PUBLIC SERVICE PENSIONS

HC Deb 17 November 1970 vol 806 cc1040-7

The Parliamentary Secretary to the Civil Service Department (Mr. David Howell)

With permission, I wish to make a statement about public service pensions.

It has long been felt that the arrangements for reviewing public service pensions are inadequate and in need of radical reform. As the House knows, during the passage of the Pensions (Increase) Act, 1969, commitments were entered into by both the then Government and Opposition to review the change in the purchasing power of the pensions covered by the Act as at 1st April, 1971. The present Government will honour this undertaking and will set in train such a review next April to establish the appropriate level of increases down to that date for every type of relevant public service pension. We will carry this review through as quickly as possible, aiming to pay the increases with effect from 1st September following. Thereafter, biennial reviews will take place with a view to making increases, if appropriate, in September every other year.

To provide for these new arrangements for increasing public service pensions and to improve both the machinery and the basis for calculating increases, a Bill will be introduced this Session. Full details must await publication of the Bill, but it will include three main features. First, provision will be made to maintain the purchasing power of public service pensions by a system of biennial reviews. The first of these will be for the period 1st April, 1969 to 1st April, 1971.

Secondly, because the increases awarded under previous Acts have been uneven in their effect, many pensions will require a once-for-all increase to bring them up to an equitable base-line from which the biennial reviews can start. All pensions which began before 1st April, 1969, will need to be examined for this purpose, and not merely those which began before 1956. The Bill will provide for this. Thirdly, power will be sought to enable us to reduce, within the lifetime of this Parliament, the minimum age at which pensions may be increased.

The Armed Forces will not be covered by the Bill but my right hon. and noble Friend the Secretary of State for Defence will be making similar provision for them by Prerogative Instruments.

Mr. Sheldon

While I welcome the statement of the hon. Gentleman, which in the main continues the previous commitment of the former Administration, may I ask him to clear up one or two points? First, he says that the pensions will require a once-for-all increase to bring them up to an equitable base-line. This is rather a lesser commitment than that of the previous Government, who said that pensions would be increased to recover their original purchasing power as of 1st April, 1969. Second, what Civil Service staff associations were consulted? Was it over the whole range, or was it just one or two of them? Third, what provision has been made for increasing the pensions for widows, a matter which the previous Government were examining?

Mr. Howell

On the first point, I think, with respect, that the hon. Gentleman is wrong about this being a lesser commitment. The aim here is to restore the original purchasing power of all pensions before 1st April, 1969, so in that respect it is the same; but this proposed Bill has the additional element of the undertaking to reduce the qualifying age to 55, so that is over and above what was provided by the previous Government. On the second point, there was consultation over a wide range. I will tell the hon. Gentleman the precise nature of it if he cares to write to me, but I do not have it with me at the moment. On the third point, about widows, was he referring just to the police or to the whole question of widows of public service pensioners? [Interruption.] This will be covered, but the hon. Gentleman should await the details of the Bill to see exactly how.

Mr. Boyd-Carpenter

Can my hon. Friend clarify a little further what he said about the equitable base-line? Does that mean bringing up the level of the pensions of those who retired many years ago to the level appropriate to those who retired in a later year? If so, in what year?

Mr. Howell

Special measures will be necessary in relation to the pensions of the very old. As to the rest, certainly from 1946 onwards, it means bringing up the pension to the equitable base-line which will enable the original purchasing power to be restored for all pensions up to 1969. I hope that that is clear.

Mr. O'Malley

May I press the hon. Gentleman a little further on the widowhood provisions? Since there is considerable dissatisfaction at the inadequacy of the fraction of widowhood cover provided, is it generally the Government's intention to increase that fraction for public service pensioners in future? Second, on the pre-1956 pensioners, do the Government envisage any further use of the escalator principle used in previous public service pensions increase Bills to give, if necessary, some of those 1956 pensions rather more than inflation-proofing?

