HC Deb 16 June 1969 vol 785 cc38-48
The Secretary of State for Defence (Mr. Denis Healey)

With your permission, Mr. Speaker, and that of the House, I wish to make a statement.

On 30th May, 1968, the Government announced that they had asked the National Board for Prices and Incomes to undertake a thorough-going review of the pay of the Armed Forces. This review was to examine the feasibility of evaluating Service jobs and comparing them with those in civil life by methods which would reduce to the minimum the necessity for subjective judgement and also to examine the basic structure of Service pay and allowances.

The Government have now considered the Board's Report which is published today. They are grateful for the thoroughness with which the Board have carried out their task.

For the short term, the Government accept the recommended increase in pay to take effect from 1st April, 1969, together with other immediate changes in emoluments recommended by the Board.

The Government accept in broad principle the Board's long-term proposals as a basis for a new structure of forces' pay, along lines which would make it possible to establish a clear relationship between the emoluments of Servicemen and their civilian counterparts.

As the Board recognises, however, much work still needs to be done to establish, following the Report, suitable levels of reward for individual Service ranks, branches and trades; to determine appropriate charges for accommodation and rations; to construct a new pay code which will ensure a square deal for the Serviceman while assisting the Services to overcome current recruiting problems; and to enable the cost and other implications of implementing the new structure to be precisely assessed.

In addition, there are a number of detailed recommendations in the Board's Report the implications of which require careful study which must take some time in certain cases. It will be our intention, however, to complete this process, so far as the practical difficulties and the sheer size of the task permit, by next April. Work has already begun.

The Government accept the Board's proposal for the regular review of forces' pay thereafter.

They also note the views of the Board on Service pensions. This subject is being studied separately, and it will necessarily be some time before the results can be published. A major factor lies in the need to clarify the relationship between Service pensions—together with other occupational pensions—and the Government's earnings-related pensions scheme announced in Cmnd. 3883.

Mr. Rippon

May I say, first of all, how much we regret that this statement could not have been made by our late colleague, Mr. Gerry Reynolds, who did so much work on the subject and who, as a brilliant young Minister, won the respect of the House for his courage and devotion to duty?

Hon. Members

Hear, hear.

Mr. Rippon

Is the Secretary of State aware, however, that his rather belated statement on the subject, as it stands, is meaningless and wholly unsatisfactory to the House?

Is the right hon. Gentleman aware that we have not got the Report of the National Board for Prices and Incomes and that copies are not available in the Vote Office? Will he, therefore, explain exactly what his statement means? How much increase in pay will the Services get now? What will it cost? What percentage increase will it be?

Is the right hon. Gentleman further aware that right hon. and hon. Members on this side of the House regard the Government's continued failure to honour the repeated undertakings to keep Service pay up to date in accordance with the Grigg formula as a serious breach of faith?

We shall have to study the Report, which, I understand, is a long one. However, may I ask him a number of specific questions? First, will he agree that his statement means that there will be at least a further year's delay in reaching conclusions about how to assess Service pay and conditions?

Secondly, will he tell us how far these new proposals and, in particular, the Government's proposed increases today will fall below what would have been due to the Services if the Grigg formula had been applied?

Thirdly, will he accept also that the pay of Servicemen has fallen by something like 8 per cent. below their counterparts in civilian life since April, 1968, and can he say how far behind they will still be after the implementation of his proposals?

Finally, can the right hon. Gentleman assure the House that these proposals will get the recruits which the Services so desperately need?

Mr. Healey

First, let me say how much I appreciate the tribute which the right hon. and learned Gentleman has paid to my late right hon. Friend. His record as a Minister of State and as an Under-Secretary in the Ministry of Defence commended him to the whole House, whether or not everyone agreed with his individual views on particular issues. I feel a very deep sense of personal as well as political loss through his passing.

I deeply regret that through causes which I certainly undertake to investigate, the Report of the Prices and Incomes Board is not now available in the Vote Office, although it was published at three o'clock this afternoon. As the House knows, I am not the Minister responsible for the treatment of reports by the Prices and Incomes Board, but I will certainly undertake to investigate this matter and let the right hon. and learned Gentleman know about it.

The right hon. and learned Gentleman will admit that as soon as I discovered that this was the case I gave his right hon. Friend the Member for Harrogate (Mr. Ramsden) a copy, just over half an hour ago, which is more than the usual period of notice which Opposition Front Bench spokesmen have of a statement by a member of the Government. I take it that he, at least, made good use of the preceding half hour.

I hope that you will allow me, Mr. Speaker, since the Report is not momentarily available in the Vote Office, to answer the questions of the right hon and learned Gentleman at a little greater length than would normally be the case, because I know that the whole House is very concerned to know what precisely are the recommendations of the Board.

In the short term, the Board recommends an increase of 3½ per cent., backdated to 1st April this year on the whole of Service pay, that is, including basic pay, additional pay and marriage allowance, which is treated as a component in pay. The Government have decided to pay this increase of 3½ per cent. in pay overall as an increase in basic pay of almost 4 per cent.—3.93 per cent.

