HC Deb 25 June 1971 vol 819 cc1792-818
Mr. Sheldon

I beg to move Amendment No. 14, in page 2, line 15, after 'thereafter', insert: 'except when the cost of living has increased by an annual rate greater than five per cent. in the nine months following the previous review when there shall be a further review twelve months thereafter '. The purpose of the Amendment is to enable the Minister to decide on the frequency of the reviews by reference to an objective test. Under the Bill as drafted, there is to be a biennial review in March of every other year if the cost of living increases by an amount greater than 4 per cent. It is important for pensioners, when considering their future prospects, to know whether they will get increases as a result of a review.

In Committee an Amendment put forward by the Opposition to the effect that there should be an annual review because of the high levels of inflation which we foresaw was rejected. In this Amendment we seek to provide for an annual review if, and only if, the cost of living increases at the rate which seems likely under the present Government. If the cost of living were to be anything like as great as it has been in the last year, there would automatically be an annual review.

This is a most important matter for pensioners. They have a number of disadvantages compared with the population at large. One of them is that they have few means of supplementing the income which is known. In other words, they can see ahead more clearly the limitations on their future income. Therefore, they should not have a very large increase every two years with a subsequent decline in the following two years. If the levels of inflation are similar to today's levels —say, about 10 per cent.—then at the end of the second year the decline in the value of the pensioner's income will have been about 20 per cent. One-fifth of his income would have been wiped out before the next increase became due. The House should not accept fluctuations of that kind.

It is possible to provide an alternative way so that, rather than have violent fluctuations, we can proceed to a more orderly, ripple-like change in the value of the pension. Consequently, if the cost of living proved to be greater than an annual rate of 5 per cent. in the nine months following the previous review, there should be a further review 12 months thereafter. The period of nine months is chosen so that there will be time for the review body to meet and take account of the various factors which have caused the changes in the cost of living and allow for them. If the cost of living has not risen by as much as 5 per cent. the same increase which it had previously made will continue until the second year. The Amendment would provide for a much steadier flow of income into the household.

This Amendment, in contrast with the last Amendment, is fundamentally to do with long-term inflation. The previous Amendment was concerned with the levels of inflation this year and the expected levels of inflation this year and dealt with the question of what we could do to alleviate the increases in inflation. Amendment No. 14 seeks to alleviate the consequences of inflation over a long period ahead.

I understand from what the Parliamentary Secretary said in Committee that the administrative tasks of meeting each year were not very great, although he referred to the clerical difficulties of dealing with these changes, which the Committee, clearly, did not accept, while these matters were under discussion. I hope we shall not today hear that unsatisfactory reply about the administration required to deal with annual increases in pensions.

In a period of high and rising inflation, we must provide means of avoiding the consequences of it. If the Government accept, as they must, the responsibility for creating one of the greatest levels of inflation which this country has known, they must also accept the responsibility for mitigating its effects upon people who find it hardest to bear. We should not seriously consider the difficulties of administration, bearing in mind the disadvantages to which pensioners are subject.

Throughout the century levels of inflation have persisted even in times of severely deflationary policies. It is not readily understood that even in the first decade of this century, with very high levels of unemployment, inflation operated. Between 1931 and 1939, which was one of the most troubled decades of the century, inflation increased by about 10 per cent.

So even in a period in which one of the most stringent economic policies that the country has ever known operates inflation still exists to an extent which will not produce the kind of stability which many people yearn for but few believe in any more. There is something about industrial society which presupposes levels of inflation: it seems that inflation is built into a modem industrial society. Until a way of changing this is found, we shall need to compensate to allow for this.

As a result of this ever-increasing burden, we have always been tardy in changing the basis by which people on fixed incomes are paid, as a result of the inflation, for which Government must accept responsibility but where they tend always to have an optimism in advance of the economic realities. As the Government accept responsibility for inflation and for increasing these pensions, so must they be prepared to do their utmost to compensate those who must sit passively by awaiting the Government's decisions on how much money they will get to live on.

In a matter like this we can have little confidence that the Government will succeed to any great degree in conquering inflation, mainly because they are not even taking the elementary steps that the O.E.C.D. and other international bodies have urged upon them.

Mr. John Nott (St. Ives)

We are all sympathetic to the point that the hon. Gentleman is making but, to achieve a sense of balance, he should remember that pension supplements of this sort are not even available for two-thirds of those on occupational pensions as a result of service throughout their lives in the private sector. The public service pensioner has very great advantages over the pensioner who has retired from working all his life in the private sector.

Mr. Sheldon

I fully accept that point. It is a scandal that the decline in the value of money, for which the Government are responsible, makes certain people on fixed incomes suffer as a direct consequence.

Mr. Nott

I do not want to indulge in a debate with the hon. Gentleman now. I merely make the point that in many fields the public sector, as we all agree, on pension arrangements is way behind the private sector. We debated this question in Committee on the Finance Bill. However, in this respect the public sector is miles ahead of the private sector.

Mr. Sheldon

I was coming on to that aspect of the hon. Gentleman's intervention. It is disgraceful that others have had their effective pensions reduced in value as a result of the policies of the Government, particularly of this Government, which have elected to stand by while we have had the greatest inflation of recent times.

The hon. Gentleman is right in saying that public service pensioners are better off. In the past, the terms of employment they were offered took into account the considerable advantages they had in pensions. When the Pay Research Unit examines matters of pay and comparability of pay, this is one of the factors that are considered. Clearly, the whole of this must be seen as one.

