now one more in the series of Measures; we are back to the same old routine. It is not really significantly different from the £20 tinkering measures advocated by the hon. Member for Tynemouth (Dame Irene Ward).
In the Explanatory Memorandum to the Bill the first sentence refers to Pensions (Increase) Acts 1920, 1924, 1944, 1947, 1952, 1954, 1956, 1959, 1962 and 1965. I wonder whether the Government, in drafting that, did not have some dim faint feeling that this series of Acts is something less than satisfactory. I submit that such a series is, as well as being unfortunate for the pensioners, unfortunate constitutionally. As I understand an Act, it is, or should be, something of general application. This series of Measures, including this Bill if it becomes law, will not be law in that sense at all. They are merely administrative actions, fortuitously couched in the form of a law.
I cannot think that these Acts are the general statements that I conceive a law to be. It is hardly surprising that this difference exists, because other Acts which I regard as being real law deal with the general body of citizens. These Measures do not. In a sense these Measures deal not with citizens at all but with our ex-employees. It is, therefore, not surprising that we should have 1193 a different approach to this matter. I regret that we have not taken the opportunity to introduce one culminating Act which might lay down, once and for all, some formula for dealing with the problem of pensioners which comes before us so often—a formula either linking the value of pensions with the cost of living or introducing the concept of parity.
I should have preferred a Measure linking the pensions with the cost of living, despite what my right hon. Friend the Member for Sowerby said, and despite the arguments which we have just heard. My right hon. Friend certainly introduced some interesting arguments. I do not quite see why pensions as a whole should necessarily be linked to wages and salaries, because that would mean that the level of pensions might to some extent depend upon the success of the pensioners' successors in securing wage or salary increases. That is perhaps a rather chancy process. For that reason I should have preferred to see a Measure linking pensions with the cost of living.
I heartily agree about the administrative snags over the concept of parity, introduced by the Paymaster-General. If she had stopped there I should have had no criticism to make, but she went on to advance other arguments against the concept of parity which rather alarmed me. She said that the introduction of a concept of parity would mean a high privilege for ex-public servants. I am not sure that that is true, bearing in mind the remarks I have quoted earlier by the hon. Member for Orpington, but even if it is true what is so dreadful about that? Why should the Government not set a lead in this? Is it really to be supposed that we cannot even consider some automatic proposal to keep pensions level with the cost of living? Is it conceivable that we cannot consider such a proposal for public servants until something of this nature has been carried out in private pension schemes? Surely not.
My right hon. Friend went on to advance further arguments, and at that point I confess that either her thinking or my listening became extremely muddled, because it seemed to me that she was arguing that the concept of parity was very difficult to introduce because of the graduated pension schemes which existed some time ago. I will check this up in HANSARD to see whether 1194 she did say that, but if this is so, it seems to march very curiously indeed with today's White Paper.
I cannot see why we should not introduce a Measure linking pensions with the cost of living. I accept the administrative arguments against parity. There would not necessarily be any difficulty about retaining control over public expenditure if we did that, because it would be perfectly plain that this House had to satisfy itself that the formula laid down in the Act was being observed. This is what I should like to see. These are the arguments which led me to hope that this Bill would be a culminating Bill. I was not alone in thinking that. In a debate almost exactly a year ago these words were spoken:What we really need is a system, as opposed to hand-to-mouth methods, of increasing funds from time to time, when the Government sees the effects of erosion on the pension …. What is fundamentally wrong … about the present system … is that it is a hand-to-mouth system. It does not provide any organised systematic basis upon which any Government determines what alterations in our pensions should occur."—[OFFICIAL REPORT, 26th January, 1968; Vol. 757, c. 792.]They are very wise words, and naturally so, because they came from the lips of the Financial Secretary to the Treasury. I see no reason to dissent from that view. I agreed with it then, and I agree with it now.
All those who agreed with those words must have felt a great sinking of the heart when the Bill came forward on the same lines as previous Bills. When I saw the Bill, I guessed that the White Paper, so long promised and so long awaited, which was to be the solution to these pension difficulties, among other things, would not introduce a principle of this kind, despite the hints and half promises which had led us to expect that it would. Although I have not been able to read it, I have at least looked at its first page and have some reason for thinking that my fears are justified and that it does not introduce the system I had hoped to see.