In addition, the Government are immediately implementing the recommendation of the Report to bring the pay of Service doctors and dentists into line with that of general practitioners in the National Health Service. This implies an increase overall, although it will be adjusted slightly from rank to rank, of 14 per cent. for Service doctors and dentists.

The Government accept the recommendation of the Board that marriage allowance should be paid to officers under the age of 25 and other ranks under the age of 21 who had previously not been paid marriage allowance.

The Government accept the recommendation that ration allowance should be paid to married soldiers when away from home, something which did not happen in the past and which was very detrimental to Service morale.

The Government have accepted the other recommendations for increases in the short run in certain types of allowance, and adjustments to allowances such as education allowance.

For the long term, the Government have accepted the recommendation that the forces should in future be paid a military salary which, while implying no reduction in the payment of married soldiers, will bring the payment of unmarried soldiers up to the level of married soldiers and will also require the forces to pay charges for those services which are now provided free, such as rations and accommodation, guaranteeing that the forces will get increments of pay directly parallel and equal to the charges which they are then expected to pay.

The other two major long-term recommendations of the Board relate to the way in which pay rates for the individual ranks and trades are determined. The Government accept the Board's recommendation that this should be decided by the most objective form of job evaluation which can be devised and that an addition should be made to compensate Servicemen for the special disadvantages of Service life such as turbulence, danger and discomfort.

The new proposals, which will be brought in next year, will represent a very substantial increase in pay for the Services above what they could have expected if the Grigg formula had been maintained. One of the most important aspects of the Board's report is that it demonstrates that the base from which the Grigg formula started no longer represents the relative skill and qualification of Servicemen compared with people in civil life, and that, therefore, the pay of Servicemen relative to those in civil life should overall be substantially better than was envisaged under Grigg.

For all these reasons I believe that the Report and the Government's implementation of it will be a substantial help to obtaining the recruits which we need.

Mr. Mayhew

While warmly congratulating my right hon. Friend on the latter part of his statement, could he clarify the additions to pay in the interim period? What is the average increase in total emoluments during this interim period compared with the average increase in civil earnings during the same period?

Mr. Healey

I cannot answer the question in relation to civil pay in the interim period. What I can say is that the increase in pay—and my hon. Friend who was a colleague in former years at the Ministry of Defence will know that pay consists of basis pay, additional pay and marriage allowance—for the Serviceman will be an increase of 3½ per cent. The Government have decided to implement this as an increase of 3.93 per cent., nearly 4 per cent. increase in basic pay.

Mr. Goodhew

Can the right hon. Gentleman say a further word about dental and medical officers? Will they be brought into line with general practitioners? They were always well ahead of them under the old system, about 15 per cent., but have gradually got further and further behind. Are they merely being brought up to the level of the general practitioner or back to the position of being 15 per cent. ahead, which was always considered as reasonable remuneration before?

Mr. Healey

No, Sir, they are not being paid 15 per cent. more than general practitioners. As the House will know, general practitioners were regarded, when the Board examined their problems, as grossly overpaid in relation to the nature of their work. They will be paid up to the level of general practitioners, on average about £4,000 a year, minus a component for the next 12 months to account for the free accommodation, and in some cases rations, which Service doctors and dentists obtain.

The increase in their pay represented by this decision is of about 14 per cent., which, although it is very much in excess of the norm permitted under the incomes policy in ordinary circumstances, is fully justified by that criterion in incomes policy which relates to pay increases required to obtain the requisite number of essential personnel.

Mr. Dalyell

May I welcome the increase in marriage allowance, which is surely just and reflects the trend in civil life? May I ask whether anything is to be done for those certain categories of naval tradesmen, the subject of some discussion in the Navy Estimates debate this year?

Mr. Healey

In the short term what we are doing is giving the Services overall roughly about a 4 per cent. increase in basic pay and removing some of the anomalies in the payment of allowances which we believe were highly deleterious—and the Board agrees with us—to morale and recruiting.

In the long run we are producing an entirely new structure of basic pay, a structure likely to involve rewards substantially in excess of those which would have been permitted under the Grigg formula, because the relative skills and qualifications of Servicemen compared with that of civilians in civil employment turn out, on investigation, to be substantially higher than was recognised in Grigg.

Mr. Goodhart

Is it not clear that the change to a military salary concept will have a profound effect on the tax position of individual Servicemen? In principle, does the Ministry accept this, and, if so, will it meet any increased tax liability of Servicemen?

Mr. Healey

Yes, Sir. In deciding how increases in pay to cover the payment for services now provided free are determined, we shall treat the allowances as gross for tax. In other words, the pay which a man gets to pay for food and accommodation will be high enough to meet the charge after he has paid the tax. I hope that that meets the hon. Gentleman's question.

Mr. Pardoe

Is the right hon. Gentleman aware that back-benchers need to see a copy of this Report before a statement just as much as Front Benchers? Might it not have been considerate to have postponed the statement until we have the Report? Can the right hon. Gentleman say what will be the cost of this increase in a full year? Can he say what organisation is available to carry out the work he has said still needs to be done to establish pay codes and conditions of service?