12.15 p.m.

In terms of ensuring that the responsibility of the Government is accepted, clearly one of the earliest signs of that responsibility must be the way in which they treat their own employees. Throughout history, Governments' dealings in matters of labour relations have been, and should be, an area in which they lead and show private employers how they should treat their employees and how they should behave in a modern civilised manner.

I would accept any legislation or any action by the Government that sought to provide for the private sector pensioners matters which compensate for the levels of inflation which this Government have accepted and which are the direct responsibility of this Government. As a consequence I seek to provide justice for those who are covered by the Government service and hope that, where similar criteria prevail, they will be handled in a similar manner.

The Amendment deals with the levels of inflation and the way in which the effects of inflation can be counted over a long period ahead. If we had confidence that this Government would mitigate the effects of inflation and reduce its extent, biennial reviews could well be a sensible way of proceeding. The O.E.C.D., which is hardly a Left-wing body, has pointed out the values of a prices and incomes policy and has, in its monumental report on inflation, pointed out the value of subsidising consumer organisations for the purpose of reducing the levels of inflation.

These are matters in which the Government have signally failed. They have gone directly counter to the best available advice. They have scrapped the Consumer Council—not subsidised it, as the O.E.C.D. suggests. The Government have scrapped the concept of a prices and incomes policy—not promoted it, as the O.E.C.D. suggests.

In the face of these actions, nobody can believe that the Government will succeed in their long-term aim of reducing the rate of inflation; and biennial reviews will not be a sufficient answer to the levels of inflation which are likely under this Government.

As a result, over this two-year period there is likely to be a decline in the value of money of about 20 per cent., which is the current going rate, before the next pension increase comes along. Such a decline in the value of money is too great. Pensioners ought not to see the value of their pensions decline in this way. Small amounts can be accepted, but it is quite wrong for pensioners to receive their increase and know that two years later they will have available to spend in real terms 4s.—or 20p—in every pound less than they have when they first receive the increase. This decline in their standard of living will occur in the face of increase prices.

The House has no right to pass legislation of this kind, bearing in mind that matters like rent and rates, which are a fixed charge and are increasing, form such a high proportion of pensioners' income. It is clear that the other items in their expenditure—food, clothing, heating, lighting—will have to be very substantially reduced over the remaining stages of these two years because of their commitments to pay so much of their pensions on fixed charges such as rents and rates. So we see that this Government, if they do not accept the Amendment, will be forcing these pensioners into a declining standard of living to a very considerable degree indeed.

The Amendment is a modest one and easily capable of implementation. It allows for not the certainty of annual reviews but annual reviews in those conditions in which the Government's failure to control the economy is manifest. If the Government fail, then the least they can do is to compensate those people who suffer from their failure, and because I believe that this is the least that the Government can do in the face of their present policies, I urge them to accept the Amendment.

Mr. Andrew Bowden (Brighton, Kemptown)

I cannot help feeling that the Amendment is not unreasonable. What I think unfortunate is the extravagant statements used by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) in presenting it. It is blatant hypocrisy for the hon. Gentleman to shed what are crocodile tears about the decline in the value of money when for six and a half years the Government he supported indulged in the biggest and most irresponsible spending spree which this country has ever seen. What he has done this afternoon is to spoil his case, because, without doubt, there is an increasingly strong argument for the Government to consider having more frequent reviews of pensions at this present time.

I am one of those who believe that the policies of the Government in curbing inflation will work, but they will take time, after six and a half years of government by the party opposite; they are bound to take time, and it may be another 18 months or two years before we see the full effects of the present Government's policies. Therefore, we have to face the fact that there will be an increase in the cost of living in 1972 of probably between 8 per cent. and 10 per cent., and in 1973 of about 6 per cent. or 7 per cent. By this time, however—

Mr. Alfred Morris (Manchester, Wythenshawe)

We may be in the Common Market.

Mr. Bowden

There is no certainty of that by any means yet.

The fact is that we are to see an increase—and I do not think it will be denied—in the cost of living, and it will be unfortunate if the Government are tied by statutory control and so not able to review these pensions, if they should wish to do so, without bringing forward further legislation.

I have a substantial number of Civil Service pensioners in my constituency, and I know that they are extremely concerned about the situation. One cannot blame them, but it is the case that it is difficult for the Government at this point in time to convince those pensioners that the Government's policies in checking inflation will work. If they do work more rapidly than I have suggested, and I sincerely hope that they will, no harm will have been done by the Government having given themselves flexibility in deciding whether or not they will increase pensions again in a period of less than two years.

I know that my hon. Friend the Member for Guildford (Mr. David Howell), the Parliamentary Secretary, has a fine reputation for his compassion, and understanding of pensioners' problems. Whereas I totally reject a large part of the manner in which the hon. Member presented his Amendment, I would ask my hon. Friend to bear in mind the real points lying behind it.

Mr. Hugh Jenkins

I was hoping to catch the eye of the Chair on Third Reading very briefly to make a point which I very much want to make, but as there may be some doubt about whether I shall then be able to do so I shall try to raise it now. If I should begin to stray out of order I have no doubt that I shall be prevented from doing so.