Though in a sense I am delighted to see the proposals which are in the Bill, it is a source of some regret to me that the opportunity has not been taken, as so many of us thought it would be, to introduce a Bill that, as my hon. Friend the Member for Epping (Mr. Newens) said, would take so much of this question 1195 out of the realms of argument and politics and introduce an automatic system which would deal with it equitably and permanently.
§ 7.51 p.m.
§ Mr. Charles Mapp (Oldham, East)
The first of the only two points that I wish to make has figured in every speech which has been made. It is the question of a review. I listened with great care to the intervention my right hon. Friend the Minister made a little earlier. Regardless of the issue of the White Paper, I wish to see an end to the public disgrace which occurs every two or three years, no matter which party is in power, of great numbers of complaints being made by well-meaning organisations and people outside the House.
It so happens that the White Paper has been issued today. Paragraphs 100 to 103 do not talk about reviews of occupational pensions, which is what we are now talking about. We delude ourselves if we think that occupational pensions will necessarily be reviewed in two years' time. A more careful study of paragraphs 100 to 103 shows that the review which will take place in 1971 and 1972 will be wholly confined to what might be called the State pension scheme. The Minister was careful not to give a firm undertaking that this occupational pension would be the subject of a review in two years' time.
As I have understood it, the sense of the House today is to note the long-term policy outlined in the White Paper and to give effect to it even in this Bill. I myself would like it to be done in any case, regardless of the White Paper. If there is such a large measure of good will on all sides, there is room for a new Clause in the Bill. By all our arguments, are we not committed to the principle of a new Clause providing that arising out of this Bill when enacted there will be an automatic review in the spring of 1971? That would be a means of ending the lobbying which has gone on for far too long.
I shall be agreeably surprised if the Government Front Bench is able to meet this point in the way that I believe it should honourably be met. If there is evasion, as I expect there will be, it will be to unhinge this occupational scheme from the national scheme and we shall 1196 be out on a limb, just as we have been for 15 to 20 years. Both sides of the House should make a careful study of the words which have been used and seek to ensure that the Bill is improved by the addition of a Clause imposing a legislative duty to carry out a review in two years from 1st April next. Then the legislation can be carried through in the September of that year.
My hon. Friend the Member for Dunbartonshire, West (Mr. Steele) called attention to the inequalities affecting the taxpayer, who will be called upon—rightly in my view—to foot the bill to the tune of £20 million in terms of taxes and to the tune of £7 million in terms of rates, to say nothing of the cost for the Armed Forces later. Within that group of taxpayers and ratepayers are a large number of people who were in excepted employment up to 1947 and, consequently were not able with full rights to qualify under the Act of that year. Their statutory superannuation schemes have more than the weaknesses and more that the poverty of the Government occupational schemes.
Some of those people were former employees of industries, now generally nationalised, which are fortunately, in the main, profitable. By the very nature of things, the railway element is far from being profitable in any circumstances. Having a little knowledge of transport, I would not like to say that next year it can or will be viable.
I would like the Paymaster-General to tell the Ministers of Transport and of Power that this is a burden which the taxpayers are willing to bear, including the later consequences of it in respect of this public service. There is an equally strong obligation, morally and materially, to other people to whom this argument applies, except that they had the historical difficulty that they just did not happen to be in local government, although in many ways they perhaps rendered greater public service than local government officers.
One small part of the Bill intrigues me. I still await the reply of the Minister on this. Schedule 1, Part III, paragraph 1, says:A pension payable by the trustees of a trustee savings bank or by the Inspection Committee of Trustees savings banks.1197 The subsequent items, paragraph 2, on the face of them, will in one form or another fall on Government account, but I should not have thought at first glance that there was a case for putting Clause I—the Savings Bank people—on Government funds. If there is a case, well and good. If there is not a case, clearly the Bill can be open to amendment for other staffs who qualify in precisely the same way.