Mr. Healey

I deeply regret that the Board's report is not available. I have already issued instructions that it shall be made available immediately. I regret to say that I could not personally have delayed the announcement. I did not discover this until a few minutes before half-past three and I have to leave for Canberra in about an hour's time, for a conference of the five Commonwealth countries concerned with the Far East.

The cost of carrying out the Government's short term proposals will be a global sum of £14 million for the 3½ per cent. increase in pay plus a sum of £6½ million for the improvements in the way in which allowance are treated—a total of £20½, million.

The total cost of the long-term proposals it is not now possible to estimate because the job evaluation of Service ranks and trades has still to be carried out, although it has begun. The quantification of the so-called "X factor" to which my late right hon. Friend and colleague, Mr. Reynolds, referred in the earlier debate, in terms which were understandable to hon. Members although they would not be Parliamentary, the "mucking about" which soldiers get—not to use the precise analogy to which he referred—has to be dealt with in detail.

The Board has quantified the cost of providing the military salary as distinct from the job evaluation and the "X factor" and this will be found in an appendix to the Report. It is in excess of £50 million. In addition, the Government will pay a substantial sum next year to provide for the requisite awards for individual trades and ranks relating to job evaluation and the "X factor".

It will be a very expensive project, but the House will agree that if an objective study can prove, as it has, that Service men deserve better rewards than was hitherto envisaged, no one would withhold payment of those rewards.

Mr. Mikardo

Does my right hon. Friend realise that if the same positive approach which he has announced for the pay of Service men were applied to the pay of Her Majesty's Stationery Office employees he would not be having to apologise for the lack of copies of the Board's Report in the Vote Office?

Mr. Healey

I am far from clear that the reason which my hon. Friend attributes for the non-appearance of the Report is the real one.

Sir E. Errington

Would the right hon. Gentleman be clear about his long-term policy and about the tax position? There has always been a feeling in the Services that what has been given by the Minister of Defence has been taken away by the Treasury. It is vitally important that this should be remedied.

Mr. Healey

I am grateful to the hon. Member for making that point. I am conscious that no one in the Services is interested in what I believe is known as an "Irishman's rise". In dealing with this, we are concerned the whole time with what is left for the Serviceman after he has paid his tax, and in determining the increases in pay which are due to payment of charges we shall gross the cost for tax.

Mr. Arthur Lewis

In the long term, can my right hon. Friend say how the percentage increases compare with the 60 per cent. increase being paid to the chairman of the boards of nationalised industries and the proposed 62 per cent. increase being paid to higher civil servants? Is there any relationship between the figures?

Mr. Healey

The recommendations of the Board for Servicemen, like other recommendations it has made, are based on the most detailed and profound study of the value of individual trades and ranks to the nation.

Mr. Ramsden

Is the right hon. Gentleman aware that one of our great concerns about pay is, and has been for the past 18 months, its relationship with recruiting? Does he accept that the Grigg Report was about recruiting? Does he further accept that on the figures which he has given for the latest rise the Services are still about 4 per cent. behind the comparable rates of people outside which, according to Grigg, they should have had?

This is very worrying from the recruiting point of view. Can the right hon. Gentleman give an assurance that the new military salaries will be reviewed every two years, as laid down by the Grigg formula?

Mr. Healey

The Board and I are deeply conscious of the importance of pay to recruiting. The inquiries made by the Board, which are summarised in the appendices to the Report, show that for other ranks pay is by far the most important single factor.

On the question of recruiting, the figures for April are not yet complete, but I hope that they will be published later this week. I think that they will indicate, as the figures for the last few months do, that the effect of the defence cuts on recruiting is beginning to wear off.

However, as the Board points out in detail, the basic problem which we face in recruiting is that for demographic reasons there is a much smaller number of men from which to draw recruits. We shall have to recruit a greater percentage of that number than ever in the past even to fulfil the lower requirements of the Services when the withdrawal from east of Suez and the rundown of our forces is complete. No doubt this is one of the factors which led the Board to envisage rewards for the forces which will work out higher than the rewards which they will have received under the Grigg formula.

Mr. Rippon

Would the right hon. Gentleman let us know which Minister is responsible for the Report not being available to the House, and undertake to let us know the result of the inquiries which he said he would institute into why it was not available?

Secondly, will the right hon. Gentleman answer the question which I put to him, what the increase in Service pay would be, both as a percentage and in total, if the Grigg formula were applied?

Mr. Healey

I have undertaken to let the right hon. and learned Gentleman know the result of my inquiries. He is at liberty to publish it, but, as no doubt he knows, I am just leaving for a rather lengthy tour of Australia and the Far East. I imagine that he would like to have the results of my inquiries as soon as they are available. I may not be able to give them personally to the House.

The right hon. and learned Gentleman's second point enables me to answer a previous question which I forgot. The Grigg formula envisaged a pay increase every two years. The increase this year follows an increase of 7 per cent. last year, but under the new formula, with the military salary, the Board envisages a minimum increase every two years with a fundamental review every six years, and it is open to the Ministry of Defence to ask for a review in intermediate years if circumstances seem to make that desirable.

Several Hon. Members

rose—

Mr. Rippon

Would the right hon. Gentleman answer my question?

Mr. Speaker

Order. I must protect the business of the House.