I want to give support to the Amendment so ably moved by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). I did not detect any exaggeration in the terms or the manner in which he moved it, and I am sorry that the hon. Member for Brighton, Kemptown (Mr. Bowden), who supported it, felt that there had been and that my hon. Friend had used inflated terms. I did not detect that sort of inflation, although there is no difficulty in detecting the real inflation which has been growing in the last few months. The fact that the hon. Member said that so far we have not seen half of the effects of the Government's policies induces me to add: heaven help us when the full effects are felt, which he forecasts will be within two years.

I have a very considerable sympathy with constituents of mine who have written to me about this problem. All of us would agree in welcoming this Measure in general terms, and those of us on this side who have been expressing anxieties about these problems have no objection to the general proposition in the Bill. There is nothing between the two sides of the House on that. What we are anxious about is that if this important measure is taken, it should be done in the right way, and I think that I have the support of the hon. Member for Kemptown on that point. If a change is made, then what we want to see is that it is made in such a way that it will set an example outside the Civil Service sector, set an example to the other public services, an example which public corporations will follow and which private industry, too, will follow and so put its house in order in this respect. So it is important that if this measure is to be done, it shall be done in a manner which sets the right pattern.

I would not think that there could be any doubt on this point that at a time of very substantial—indeed, unprecedented—inflation the two-year period of review is too long. As described in the memorandum which was issued originally with the Bill, it was said that the object of the exercise was to ensure that increases in the cost of living were covered. The reason for the objections which we have raised and the reason for the Amendment has been our belief that that object is no longer achieved and that the two-year review is not enough to meet the rapid increase in inflation. In other words, the pensioner gets too far behind in a two-year period.

On an earlier Amendment, my hon. Friend was proposing to deal with short-term inflation. What we have in this Amendment is a proposition to deal with the inevitable prospect of longer-term inflation. That is why we regard this Amendment as important, and I hope that the Minister will be able to say that he will accept it, or, if he is not able to say that, that he will be able to say at least that he will reconsider the whole question between now and the time when the Bill goes to another place.

I had hoped to move an Amendment to achieve what we on this side wanted to achieve in this matter, which is an annual review. That was the object which we sought and which my hon. Friends sought in Committee on the Bill. I put down an Amendment to try to achieve that end, but you have rightly decided, Mr. Speaker, that that cannot be done now because an almost identical Amendment was fully debated and defeated in Committee. It was defeated only by seven votes to six.

The narrowness of the margin in Committee is a factor which the Government might do well to bear in mind in considering whether, between now and when the Bill returns to the House, they will look again at the question of an annual review. There is not much to be lost here. One would hope that the cost would not be enormous, and an annual review would prevent a gradual decline in the standard of living throughout a period and then a gradual recovery; in other words, a see-saw over two years instead of a reasonably stable standard of living.

12.30 p.m.

My constituents who are concerned about this have written extensively, and the Government, to do them credit, have replied equally extensively. The representatives of the Merton, Wandsworth and District Group of the Civil Service Pensioners' Alliance sought several improvements in the Bill, but Lord Jellicoe, replying on behalf of the Government in a robust fashion, rejected the proposals, saying that the object of the Measure was inflation-proofing. If this is the object, the Bill does not achieve it. If the Government have this object at heart they should look again at the time over which the inflation-proofing takes place. The proofing is inadequate, and inflation will get in unless the changes which we suggest are made.

My constituents, finding that their proposals generally were unacceptable to the Government, returned on one single point, which is the point dealt with by the Amendment, and said this: The Bill provides for biennial reviews. Whilst this provision is a considerable improvement on past practice, an adjustment controlled by so long an interval is out of harmony with current practice in relation to wage improvements. Many incomes are revised annually, some more frequently than that. It is important for pensioners most of all in the community not to be subject to a long waiting period for review. It is therefore suggested that reviews should be made annually and pension adjustments be made providing the average rise in the cost of living and rates of wages is not under 2 per cent. We are not pressing that last point; we are suggesting simply that there should be an annual review. I hope the Minister will be able to accept the Amendment. If he does not, I hope that he will accept the principle of it and that there will be a movement by the Government, bearing in mind the importance of this not only to civil servants but to all pensioners, towards setting the right pattern.

Mr. Nott

I had intended to speak on Third Reading until I appreciated that there was to be no Third Reading debate. I will, therefore, try to keep my remarks in order within the Amendment. The Amendment goes very wide, since it attempts to protect public service pensioners and others from inflation on the basis of successive pension reviews at shorter intervals.

I very much welcome the Bill, as I know hon. Gentleman opposite do also. It is costing £87 million and, for necessary and obvious reasons, this is one of the largest awards ever made. I say "for necessary and obvious reasons", because this large sum is related to the decrease in the purchasing power of money between 1st April, 1969, and 1st April, 1971.

I much prefer my hon. Friend and his Department, rather than the Treasury, to deal with inflation and its effect on pensioners. I do not agree with the comments made by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) on the previous Amendment. It is thoroughly desirable that there should be a group of people, a Government Department, separately responsible for protecting the interests of pensioners and negotiating with the Treasury, rather than leaving the matter to the Treasury alone.

Mr. Sheldon

The hon. Gentleman will not have heard what I said on Second Reading and in Committee, when I welcomed wholeheartedly this implementation of the Fulton Report and said that the Civil Service Department exercises its managerial functions firmly and fairly. My point was that, when we are discussing inflation, the Minister should have the support and advice of the Treasury Ministers concerned.

