PENSIONS OF MEMBERS

HC Deb 09 June 1972 vol 838 cc908-34

Mr. Arthur Lewis

I beg to move Amendment No. 9, in page 7, line 41, leave out 'sixty-five' and insert 'sixty'

The Second Deputy Chairman

With this Amendment it will be convenient to take the following Amendments:

No. 15, in page 8, line 18, leave out 'sixty' and insert 'fifty-five'.

No. 16, in line 19, leave out 'sixty-five and insert 'sixty'.

No. 17, in line 25, leave out 'sixty-five and insert 'sixty'.

No. 18, in line 28, leave out 'sixty-five and insert 'sixty'.

No. 19, in line 34, leave out 'sixty-five and insert 'sixty'.

Mr. Lewis

This is a small but vital point. I will travel as quickly as I can. If I do not go into detail I still think hon. Members will get the point.

As the Clause stands, it will be possible for a Member at 65 to go on to pension subject to the details and qualifications, which I shall not go into as they are in the Bill. On a voluntary basis a Member can go at 60 on a pro tanto reduced benefit basis.

The object of the Amendment is that the 65 should be reduced to 60. That means that a Member would automatically have the right of pension at 60—whether he wanted to go or not would be entirely up to him—and have the right to opt for a reduced pension on a pro tanto basis at 55 instead of 60. The Amendments vary, but they are all consequential. Basically they have this one point in mind.

I need not go into the facts of the situation, because I have already said there is no comparability with Members. It is now generally accepted in almost every pension scheme of which I know, private or public, that the pensionable age is 60. Most of them are asking to be reduced to below 60 where it can be taken on age provided that the qualifications have been met.

I am asking the Minister to give consideration to this matter. In this instance, as it will not vitally affect anyone who is liable to become too adversely affected, if the Minister can assure me that the Review Body will consider this matter at its next review I should be happy.

Mr. Kenneth Baker

The Committee may be interested to know the cost of the proposal to reduce retirement age from 65 to 60 on a voluntary basis. It would raise the cost of the scheme, and the total new entrant contribution rate would rise from 13½ per cent, to 16 per cent. That is the total of the Government's and the Member's shares. The Boyle Committee recommended sharing the costs as to three-eighths and five-eighths by Members and the Government respectively. That would require a Member's 5 per cent, contribution to be raised to 6 per cent., and there would be a corresponding increase in the deficit payment falling upon the Exchequer in respect of past service.

However, I do not rest my resistance to this proposal on the basis of cost. The Boyle Committee looked at this matter carefully and specifically and in paragraph 60 said: A lowering of the normal retirement age would, however, enable Members to enjoy more favourable terms in this respect than those available under the National Insurance Act, as well as the great majority of occupational pension schemes. The Boyle Committee rested its argument not on comparability with the Civil Service, which received rather dusty treatment under the last Amendment, but with the great majority of the electorate for whom the male retirement age is 65.

Mr. John Hall

Although it is perfectly true that the majority of the schemes to which the Parliamentary Secretary refers have 65 as the retirement age, certainly those established by the major undertakings have a lower age. The age is coming down all the time. Most of the big companies have 62 or 63 as the age of retirement.

Mr. Baker

My hon. Friend has anticipated my next point. I was about to comment that a good deal of thought is going on at the moment in all parts of the country about the retirement age. For example, the unions have made certain recommendations in recent months. There is a most interesting and well thought out pamphlet by some Tory Members of Parliament published this week which advocates that this matter should be looked at again. I am talking about the national retirement age being reduced from 65 to 60. As a Minister I am not allowed to make personal observations at the Dispatch Box, so I have to leave it at that. However, there is a great deal of feeling in the country that this is one area where social improvement should be made.

I am concerned that our pension scheme should not run ahead of the field. That would be giving ourselves a special position. Many schemes have other facilities that are not in the Bill, but we cannot act as Billy Bunters in the tuck shop of the constitution and pick out the currants from the buns we see in front of us and ignore the rest of the buns. I think the public would resent it if we gave ourselves a special position on earlier retirement.