I hope that my two major points have got home. One is that, if our protestations and arguments about a review are worth what we have been talking about, the Bill is worth amending to that effect. Secondly, I would like the Minister to ensure that the principles of the Bill find their reflection in the other areas of which I have spoken and that negotiations will be initiated on those lines as soon as possible.
§ 8.0 p.m.
§ Mr. Peter Hordern (Horsham)
Many right hon. and hon. Members who have taken part in the debate must have felt that they have been here before. The hon. Member for Dunbartonshire, West (Mr. Steele), the right hon. Member for Sowerby (Mr. Houghton) and my hon. Friends the Members for Burton-onTrent (Mr. Jennings) and Tynemouth (Dame Irene Ward) have debated Bills like this for many years past. I know that they will forgive me if I say that some of the ground which they have covered this afternoon appeared to me to be familiar to anyone who has followed those debates.
A point which the hon. Member for Oldham, East (Mr. Mapp) has raised in his remarks and which seems to me to be important is the question of the two-year review. The point was made by my hon. Friend the Member for Tynemouth and by many other hon. Members during the debate that what was required was a regular review. It is well known that a part of Conservative Party policy is to have a biennial review. We want to know whether this is now accepted by the Government for public service pensioners. If it is so accepted, why is it not framed within the Bill? That is what we want to know at the outset.
The right hon. Member for Sowerby also asked as he has done these many 1198 years past, when we would get a fundamental review of the entire range of public service pensions. I regret to say that I do not think any answer has been presented by the Government even now.
The right hon. Member also said that, without accepting parity, he thought that the movement of wages and salaries would make a better index than the price index. The right hon. Gentleman did not elaborate that proposal sufficiently for us to be able to judge clearly what he meant by it, but it seems to me to be closely akin to the idea of parity. The right hon. Gentleman has not, uniquely, on this occasion referred to parity. He sailed close to the wind on this matter in previous debates and I only wish that he could have told the House precisely what he meant on this occasion.
This is the eighth Pensions (Increase) Bill to be introduced since the war. It is also the most expensive. I wish that that could mean that it was also the most generous in attempting to introduce a new principle into the calculation of pensions. The truth is, however, that the cost of living has increased so rapidly under the present Government that it has already risen by 12.3 per cent. since the 1965 Act came into force. This is certainly the largest increase experienced in the intervals between any of the Acts since 1956.
Therefore, the cost of the Bill—£27 million—is due more to the fundamental incompetence of the Government than to any spirit of generosity or determination to import a new principle of relief for these hard-pressed pensioners. In this way, it stands in some contrast—I will not say marked contrast—to the previous Bills introduced by former Conservative Governments.
I hasten to say that I do not mean that previous Acts of the Conservative Administration were unnecessarily generous, or that there is not still a long way to go. Indeed, the remarks made by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), at the beginning of the debate, show that we consider that there is still a long way to go. Our attitude to the Bill must, however, be influenced by the kind of progress that we have experienced since the war. It may have been slow, but it was certainly progressive.
1199 One cannot fail to notice that the debates in which Mr. Speaker played such an important part, during the post-war years, were uncontroversial. The right hon. Member for Sowerby was nearly always warm in his praise; as was the then Mr. Glenvil Hall. Their tributes were well deserved. When, however, one looks at the fate of public service pensioners in the late 1940s, it is like looking at a dark age centuries ago and not simply 30 years ago.
The 1954 White Paper, for example, referred to the old attitude to public service pensions that the fundamental principle was that, once awarded, they were not normally subject to change in either direction and that that principle had been upheld by successive Governments. There could hardly be a more stiff-necked attitude than that, and yet many hon. Members will remember the pre-war years, when there was a distinct possibility of wages going down, not up, and there was a similar threat to pensions.
In the 1956 Act, the means test was abolished and further increases of from 2 to 12 per cent. right up the scale were granted with a maximum of £100. In the 1959 Act, increases were calculated on the annual current pension instead of the basic pension as originally awarded, and the £100 limit was removed. In the 1962 Act, about a quarter of a million people over the age of 70 also received an additional flat increase of up to £20 and the pensions of 10,000 overseas pensioners were brought into line with home pensions.
