Lords Amendment: No. 2, in page 23, line 23, at end insert new Clause A—
A.—(1) For subsections (1) to (4) of section 2 of the Pensions (Increase) Act 1971 (which provides for the future review of official pensions and payment of increases) there shall be substituted the following subsections:—
(1) Subject to the provisions of this section, the Minister for the Civil Service, as soon as may be after 30th June in the year 1972, and every year thereafter, shall review the rates of official pensions against any rise there may have been in the cost of living during the review period, that is to say—
(2) Subject to subsection (3) below, the increases to be provided for by an order under this section shall be as follows:—
(2A) For purposes of subsection (2)(b) above—
(3) Where the rise referred to in subsection (2)(b) above is less for any half year than two per cent., there shall only be an increase for pensions beginning in that half year if there is one for pensions beginning in a later half year, and the increase (if there is one) shall be two per cent.; but where this subsection prevents there being an increase for pensions beginning in any half year, then the order made in respect of the next review period shall for those pensions authorise, instead of an increase calculated in accordance with subsection (2)(a) above, such increase as would result if that prevented by this subsection had been made and were followed by one calculated in accordance with subsection (2)(a) by reference to the rate as so increased.
(4) Where on any review under this section it is not found that the cost of living has risen by two per cent. or more in the review period, the review in the next year shall be for the same review period extended by twelve months; and if it is found that the cost of living has risen by two per cent. or more in the (extended) review period, the provisions of this section shall apply subject to the modification that for subsection (2)(b)(ii) and (iii) there shall be substituted the following:—
'(ii) in any of the succeeding half years up to that ending with the day after the end of the review period'.
(2) For subsection (3) of section 9 of the said Act of 1971 (which relates to gratuities and lump sums) there shall be substituted the following subsection:—
(3) In respect of any lump sum or instalment of a lump sum which becomes payable after the day following the last day of a review period but before 1st December next following the review period there may be paid by virtue of section 2 above the same increase as if it became payable on that date.
(3) After subsection (4) of the said section 9 there shall be inserted the following subsection:—
(4A) Subsection (4) above shall have affect in relation to the first review period
as if the period of three months ending with 1st July 1972 were a half year ending with that date.
§ Read a Second time.
§ Mr. David Howell
I beg to move, That this House doth agree with the Lords in the said Amendment.
The Amendment, which of the four, perhaps, is the one substantial Amendment, is to insert new Clause A. The Clause gives effect to the Government's decision, announced in the House by my right hon. Friend the Secretary of State for Social Services on 16th December, to review public service pensions every year instead of every two years. Although the Clause may look grimly complex, it merely alters the existing procedure for review in three main respects.
Briefly, these are, first, to make the reviews annually instead of biennially; second, to provide for the transition from a 1st September to a 1st December payment date, and the fact that the present review period will, therefore, not consist of an exact number of half years; and third, to reduce from 4 per cent. to 2 per cent. the amount, sometimes called the "trigger", by which the cost of living must have risen during the relevant period for an increase to be payable.
That is the main purpose of this rather complex looking Clause, which is put forward as an alternative to a whole string of unintelligible Amendments which would otherwise have had to have been brought forward to make these changes.
Although it does not arise directly out of the Amendment—as the necessary powers are already contained in Section 3(8) of the 1971 Act—I remind the House that we shall also be giving effect, from 1st December, 1972, to our undertaking to reduce from 60 to 55 the age at which public service pensioners normally qualify for increases under the Act.
Those are the main purposes of the new Clause.
§ 12.29 a.m.
§ Sir Brandon Rhys Williams (Kensington, South)
At this hour and with the small attendance, I shall comment only briefly on this extremely important Amendment. It means so much to so many that perhaps the House has not appreciated from the language, which takes a little unravelling, how much 213 it means. I take this opportunity of saying how appreciative those of us who are close students of this subject are of what the Government are doing and how glad we are that my hon. Friend has come into Macedonia to help us.
On annual reviews, the Government are simply matching the announcement already made as a matter of general policy. I should like to comment on the use of the cost of living as an index. Obviously those who look to an expansion in our economy will hope that in due course we shall move away from the cost of living as an index to something more closely related to the actual progress of the economy, so that those who have retired and who contributed to the economy in their working lives are not left behind as we all move forward. I think it was Harold Macmillan who said that the pensioners brought us to where we are. We must take them along with us to where we are going, and in that respect the cost of living as the index is not entirely satisfactory.
The other question which needs examining in the context of longer-term considerations on the whole matter of the relationship between retired people and those at work is whether the cost of living is the right index for a larger group than a family of one or two people. Normally in dealing with pensioners the question of a man with family responsibilities, including the raising of children, does not arise. But the point needs reiterating on every possible opportunity that the cost of living increase is a rather insensitive guide to the actual cost of a family, and where a pensioner has more than one dependant there is the possibility that over the passage of time, if inflation continues as it has in the past year or two, a problem will arise which will need further consideration, namely how to deal with a person who is trying to manage the cost of living index on behalf of several people at a time.
214 Having made these small points at this highly significant hour, I should like once again to congratulate the Under-Secretary and say that he is setting a pace which it is going to be extremely difficult for private schemes to match.
§ Question put and agreed to [Special Entry].
§ Remaining Lords Amendments agreed to [One with Special Entry].