Mr. Nott

It is rather a far-fetched argument. The hon. Gentleman might argue with just as much logic that the Attorney-General should be present because matters of law are in question. Where does this argument finish, and where does it begin? The Civil Service Department is perfectly capable of studying the facts, and there is no need for my hon. Friend the Financial Secretary to the Treasury to be present on the Bench.

I pass to the comments of the hon. Member for Ashton-under-Lyne to some extent with a constituency bias, because my constituency has become more and more of a place for retired people to spend the remaining years of their lives. More and more public service pensioners are coming to my constituency in West Cornwall, and I therefore see the problems which these people face. There is a great concern among a wide section of the population in my constituency about the rise in the cost of living. Most of these people made provision for their retirement, admittedly in inflationary conditions—probably after the last war—but in inflationary conditions which were less severe than those which prevail today.

I agree with my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) that the outlook for the 1970s is not at all promising, and in this I agree, but for different reasons, with the hon. Member for Ashton-under-Lyne. Most of the causes of our current high rate of inflation do not lie, as the hon. Gentleman said, within the control of the Government. Admittedly, and this is where I go along with the sentiments expressed by the hon. Gentleman, there are ways in which the Government can help to mitigate the effects of inflation on public service pensioners, and that is why I have some sympathy for the Amendment.

Nevertheless, the country is faced throughout the next decade with the likelihood of increasing social and political unrest throughout the western world—it is going on in Italy, Germany, France, Japan and the United States, as well as here. Labour as a factor of production is demanding, and getting, more. This process will continue throughout the 1970s, the price of manufactured goods will rise in world markets and this country will suffer the consequences. It does not lie wholly within the control of the Government to prevent this happening, since we are a trading nation and must remain one, so we shall be subjected whether we like it or not to the inflation which is occurring throughout the western world.

Secondly, world commodity prices—and butter and beef were mentioned specifically in the House yesterday—and also the price of raw materials throughout the world are rising rapidly, more so outside the Common Market than within it. Although it lies within the Government's power, as the hon. Member for Ashton-under-Lyne said to endeavour to protect public service and other pensioners as best they can from the consequences of world conditions, the hon. Gentleman cannot extend that argument to claim that the Government have within their control the holding back of world commodity prices such as butter, beef, raw materials and various other food prices. The hon. Gentleman turned a reasonable argument on the need to protect public service pensioners into a harangue that inflation could be stopped by the Government, which is not the case.

Mr. Sheldon

The point I was making was not that inflation could be stopped, but that the Government could take measures to limit it. I quoted the O.E.C.D. view when pointing out what I thought the Government should be doing.

Mr. Nott

The Government can take measures which they believe can attempt to isolate this country from the inflation which is rising rapidly throughout the world. On the other hand, the measures which the Government take may well vary from those put forward by the hon. Gentleman. It lies within the Government's responsibility to endeavour to control inflation, but it is a matter of judgment as to what measures will succeed in that objective. It is obvious that the hon. Gentleman disagrees with the Government, but that does not mean to say that the Government are not doing their best to meet a problem which is prevalent throughout the world.

The hon. Member for Ashton-under-Lyme does not help the public service pensioners by coupling a reasonable Amendment to the claim that the Government are doing nothing about the situation. We hear the absurd claim almost every day in the House of Commons—and I do not say that the hon. Gentleman himself made it—that the Prime Minister is supposed to have said that he would cut prices at a stroke. My right hon. Friend said no such thing. I have his remarks in the election in front of me, and I am sure that the hon. Gentleman would like me to read them.

Mr. Sheldonindicated assent.

Mr. Nott

The Prime Minister said. referring to the world price spiral This can be done by reducing those taxes which bear directly on prices and costs, such as S.E.T., and by taking a firm grip on public sector prices and charges such as coal, steel, gas electricity, transport charges and postal charges. This would at a stroke reduce the rise in prices.

Mr. Sheldon

Does the hon. Gentleman really believe that the Prime Minister on that occasion was conducting a philosophical discourse on the matter? Was this nothing to do with the steps he intended to take?

Mr. Nott

I have read out what the Prime Minister said.

Mr. Speaker

The hon. Gentleman at the outset of his remarks hinted that he intended to try to make a Third Reading speech. I believe that he has gone far enough.

Mr. Nott

I will leave that point, Mr. Speaker. I was only seeking to make the point that the Prime Minister is charged with having said that he would cut all prices at a stroke. He has never said any such thing. He said that he would have the ability to cut such things as S.E.T. at a stroke, which indeed is what he will have done from the 1st July.

Mr. Sheldon

No.

Mr. Nott

I have some sympathy with the terms of this Amendment and for a system of annual reviews. I appreciate that the Government have gone a great way to meeting this point by having an "on-account" arrangement under which they are able to take into consideration the increase in the cost of living which arises before the pensions increase takes place. I accept that the Government have gone a long way towards this, but I believe that there is something to be said for annual reviews in respect of the public service pensioner. Although the on-account procedure goes a long way to meet Opposition criticism, an annual review would be so much more simple and straightforward. There is something about an annual review which would satisfy pensioners in a way that some kind of "on-account" procedure would not, since the latter is so much more complicated and can easily be misunderstood.

12.45 p.m.

I should like to relate this Amendment to three specific points which arise on the Bill. New Clause I was disposed of so rapidly that a number of hon. Members, including myself, got here too late and were prevented from speaking in the way that was hoped. This is no criticism of my hon. Friend who, I am sure, behaved with the utmost rectitude in moving the new Clause at great speed. It is possible however to bring this matter within the Amendment since the people concerned with new Clause 1, the quasi-Government pensioners are very worried at present about the level of inflation.