All improvements are relative and I accept that the pre-1954 attitude was intolerable. Indeed, some of those improvements brought their own problems upon them. One of them—I swear that it was invented by the right hon. Member for Sowerby—was known as overtopping, which I recognise on the golf course, at least, but not at first in connection with pensions. Overtopping is still with us and seems likely to remain as long as these Bills are presented in their present form.
Surely, the most encouraging change was the 1962 proposal to pay an additional flat increase of up to £20 for those over 70 years of age. My hon. Friend the Member for Tynemouth particularly 1200 mentioned this in her speech. It went beyond the normal cost-of-living increases. It seemed to be a quite arbitrary figure and, in this respect, it was the most significant increase yet for public service pensioners. They have, of course, even more reason to be encouraged by the promises made by the party opposite before the 1964 election and, in particular, by the pledges for full parity made by the hon. and learned Member for Northampton (Mr. Paget) at the Dispatch Box. He has told us that he was authorised to do so by the National Executive of the Labour Party.
What about the Chairman of the Officers' Labour Party in a letter to the Chairman of the Officers' Pension Society just before the election on 14th September, 1964:You will know "—he said—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.What kind of negotiations have taken place? They must have been scintillating. Nearly five years later, there has been no progress whatever towards parity, and service pensioners, like the rest of the country, are under no illusions about the kind of Government we have.
What about the general review? There has been virtually no progress on this front since the party opposite came into office. When the 1965 Bill was introduced by the Chief Secretary, we were told that it was essentially a holding Bill. There is certainly nobody better than "Stonewall Jack" to put that line forward. The right hon. Gentleman started by referring to the prices and incomes policy as a means of containing inflation and said that it was: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".The right hon. Gentleman went on: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 Lancaster1201 the right hon. Member for Sowerby.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 … This Bill, however "—he was referring to the 1965 Bill—is essentially a holding Measure awaiting the outcome of the fundamental review of social security."—[OFFICIAL REPORT, 18th November, 1965; Vol. 720, c. 1353–4.]Today, we have had published the result of that fundamental review. Paragraph 148 of the White Paper reads:In the Civil Service, following the recommendations on various pension questions by the Committee under the chairmanship of Lord Fulton a joint committee has already been set up to review the whole basis of superannuation, with representatives of management and staff, including the industrial trade unions concerned.I do not call setting up yet another Committee a result of a fundamental review. Three years later we are presented with another holding operation, but this time by the Paymaster-General, the chief censor of Cabinet speeches. How very suitable. No more pledges from her, no special help for the over-seventies—just a censorship operation.
The Government's neglect of these pensioners in the light of their pledges and what they said about the last Bill in 1965 has been quite shameful. This Bill makes no special provision for the older pensioners or those on the smallest pensions. No increase is payable until the pensioner reaches the age of 60, and yet there are many people, such as policemen, firemen and those in the Services, who retire earlier.
Perhaps the most important and significant of all the omissions from the Bill is that there is no provision, so far as one can tell, for regular reviews. The hon. Member for Oldham, East raised this point. In the debate on a similar Bill almost 10 years ago Mr. Glevil Hall said:… what is wanted … is legislation to provide machinery for a periodic and automatic review of pension rates in the light of the cost of living as it changes."—[OFFICIAL REPORT, 2nd June, 1959; Vol. 606, c. 47.]After four years of this Government, no such arrangements have been made.
We have made it clear that when we are returned to office we shall review the position every two years. We shall 1202 reduce to 55 the age at which increased pensions become payable. We shall bring the pensions of those who retired before 1956 up to the same level as if they had retired then with appropriate increases since. These were the pledges we gave before the last election, and we stick to them now.
The reason we have chosen 1956 is that the various Pensions (Increase) Acts have more or less covered the cost of living until now, although not evenly over the field. For example, if we take the case of a man who retired on 1st May, 1964—that is the cut-off period—he would have no increase payable until 1st April, 1969, when he will have an 8 per cent. increase. Meanwhile, the cost of living has risen by 21 per cent. to December, 1968. The hon. Member for Orpington (Mr. Lubbock), carrying that progression forward, said that by 1st April the amount would probably be 13.7 per cent.