Mr. Howell

On the widows question, I must ask the hon. Member to await the details of the Bill. The Government have considered this, obviously, but the full details will appear in the Bill. On the escalator principle and the pre-1956 pensions, in a sense that question is bypassed by the proposals in the Bill. What we are proposing is that all pensions up to 1969 should be brought up to original purchasing power and not just those pre-1956 up to the 1956 levels—so it does not really arise.

Mr. Ridsdale

Is my hon. Friend aware how welcome his statement will be? Would he try to speed up the help to be given to the older pensioners, the pre-1956 pensioners? Is he aware how ungenerous the trade unions, particularly the Transport and General Workers' Union, are being to their pensioners who retired before 1955? Indeed, the hypocrisy of union leaders is such that those who are pleading for a pension increase are treating their pre-1956 pensioners in a disgraceful way, as I have heard from correspondents.

Mr. Howell

On the first point, everything possible is being done administratively to get the money into the hands of the pensioners, but I am afraid that 1st September is the earliest date and I cannot promise any improvement on that timetable. On the second point, it is not really for me to comment.

Mr. Edward Short

Would the hon. Gentleman see that our own retired colleagues from this House, retired Members of Parliament, are included in this category of public service pensioners?

Mr. Howell

That is a question of which I should want further notice. It is not for me. If the right hon. Gentleman would write to me, I will provide all the details on that.

Mr. Jennings

Is my hon. Friend aware that the ideal way to settle this public service pensions problem is to bring pensions to present-day parity? However, he will be aware from previous debates that this has been found impossible by both sides of the House? Is he further aware that the Conservative Party in the past tried to fix a certain parity, say at the 1956 figure? Have they now any such year in mind in advance of 1956? Did my hon. Friend really mean that 1969 was the year that they have in mind?

Mr. Howell

On my hon. Friend's first point, it is not impossible, but it is prohibitively expensive for the taxpayer. It also raises administrative difficulties, but I would be the first to concede that the major obstacle is the enormous cost. I am sorry, but I have forgotten the second point.

Mr. Jennings

I said that the previous Tory policies suggested 1956 as a year of parity. Does my hon. Friend now have 1969 in mind?

Mr. Howell

As I said, the aim is that all pensions up to 1st April, 1969, should be restored to their original purchasing power. This, in effect, my hon. Friend will recognise, is a more effective and better deal than that originally proposed in the Conservative manifesto.

Mr. Palmer

Am I right in understanding that this statement means that no public service pension can be increased until 1st September next year? If so, is that not rather a long delay, especially in view of the rapidly increasing cost of living?

Mr. Howell

Of course, we should all like to see these things done sooner, but Governments of both parties have recognised that we cannot move until the review is complete. That cannot begin until the two years are up, and it takes a minimum of six months—even that is pushing it—to deliver the goods by 1st September.

Mr. Longden

I warmly welcome my hon. Friend's statement, but can he tell us more about the special arrangements, especially in the Armed Services, for those who retired long before 1946.

Mr. Howell

I can tell my hon. Friend that there will be special arrangements, but I must ask him to await the Bill for details.

Mr. Arthur Lewis

The Minister mentioned the review body and gave the date of 1st April, 1969. Will he point out to that body that since then the top paid civil servants and the chairmen of the nationalised boards have had increases which will amount to 43 per cent. by January of next year? Will he also point out that their tax will be recouped from next April? Will he further suggest that a 43 per cent. increase is given to these pensioners and will he tell the Prime Minister who talks of 10 per cent. or 14 per cent. as inflationary that 43 per cent. is a little more inflationary?

Mr. Howell

I am aware of the hon. Member's strong feelings on these matters. He has, however, raised issues wider than those contained in the statement.

Mr. Bruce-Gardyne

Can my hon. Friend tell us whether he has formed any estimate of the cost of these proposals to public funds? Can he say how it is that a special principle now seems to be applied to public sector pensions which does not apply to those in the private sector? What is the equity basis of this?