The Government in new Clause 1 appear to be taking powers which do not, so far as I can see, have any meaning. The effect of new Clause 1 in relation to this Amendment is that it removes from Parliament the power to control the situation and puts it in the hands of the Executive. If the Executive is to act, then one might say that this is an improvement and would help to meet the problems the hon. Member for Ashton-under-Lyne was mentioning. If, on the other hand, all the Government are doing is to include the new Clause as a sop to those who are suffering from inflation, then it would have been better to have left it out. The issue relates to those recruited in this country on overseas terms of service through the Crown Agents and others. In regard to new Clause 1—

Mr. Speaker

Order. I must remind the hon. Gentleman that we have passed new Clause 1. He must stick to the Amendment.

Mr. Nott

I am trying, Mr. Speaker, to relate the problems of those public service pensioners who come within the Bill who are seriously affected by inflation. The hon. Gentleman's Amendment seeks to provide a more frequent review of pensions to meet the hardship facing those people. People such as the Achimota pensioners, who are ex-quasi Government pensioners, are suffering from the sort of problems to which the hon. Member for Ashton-under-Lyne was referring. Achimota College in Ghana was a Government Department until 1924.

I turn to the question of the age at which pension increases are payable. If the Amendment were to go through, these people would not benefit. I believe that they should benefit under the Amendment. The Minister has taken powers in the Bill to bring pension increases down to the age of 55, but the Bill itself does not bring these increases into effect until—

Mr. Golding

On a point of order, Mr. Speaker. Is this not a Third Reading speech? The age of retirement is not a matter chosen for debate under an Amendment and surely should not be debated on this Amendment.

Mr. Speaker

With regard to that point, I will tell the hon. Member when he is out of order. But the hon. Member did say that he intended to try to make a Third Reading speech. As other hon. Members wish to speak and the hon. Member rose at 12.34 p.m., I hope that he will manage to confine his remarks.

Mr. Nott

Certainly, Mr. Speaker. I shall draw my remarks to a close very shortly. I am relating them to the comments made by the hon. Member for Ashton-under-Lyne. Taking his example, that those public service pensioners who are suffering most from inflation at present are those who were compulsorily retired from public service and who, because they are under 60, will not be entitled, from September, 1971, to the increase provided for in the Bill, I am in broad sympathy with the hon. Member's Amendment; but it would not help. For instance, a gentleman in my constituency, previously a lieutenant-colonel in the Armed Forces, is now receiving a pension of £620 a year—had similar pension increases as those contained in the Bill applied to him now he would be receiving £998. Even the Amendment does not meet the problems of those under 60 who have been compulsorily retired from public service at an early age.

I apologise for speaking so long on the Amendment, but I wished to make one or two points upon the Bill. I did not have an opportunity of speaking on Second Reading. In general terms I welcome the Bill. The Government have gone a very great way to meet the criticism that public service pensioners are not protected against rises in the cost of living by frequent reviews. Although I should prefer an annual review to an "on-account" procedure, nevertheless, I welcome the Bill. But I cannot support the Amendment because there are better ways of achieving the same objective.

Mr. Golding

I put my name to the Amendment because I supported it. The issue is whether inflation is to continue at the present rate. On that we have heard two views. Back benchers on the Government side have forecast, as has the Minister of Agriculture, a substantial increase in food prices in the future. On the other hand, in dismissing a previous Amendment the Parliamentary Secretary to the Civil Service Department saw the increase of the last few months as abnormal. But the issue is whether or not these increases have been abnormal. The Minister should say whether he anticipates over the next ten years an overage annual rise in the cost of living of 5 per cent. or less—that is germane to the Amendment—or whether it is believed that the average increase will be 5 per cent. or higher.

If the Government expect that the increase will be lower, they have nothing to lose by accepting the Amendment because its provisions would not be invoked if the increase were less than 5 per cent. If, however, the Government expect—and it comes to pass—that the increase will be over 5 per cent., they will then have to find arguments to dispose of the pensioners' case for having annual increases, given that rate of inflation.

In Committee the arguments used against annual increases were not only that they were administratively difficult but that they could lead to quite small increases of about 2 per cent. If we have a rate of inflation of over 5 per cent. a year, pensioners will be faced with a very substantial problem. Already pensioners of all sorts are beginning to despair. One poor soul—not a public pensioner, I admit—in North Staffordshire in the last fortnight committed suicide because of the increase in the cost of living. Increases in the cost of living can be a nightmare for those with a low level of income.

I have ascertained this morning that the average pension at present is roughly £370. I hope the Minister will give the figure following these increases. But that average covers a very wide range, from the retired Permanent Secretary with 40 years' service to the Post Office engineer or postman, whose pension is calculated on low pay and possibly on a much shorter period of service than 40 years.

One thing is certain. A substantial number of public service pensioners are living on very low incomes indeed. Even when taking into account their State pension, with its £1.30 deduction, many public service pensioners from the Post Office engineering branch or the postman class are living on very small incomes. These are the people for whom an annual rate of inflation of 5 per cent. is a nightmare, because over a two-year period that is a very big erosion in their income.

The fault of the present system is that there could be a very big erosion on the day following a review of pensions, which pensioners would then have to live with for two years. I shall not go into details but, obviously, if there were a devaluation at the beginning of the pension review period, pensioners would have to live with that for two years.