That brings us back to the argument for complete parity. Speaking for myself alone—and I emphasise that—I have never been impressed by all the arguments against parity. The fact that higher salaries must be paid in the Civil Service is a reflection of inflation, and the Government are responsible for that. It is true that N.A.T.O. countries give their public servants parity. Even though they do not have a National Insurance retirement pension as well, that is not strictly comparable because it is a contributory scheme, and, in any case, the point of these Bills is specifically to provide against inflation, and the National Insurance bill should not enter into the argument.
The major difficulty about full parity is the cost, which is about £100 million, and I cannot see how we can afford this sum in a single Bill. But what we propose to do is to raise all the older pensions to the 1956 level. Looking back at earlier debates, I have seen too many irrefutable Treasury arguments, such as those concerning overseas pensioners, turned on their head, and I hope that they will be again.
There has been no general review of public service pensions since 1859, when Mr. Gladstone was Chancellor of the Exchequer. It is time we had another. The need for a review has been demonstrated by the Fulton Report on the Civil 1203 Service. The Paymaster-General should have told us what she thought about the Fulton's Committee's proposals and what she intended to do about them, but she said nothing on that subject. Therefore, I trust that the Parliamentary Secretary will tell us what the position is about the review.
The Fulton Report proposed greater mobility into and out of the Civil Service and recommended that important changes should be made in the Services' pension arrangements. The first of these was the extension of the scheme to cover temporary staff. The definition of "temporary staff" is those staff not taken on establishment. There are apparently 124,000 temporary civil servants, and it is possible to reach the age of 59 with 19 years' service and still not be entitled to a pension. I realise that everything in life is temporary, but I think that that carries the principle too far. Pensions for temporary civil servants and for re-engaged staff have been a recurring feature of these debates, and we should be told the Government's position.
There is the question of transferability of pension rights. Pensions can be transferred within the public sector, but not from the public to the private sector. So far as I can see, the preservation of pension rights forms no part of the new earnings-related National Insurance scheme.
§ Mr. Hordern
I am grateful.
Paragraph 158 of the White Paper reads:While the Government hope to see a continuing spread of transfer arrangements, they have concluded that it is not at present possible to achieve universal transferability of occupational pension rights.
§ Mr. Hordern
—preservation of pension rights? What action, if any, do the Government propose to take on the proposal 1204 of the Fulton Committee to reduce the qualifying period of the pension from 10 to five years?
I turn to the question of contributory pensions. Although the Tomlin Commission recommended 40 years ago that Civil Service pensions should be contributory, they remain non-contributory. This seems anomalous when one recalls that the nationalised industries' schemes and most other public service schemes are not contributory. It seems even more anomalous in the light of the new National Insurance scheme. What action do the Government propose to take?
These are all important questions which touch on the prospects of future as well as existing pensioners. But, important though they are, they pale before the central question, which was put by my hon. Friend the Member for Burton: what do the Government propose to do about inflation? If they had shown any competence in arresting inflation, we should not be faced with the most expensive Bill of this kind ever produced. The sum of £27 million is a lot, even in these days, especially when it cannot be taken as a mark of generosity to pensioners but is a measure of the Government's incompetence.
I have more retired public servants, particularly retired overseas public servants, in my constituency than most hon. Members, and I know their problems very well. Theirs is a desperate battle to keep the standards to which they were once accustomed and to which they feel entitled. We have been talking about cut-off dates, overtopping and frozen entitlements. That is easy enough. But try talking to an elderly ex-schoolmaster who invested his savings in 3½ per cent. War Loan and try making a convincing case against parity to him or to oneself. This is the tragedy: it is the most responsible, dedicated and loyal people who have suffered the most.
Those who have trusted successive Governments and invested their hard-won savings in Government securities in order not to be a burden on the State find that their reward is that their savings plummet down to less than a half of their value in money terms, and are ravaged further by galloping inflation. No. hon. Member can be ignorant of this process, and no one of us can escape responsibility.