Mr. Howell

The cost will be about £50 million for the first year. I cannot give the precise figure because it depends upon the cost of living index which is the basis for the calculation. That figure, incidentally, is taken fully into account in the expenditure projections of the Chancellor. The second point about pensions policy is a matter for my right hon. Friend the Secretary of State for Social Services and I must leave it to him.

Mr. Golding

Will the hon. Gentleman tell us, when he is reviewing public service pensions, if he will meet the claim of Civil Service and other pensioners for all service to count? Is he aware that great hardship is caused to many public service pensioners because long years of so-called unestablished service are not counted, even though these men have had continuous employment for many years and consequently their pensions suffer?

Mr. Howell

I am aware of feelings on this matter and am grateful to the hon. Member for putting this point. I must ask him to await the Bill for details.

Mr. Tilney

Will Her Majesty's overseas civil servants be covered by the statement?

Mr. Howell

Overseas pensioners will be affected, but again I must ask my hon. Friend to await the Bill for details.

Mr. Raphael Tuck

Further to the point raised by my right hon. Friend for Newcastle-upon-Tyne, Central (Mr. Edward Short), is there any reason whatever why former Members of Parliament should not also be included in these proposals as many of them, particularly on this side of the House, have no independent means of their own?

Mr. Howell

As I said, I must ask the hon. Member to await publication of the Bill. The question of remuneration and pensions for Members of this House is a matter for my right hon. Friend the Lord President.

Mr. J. T. Price

While not wishing to discuss the merits of the statement, may I ask when we may expect a similar statement dealing with the 7 million old-age pensioners who will be given false hopes by this announcement and will think that they are in the pipeline? Could we have some information, before September, 1971, that something substantial is to be done for those suffering the worst from this spate of inflation?

Mr. Howell

I cannot give that information. This is a start and I hope that the hon. Member welcomes the statement. The matter of further pension reform is a question for my right hon. Friend the Secretary of State for Social Services.

Sir R. Cary

In view of the question put to my hon. Friend about Members' pensions under the Members' contributory pension fund, will he bear in mind that it was based on a separate review six years ago carried out by the Lawrence Committee and really has nothing to do with the Bill he is talking about? To improve these pensions we can repeat the exercise carried out by the Lawrence Committee.

Mr. Howell

As my hon. Friend says, that is a separate matter.

Mr. Robert Hughes

Can the hon. Gentleman elaborate on the difference between parity and restoring purchasing power? Can he also tell us why it is necessary to wait until April for the review body to start work? Can he not press his right hon. Friend at the Ministry of Social Services to recommend something for ordinary existing pensioners?

Mr. Howell

As the hon. Member will know, full parity means bringing all pensions up to present-day purchasing power. What we are talking about is bringing pensions up to their original purchasing power, which is a different and a much less expensive thing. As to starting in April, the former Government and the present one have made clear that it is only at the end of the biennial period starting 1st April, 1969, that the review can begin. Only at that point will we know exactly how much the cost of living index has risen in that year so that calculations can be made. Arrangements will then be pushed ahead as fast as possible.

Mr. Lipton

Will the hon. Gentleman be good enough to say whether the same time-table will operate for Forces' pensions as for public service pensions? Will the increases be made simultaneously?

Mr. Howell

I must leave that to my right hon. and noble Friend the Secretary of State for Defence, who will be saying something on this.

Sir T. Beamish

Is my hon. Friend aware, bearing in mind the record of the party opposite of how refreshing it is to have a Government in power which keeps promises?

Mr. Dalyell

Is it within the recollection of the hon. Gentleman that many of his hon. Friends chastised the previous Administration for not introducing annual reviews? Might not this be an occasion to introduce the concept of an annual rather than a biennial review?

Mr. Howell

The hon. Member will recall that both sides of the House were clearly committed—and this was put by my hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jenkin) when speaking from the Opposition Front Bench—to a biennial review taking place as from 1st April, 1971. This was the view of both sides. It is the only way that makes sense, and this is the way we will proceed.