The Amendment is very moderate. The Minister knows that we should have preferred annual reviews. We could have asked that pensions be increased when the increase in the cost of living had risen to 4 per cent. We could have asked that increases should be given—not the review but the increase—when the cost of living had risen by an annual rate of 5 per cent. All that we are asking for is that a review should take place, when there has been this substantial increase in the cost of living for these low income pensioners, when the cost of living has risen for them by 5 per cent. That would be entirely reasonable. I hope that the Government will accept the Amendment.

Mr. Nicholas Edwards (Pembroke)

I make a very brief intervention. I have listened to the arguments, as I listened to the arguments of Members opposite during the Committee stage.

One must have some sympathy with the pressure for frequent reviews at a time of rapid inflation. The point about the Bill is that it represents an immense improvement on anything that has gone before, not only in terms of the money now being allocated but because, instead of the previous casual, sporadic increase when the Government of the day got round to it, averaging about every three-and-a-half years between reviews, we now have a system of regular two-yearly reviews.

1.0 p.m.

My hon. Friend the Under-Secretary spoke during the Committee stage of the very great administrative task of carrying out annual reviews and the additional cost involved. If it is a question of cost, it seems to me that we must get our priorities right. To me, a very much higher priority is that which was mentioned by my hon. Friend the Member for St. Ives (Mr. Nott), which would bring the effective age down from 60 to 55 so that the large numbers of retired people who live, for example, in my constituency, in Pembroke, who are in considerable hardship and are unable to get jobs at this time of their lives, would get immediate compensation. This seems to me to be a far higher priority. I know that this is a priority which has been recognised by my hon. Friend. I merely urge him to press on with it with all possible speed.

My second priority which I put before this proposal of annual reviews is the action to protect those who I think have been referred to—although we have had no explanation—in new Clause No. 1, the quasi-Government overseas civil servants. I am not sure whether this is intended to meet the objections which some of us made in Committee. I hope it is, and I hope also that this proposal will be implemented.

These, then, are the priorities. I urge my right hon. Friend to press on with these rather than listen to the pleas from the Opposition for this Amendment.

Mr. Alfred Morris

I intervene only to urge the Minister not to be unresponsive to the further representations which will undoubtedly be made to him by organisations which are still concerned to see Amendments made to this Bill. I have heard today, through my hon. Friends the Members for Manchester, Exchange (Mr. Will Griffiths) and Manchester, Gorton (Mr. Marks), who have taken a close interest in the proceedings on this Bill, about possible Amendments. I have heard from the Manchester Teachers' Association about possible Amendments which they and other representative organisations in the city would like to see.

The approach from the Manchester Teachers' Association was made on behalf of constituent organisations—of the National Union of Teachers, the National Association of Schoolmasters, the Joint Four Secondary Associations, the National Association of Head Teachers, the Association of Teachers in Technical Institutions, the National Association of Local Government Officers and the General and Municipal Workers' Union. I know that the Transport and Salaried Staffs' Association is also concerned to see Amendments made to this Bill. I very much hope that the Minister will fully and sympathetically consider the further representations which will be made to him by all these organisations.

Mr. R. C. Mitchell (Southampton. Itchen)

I do not wish to be drawn by the hon. Member for St. Ives (Mr. Nott) into an argument about what the Prime Minister did or did not say. I do not think that the pensioners care very much what he said. What they care about is what he and his Government are doing to curb inflation. I would be the first to admit that, over the years since the war, every Government has been relatively unsuccessful in curbing inflation. My only comment is that the present Government seem to be worse than the rest of them. I will leave it at that.

As long ago as 1956 I made a speech outside the House calling for a biennial review of all pensions—public service and retirement pensions. As I was not in the House on Second Reading, may I take the opportunity of saying that, in general, this Bill is a good one and that we have established the principle of biennial reviews, for which many of us have been asking for a long time.

In normal circumstances, we would be satisfied with this. But we have to consider the rate of inflation in the last year or so and the likelihood of that rate of inflation continuing over the next two or three years. The hon. Member for Brighton, Kemptown (Mr. Bowden) made estimates of 8 per cent. to 10 per cent. in 1972 and 6 per cent. to 8 per cent. in 1973. He may or may not be right. My view is that he probably erred on the low side, and the rate may be rather greater.

We are, therefore, in effect in a situation of exceptional circumstances where, for whatever reason—and I do not wish to blame anybody in particular—inflation is going ahead at a much more rapid rate than normally, and therefore we need to take exceptional measures to deal with these circumstances.

I strongly support the Amendment. I would have preferred to argue for an annual review, but that is out of order because this was discussed fully in Committee. As we cannot call for an annual review now, I hope that the Government will at least give very serious consideration to this Amendment. It will not go the whole way. It will not go as far as I should like to go, but it will at least do something to help the pensioners in these very exceptional circumstances.

Mr. Deputy Speaker (Miss Harvie Anderson)

Mr. David Howell.

Mr. Hugh Jenkins

On a point of order, Mr. Deputy Speaker. As we are not to have a Third Reading debate, it occurs to me that the hon. Gentleman who is to reply to the debate might wish to take the opportunity, if you would allow him to do so, to deal with one point which has not been raised but which is closely associated with the discussions which have taken place. I refer to the question of representations which have been made to many of us by people closely associated with transport superannuitants. On Second Reading, the hon. Gentleman said that the Government would not disapprove if the Transport Board, for example, tried to do exactly the same thing—

Mr. Deputy Speaker

Order. This is not a point of order.