1205 There is a further category of what one might term public servants who do not come as yet within the scope of the Bill and I refer to a letter which I received this morning about a man who is about to become a pensioner of a public service. He used to contribute 5d. a week for a pension of 11s. 8d. a week. This has now been replaced by a new system under which his contribution is made slightly over 13s. a week for a pension of about 28s. a week. There is a possibility that he might qualify for an additional 6s. 6d. a week, bringing his pension up to 34s. 6d. or 35s. a week. This after 50 years on the railways.
That is an indictment of our system, and however little we can bring it into this debate I think a message ought to go out from this House that the nationalised industries should do more for their servants and retired pensioners than they do, and ought to take the initiative in the first place—and we will deal with the Treasury if it refuses their demands.
It was in the right hon. Gentleman the Member for Sowerby who stated so aptly during the passage of the 1962 Bill that a pensioner has no employer to threaten, no arbitration tribunal, and no court of appeal. Therefore, our responsibility to these pensioners is of a very special kind. If we cannot pride ourselves on being a modern and productive society unless we expand our education, we equally cannot pride ourselves on being a compassionate and civilised society unless we make proper provision for retired public servants.
We can argue about the amount of provision, we can argue about the relative allocations, but what we cannot argue about is the effect of inflation on these pensioners, and we have to face the distressing fact that the Government are doing nothing about the root cause of inflation, namely, the continual increase in Government expenditure, without any commensurate increase in the gross national product. This is not the time to embark upon a general economic debate, but it is the fact that the worst enemy of all public service pensioners—indeed, of all old-age pensioners—is the rapid march of inflation. It is also a fact that this process has been advancing more rapidly under this Government during the last three years than for these many years past. It is upon this score, of protection against inflation, that the Government 1206 can do much more to help public service pensioners than by any other action.
With that statement we welcome the Bill as a timely assistance to public service pensioners, but I cannot end without saying to the Parliamentary Secretary that I hope he will make clear the point about the two-year review, and I hope also that it will be possible to discuss this matter without being forced by the concern and consternation of public service pensioners in our country.
§ 8.24 p.m.
§ The Parliamentary Secretary to the Ministry of Overseas Development (Mr. Albert E. Oram)
Early in his speech the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) said, and I agreed with him, that this is not a subject on which we want to engage in an auction. That did not seem to prevent him from putting in one or two bids here and there in what was something like an auction.
Although I think it true to say that practically every speaker in the debate has had some point of criticism to offer of the Bill, I think it would also be true to say that practically every speaker has welcomed the Bill in general. I think this is because we on both sides recognise that those who are covered by this legislation are a group of people who have given long and honourable service to their country through their working lives, are now entirely dependent on us to ensure that their standard of living in retirement is not severely eroded by rising prices as the years go by, and deserve well of the Government and this House. I believe that this Bill demonstrates that the Government entirely accept this proposition.
Before I go on to deal with a number of the speeches which have been made I want, lest I forget it, to take up a specific point raised by the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) during my right hon. Friend's speech. He asked whether the Armed Services would be dealt with according to the same principle as other pensioners, that the largest increases would go to those who retired longest ago. If he were here—I do not think he is—I would give him the assurance that it is our intention that the same principle will apply in the case of the Armed Services.
1207 The hon. Member for Wanstead and Woodford waxed eloquent throughout his speech but particularly, I thought, when he described what he called this tangle of anomalies in the whole series of pensions increase Acts. I thought that was a little steep of him, if we have regard to the fact that five out of seven of the post-war pension increase Acts were the responsibility of a Government he supported, but I think we can accept his point that the system which has grown up in this series of Acts is one which none of us regards as wholly satisfactory for seeking to serve the purpose of insuring the pensioners against inflation.
A lot has been said, and said, I think, most forcefully by my right hon. Friend the Member for Sowerby (Mr. Houghton), about the need to conceive of a new scheme which relates to the scheme outlined in the White Paper issued today. My right hon. Friend, who has great knowledge of this subject from all points of view, explained how early in the life of this Government it was recognised that this question of pensions increase Bills is closely involved with the whole review of social security, and that there will have to be worked out a new relationship between the two sets of pensioners.
The hon. Lady the Member for Tyne-mouth (Dame Irene Ward), my hon. Friend the Member for Oldham, East (Mr. Mapp), the hon. Member for Orpington (Mr. Lubbock) and, most recently, the hon. Member for Horsham (Mr. Hordern) have all mentioned the periodical review which has been part and parcel of earlier debates on this subject. A number of hon. Members have also referred to or quoted paragraph 148 of the White Paper, which refers to the setting up of a Committee to consider the relationship between Civil Service pensions and the State scheme.
The hon. Member for Orpington accepted, as we all do, Mr. Speaker's Ruling that we were not to engage upon a full debate of the White Paper, but he was on to an important point when he asked for information about this Committee. I assure him that the Committee is considering the whole basis of superannuation in the Civil Service in the context of the proposals of the White 1208 Paper on the partial contracting-out of occupational pension schemes. A general formula governing the relationship between occupational schemes and the State scheme is set out in the White Paper. Perhaps the hon. Member for Orpington did not have time before he rose to absorb the whole of that section, but I am sure he will appreciate that the Committee that is mentioned in paragraph 148 is not just a general review body but a Committee which is already hard at work on a practical, detailed and technical task. It is this Committee which will be considering the relevance of future Bills of the kind which we are debating today to the State system. Included in that consideration will be a study of the possibility of a review period. We must wait and see the results of the Committee's work, but I assure those who have raised this point that the Committee is a very practical, hard-headed one.
§ Mr. Patrick Jenkin
I am most grateful to the Parliamentary Secretary for giving the House so much information about the work of the Committee. Is he able to go a little further and say whether the Committee will consider the fundamental questions of funding and financing and matters of that sort to which I made a brief reference in the course of my earlier remarks?
§ Mr. Oram
In reply to the question which the hon. Gentleman has just asked, the Committee will not be considering this general question, but it will be taking a hard look at all the implications of the White Paper upon public service pensions.
The hon. Member for Burton (Mr. Jennings) fully carried out his undertaking not to be partisan, and he presented the difficulties very fairly. He expressed as well as I would hope to do the reasons why the Bill has to be a holding operation, as he said, in the light of the new developments that we see ahead. He said that 1956 could perhaps be considered as a fulcrum; the hon. Member for Wanstead and Woodford called it a 1209 new starting-point. I would not call 1956 a new starting-point. I would rather regard as a new starting-point this day on which this Bill has coincided with the White Paper, a most important document in the history of our social services.
§ Mr. Jennings
In mentioning the year 1956 as a fulcrum or starting-point, I was dealing specifically with bringing pensions up to parity. The Bill, if we regard it as a new starting-point, is the beginning of a new system in which the merging of certain sections of public and private pensions will be considered. Is the Parliamentary Secretary saying that today should be the starting-point of bringing pensions up to today's parity? I hope he meant it.
§ Mr. Oram
I did not mean to be taken quite so far as the hon. Gentleman is now taking me. I was trying to say that I see today as a more significant starting-point in terms of policy-making than the year 1956 to which he referred.
My hon. Friend the Member for Bristol, Central (Mr. Palmer), my hon. Friend the Member for Dunbartonshire, West (Mr. Steele) and the hon. Member for Tynemouth all very skilfully, within the generous Ruling of Mr. Speaker, managed to introduce a good deal of discussion about the pensioners of nationalised industries. With a great deal of knowledge and experience in these matters, my hon. Friend the Member for Bristol, Central drew some important parallels between the fate of pensioners of nationalised industries and that of pensioners covered by the Bill. I do not think that any of the three disputed the central proposition that, from a legal point of view, nationalised industries do not need statutory authority such as that in the Bill to raise the pensions of their pensioners.
§ Mr. Palmer
But it cannot be disputed that they need statutory authority and, after all, it will be given by the same Government.
§ Mr. Steele
On a point of order, Mr. Deputy Speaker. When we have discussed 1210 pensions increase legislation in the past, always we have had this problem about raising matters which we were told were outside the scope of the Bill; yet in every debate we have discussed economic matters and questions of inflation. It seems that the only matter that we cannot discuss is that involving a group of pensioners who do not come within the scope of the Bill.