Mr. Jenkins

May I finish my sentence, Mr. Deputy Speaker? Would it be in order if the hon. Gentleman were to say that the Government would not disapprove but would welcome it?

Mr. Deputy Speaker

The hon. Gentleman knows very well that that is not a point of order. The hon. Gentleman has used it as a way of expressing a point of view.

Mr. David Howell

I am grateful to hon. Members on both sides of the House and, in particular, to the hon. Member for Ashton-under-Lyne (Mr. Sheldon) for the reasonable way in which they have spoken to the Amendment and for their lucid presentation of their arguments.

This has been called a reasonable Amendment on both sides of the House, and I hope that the House will judge me equally reasonable in setting out the reasons why, despite the persuasive nature of the arguments, the Government must nevertheless reject it.

I should like to congratulate again the hon. Member for Ashton-under-Lyne on the ingenuity of his Amendment to Clause 2, which has enabled him to have another go at the Government on inflation and all that in the hope of securing that, instead of the two-yearly reviews provided for in the Bill, the reviews should be annual—at least, in certain circumstances.

I also congratulate my hon. Friend the Member for St. Ives (Mr. Nott), who succeeded in raising a number of issues of a wide-ranging nature on this Amendment, even stretching to the question of the so-called quasi-Government pensioners, asking whether they also, if they were included in the scope of the Bill and if the Amendment were passed, would benefit under the annual review instead of the biennial review proposed in the Bill.

In passing, as the Chair allowed a mention of new Clause 1, I think I should be right to put on record at this point the fact that this new Clause has been placed in the Bill. It is a technical Clause. I would say straight away that it did not indicate any change of policy whatsoever but that during the Committee stage, as those on the Committee will recall, I gave an absolutely firm assurance that the Bill covered all quasi-Government pensioners whose claims have been pressed in the House since the 1962 Act and who could not otherwise be provided for. Subsequently, arising out of perceptive legal points made by the hon. and learned Member for Northampton (Mr. Paget), I found that there was a residual doubt and that it was necessary, in order to avoid all possibility of doubt, to move the new Clause. It does not represent any change of policy on the part of the Government, but it meets beyond all doubt the reassurance that I gave in Committee. I hope that it will be accepted in this way and that the position is fully redeemed by the insertion of the new Clause, technical though it is.

I recognise that the hon. Member for Ashton-under-Lyne, in turning his attention and his genius for Amendments of this kind to the possibility of biennial reviews, has advanced some way from the position that he occupied in Committee and has taken account of some of the Government's arguments. He is now saying that, if the Government feel that to provide for annual reviews is to make too pessimistic an assumption about the future course of inflation, we should provide for annual reviews only when that pessimism is justified by events. I concede that the shift in the hon. Gentleman's position has lent his arguments more force, although I am afraid that the Government will not be enticed by his ingenuity or the underlying theme of conditional pessimism about inflation which is built into his approach and the Amendment.

That is one argument why the Government reject the proposal to move to yearly reviews. It is not the only argument. If it were, I should concede that more arguments were needed to support the Government's case.

If one is to see this matter in perspective, account has to be taken of a number of factors, including general considerations like the value of the scheme as a whole, the extent of the contribution that we are asking the taxpayer to pay for, and our ability to justify it by any criterion beyond the one that this is what public service pensioners would like. My hon. Friend the Member for St. Ives made this point clearly as well.

I must ask hon. Gentlemen opposite to step back for a moment from the details of this precise Amendment and to recall how far we have advanced and the background against which it is proposed to move to a two-year system.

Until this Bill becomes law, we still have in force a system in which the pensioners have to pin their faith on periodic and unpredictable Acts of Parliament. They are unpredictable in their timing and in their size, rationale and distribution of the increases that they award. Past Acts have also included a harsh cut-off system which has produced the inflexible result that, besides having to wait for 3 to 3½ years between Acts, many pensioners who retired up to nearly two years before an Act have been precluded from any increase under it and so have had to wait nearly five years for their first award. What is more, when it came, often it was pitiful in size in relation to the amount of inflation that they had had to bear since retiring. In moving to two years, we are making a major advance on anything that has gone before.

Mr. Nott

I am sure that it is a major advance, but, for people to appreciate how great the advance is, it needs to be repeated again and again so that the country understands what the Government are doing. I am sure that it is in order for me to say that it needs repeating in the White Paper on the Common Market which the Government are to publish shortly.

1.15 p.m.

Mr. Howell

I take note of my hon. Friend's observations, and I have no doubt that others of my right hon. and hon. Friends will also take note of them. I do not know whether I am moving outside the rules of order by repeating it now. I was already demonstrating my support for my hon. Friend's point by repeating that this is a major advance on what has gone before.

Both parties found the previous system indefensible and, as a result, we had the undertaking to which both parties subscribed that two years after the operative date of the 1969 Act the Government should state the extent to which the purchasing power of pensions had fallen, if this was at least 4 per cent., and what action they proposed to take. That was an immense stride forward. But it was not the only one.

We have taken two further steps since then: first, in announcing our plans last November, and again I readily acknowledge the substantial element common to the published commitments of both parties. We promised then not merely the two-yearly review to maintain purchasing power and the firm prospect of a reduction in the qualifying age during this Parliament; we added the very substantial extra commitment to once-for-all increases which would bring all pensioners up to a fair base line at a cost of over £20 million a year. That was the second step.