§ Mr. Deputy Speaker (Mr. Sydney Irving)
I am not clear what the hon. Gentleman's point of order is. It is true that Mr. Speaker ruled rather generously with regard to railway superannuitants, but it is a general rule that incidental references may be made, and that is what has been followed this evening.
§ Dame Irene Ward
In view of the fact that the hon. Gentleman has congratulated everyone, it means that we managed to get away with quite a lot. If we were in order in doing that, why cannot the hon. Gentleman answer?
§ Mr. Oram
Terrified as I am sometimes by the hon. Lady, I am even more terrified of rebukes from the Chair.
One important point concerning my Department, the Ministry of Overseas Development, was raised briefly by the hon. Member for Wanstead and Woodford and in more detail by the hon. Member for Belfast, South (Mr. Pounder). It concerns that group of pensioners dubbed quasi-Government employees, who do not benefit from these pensions increase Measures. I will not attempt to answer the point in detail, because it was as recently as 20th December that a full debate on the subject was raised by the hon. Member for Liverpool, Wavertree (Mr. Tilney). On that occasion, my right hon. Friend made a very detailed reply. I noted that the hon. Member for Belfast, South pointed out that it is not just a matter of a few 1211 pensioners in West Africa who are concerned, but pensioners elsewhere. I take the point, and it formed a large part of the reply given by my right hon. Friend to that earlier debate, as the hon. Gentleman will see if he cares to refer to it.
I have already answered two of the points raised by the hon. Member for Tynemouth. In one case, doubtless she will say that I have failed to reply to her. But the hon. Lady raised a third point: an analogy with the 1962 Act which included the £20 flat-rate increase for the over-70s. She asked whether we could not consider doing something of that kind in the Bill. I assure the hon. Lady that we have already looked at that point. Indeed, she will have noticed that the 1965 Act did not take over from its predecessor that particular method of uplifting pensions. Frankly, the reason was because it was found particularly awkward to administer. To superimpose flat-rate increases on a pattern of proportionate increases greatly adds to the administrative task of paying pensions increases. For that reason, it was not included either in the 1965 Act or in the Bill.
§ Dame Irene Ward
I am sorry to interrupt again. Really, it is an idiotic answer to say that this great country of ours cannot find an administrative way to do what we were able to do in 1962. I do not care how difficult it is. It ought to be done.
§ Mr. Oram
We have found an alternative way, which is included in the Bill. It is the method of having the escalator stepping up by 1 per cent. back to an earlier date. This enables us to give benefit increases to pensioners who retired longest ago. The Association is particularly concerned about this group of pensioners. I know that the hon. Lady and other hon. Members have made this point on several occasions. However, I assure the hon. Lady that, although she may not agree with our conclusions, we have seriously examined the suggestion she has put before the House.
I think that I have answered most of the specific points. A number of more detailed points we shall take up in Committee.
I conclude with a word about our intentions for the future. We have always 1212 made it clear that the development of any new system for increasing public service pensions could be sensibly undertaken only in the light of the social security review. This has been reflected in the debate today.
Disappointment has been expressed that the Bill should follow so closely the form of its predecessors. But it could hardly be expected, in all fairness, that we should be ready with radical new proposals to coincide with the publication of our plans for a complete transformation of long-term social security benefits. It will be clear to all who study these plans in any detail—and from today on I am sure that there will be a great deal of study and debate about them—that they must have important implications for many aspects of public service pension schemes which will now have to be examined in depth. To have attempted to work out a new approach to pensions increases in advance of the formulation of these plans would have made little sense.
I have already said that the problem is not easy. If it were, better arrangements would have been introduced long ago—perhaps in one of the five Measures to which I referred earlier. I cannot say at this stage what form the new arrangements may take or when we may be ready to take the next step forward. Much will depend on the outcome of the Committee's work, to which reference has been made. But I assure the House that as soon as we complete the immediate task of securing for our pensioners the improvements proposed in the Bill we shall turn our attention energetically to seeking a more permanent settlement of this problem.
§ Mr. Lubbock
The White Paper stated that the new arrangements will come into force on 1st April, 1972. Is it the objective of the review which is now to take place under the direction of this Committee that simultaneously with the revised State scheme public service pensioners will come on to the new arrangements?
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).