The third step came with the publication of the Bill and the Government's acceptance of the criticism, mainly from pensioners' organisations, of the five-month gap between the review date and the payment date, and our addition in consequence of the margin on account which we have debated at such great length both in Committee and again today.

In all these matters, one has to look at the total package, which is a substantial advance on what has gone before and replaces the 3½ or 3-year or even 5-year hopeful wait, with no certainty at the end of it, by a two-year automatic, mechanical commitment to review and increase, provided that the cost of living has risen by the basic trigger level of 4 per cent.

I recognise that the arguments of the hon. Member for Ashton-under-Lyne in favour of annual reviews stem from new circumstances which are subsequent to these considerations and that his new suggestions are founded on the rate of inflation that we have experienced in recent months. Even so. I am afraid that the Government are not persuaded. We are convinced that the rate of inflation in recent months has been exceptional, and we are committed firmly to bringing it under control. Obviously, the hon. Gentleman is right to make his party point that he does not think the Government's policies will succeed. In reply, the Government must say that they are determined to succeed and that they will succeed. Obviously, we do not intend to legislate for failure.

I turn, then, to the point made by the hon. Member for Putney (Mr. Hugh Jenkins) about setting an example. It was also mentioned by my hon. Friend the Member for St. Ives. In putting together the package, we have made the best assessment that we can on the evidence available to us of how the package that we are offering as a whole compares with what other good employers offer. We are satisfied that we are proposing a package which will already put us high up in the league table of good employer practice. It is worth recalling that the Government Actuary's 1968 survey of occupational pension schemes revealed that of 17 million employees in the private sector, only 8 million were in schemes at all and that, ignoring those schemes that had not been in existence long enough to have any pensioners, only 50 per cent. of members were in schemes that had granted post-retirement increases to at least some of their pensioners.

Mr. Hugh Jenkins

With regard to giving an example, if proposals came forward from, say, British Rail or other such organisations, would the Government not merely not disapprove of them but actually welcome them?

Mr. Howell

In the light of your earlier exchanges with the hon. Member for Putney, Mr. Deputy Speaker, I feel I should be out of order if I replied to that question. If the hon. Gentleman reads what was said in Committee and on Second Reading he will see a perfectly clear expression of the Government's position and the technical position on the point he raises.

The comparison between Government employer practice and outside practice is very favourable. Only about one-fifth of the schemes that I described as providing for increases did so on a predetermined and automatic basis. The rest were based on ad hoc decisions from time to time.

We are anxious, as is the hon. Member for Ashton-under-Lyne, as he said on Second Reading, that the Bill should serve as an example of good employer practice which we hope will be copied in private industry. But in justifying what we are doing to the country at large, to those who will have to foot the bill, the taxpayers, we cannot set standards too far ahead of the field. As an example and a device for setting an example, both the Bill and the scheme represent a major step forward.

I should like to say a little about administrative difficulties. I share what I suspect is the feeling of the hon. Member for Ashton-under-Lyne about administrative difficulties in general when it comes to pushing forward public policy and carrying out public programmes, which is that although they exist, and it is absurd to pretend that they do not, they should not be advanced as major reasons for not doing things. Whenever they are advanced as major reasons, I believe that it is the hon. Gentleman's natural instinct, and I hope that it would be mine, to suspect that they are not a substantial argument. Of course there are administrative difficulties, but I do not say that they would be a decisive reason for standing in the way of a move of the kind suggested.

The real reasons why the Government ask that the Amendment should not be pressed lie elsewhere, in that the two-yearly review system is a major step forward and we are now offering regular and guaranteed inflation-proofing together with the vital assurances that the Bill offers that it will bring about increases which will maintain the purchasing power of pensions. That is as big a step forward as it would be sensible, right and reasonable to justify at this stage.

The hon. Gentleman said that we were forcing pensioners to a declining standard of living. That is not so, and I think that on reflection he will accept that.

Mr. Sheldon

Surely the hon. Gentleman grasped my point, which was that between the pension reviews pensioners' standards of living will decline. That must be obvious to him.

Mr. Howell

The hon. Gentleman did not say "between pension reviews" at the time. It is conceivable that at any time between one increase and another the movements in the cost of living and the pensions may get out of line. That is inherent in any system, whether there is a six-monthly or yearly review, or any other review.

The Bill represents a major step forward, and we should not reasonably be pressed to provide for annual reviews, with or without qualifications or conditions which we believe in any event to be founded on unnecessarily pessimistic assumptions about the future course of inflation.

We bear in mind the points hon. Members have made, including that made by my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden), who kindly told me that he could not be here when I wound up the debate. It is precisely by bearing them in mind that we have come to the two-yearly review with automatic inflation-proofing. If hon. Members ask us to go further and say that inflation is to be so terrible in the future that we must bring down and down the regularity of the reviews, there is a further obvious answer, that the aim must be not merely to provide inflation-proofing and protect our pensioners but to check inflation. That the Government are determined to do. I hope that Labour hon. Members will show a little more enthusiasm for that instead of whooping it up whenever excessive wage claims are made. That above all will allay the fears of inflation which all pensioners have.

It remains our position that the Bill is a major advance. We believe the two-year review to be right. We believe that inflation-proofing is of great advantage, and that this places the Government's pension increase provisions well up in the league compared with all other practices. On that basis. I must ask the hon. Gentleman not to press his Amendment.

Amendment negatived

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed

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