I do not find amongst my colleagues a great desire to retire early. The Amendment assumes there is great pressure by Members, that they are just waiting to go at 65 years of age.

Mr. Hall

Sixty.

Mr. Baker

Nor I believe at 60. I have yet to meet hon. Members who want to do that. The House seems to act as a magnet, and the magic age of 65 or 60 is not a demagnetising figure. Indeed, hon. Members hang on not with indifference but with tenacity. I do not feel that this would be helpful. However, I assure the hon. Member for West Ham, North, once again, that the Review Body will look at the matter and take cognisance of the debate that we have had in the last quarter of an hour.

Mr. Arthur Lewis

I appreciate the facetiousness with which the Parliamentary Secretary spoke about Ministers hanging on.

Mr. Baker

Members.

Mr. Lewis

"Hanging on" is the operative phrase. I will come to Members in a moment. However, this would not be compulsory. Hon. Members would still have the right to stay on after 65 if they wished. The hon. Member for Manchester, Withington (Sir R. Cary) and my right hon. Friend the Member for Sowerby (Mr. Houghton) know that in recent years a number of Members literally did hang on because they could not get a pension unless they completed the time.

I declare an interest here. I have been a Member for 27 years. God forbid that it should happen—I say this not for my sake, but for the sake of my wife—but if I were to have a heart attack, or for some other reason not be able to carry on as a Member, I should have to wait until I was 65 in order to get a pension. I know that my right hon. Friend and the Chief Whip would be pleased if I had to leave the House before I was due to retire, but there may be others who would not be so pleased about it. I should have to wait for another 11 years before getting a pension.

Fortunately for me, I have had a reasonably easy life. I was a trade union official for the best part of my life, and I was well looked after. All good trade unionists look after their officials, and I was all right. It was only when I came to this place that I began to suffer. That was in the early days of 1945.

There are many poor, hard-working miners who come to this House when they are 40 or 50, or perhaps even a little later. I have known some Members who would have liked to retire at60. I have in mind one of our colleagues who had pneumoconiosis. He used to walk around gasping for breath, and a number of his colleagues asked him why he did not pack up. His answer was simply that even if he had the necessary service, he was not of the right age and would have to wait until he was 60. That is a terrible situation. Men like him give perhaps 20 or 30 years service but they cannot retire even if they want to. Some hon. Members may not want to hang on, as the Minister puts it.

My right hon. Friend the Member for Sowerby laughs. I might be bribed by the Patronage Secretary opposite, and the future Patronage Secretary, who is now on this side of the Committee, to pack up and go because they want to get rid of me. My first response would have to be that I cannot go because I am not 60, even though I have the qualification of time, and there are others in a similar position.

The hon. Member for Wycombe (Mr. John Hall) said that most pension schemes are trying to bring down the retirement age. Certainly most of the progressive schemes have that in mind. I know that the Civil Service and local government are doing it. I am not against a Member staying on in the House if he wants to. I am not against someone like Lord Shinwell continuing to serve here until he is 90, so long as he is fit and capable of doing his job. By all means let someone in that situation carry on. But I want to give Members the right to retire at 55 if they are physically disabled enough to make them feel that they would like to opt for retirement even at a reduced rate or to retire automatically at 60 and to go on full pension. I do not think that the Minister has answered the point of the Amendments.

Mr. Baker

One of the small improvements made by the Boyle scheme meets some of the hon. Gentleman's arguments. Under the Lawrence scheme there could not be a reduced pension at 60. A Member had to wait until he was 65 to retire. It is fair to say that review bodies of this sort are very much aware of feelings of that nature.

Perhaps I may now deal with the point made by the hon. Gentleman about somebody aged 50 who feels ill enough not to be able to carry on and has to cease being a Member. Boyle does not provide for sickness benefits, for the simple reason that a sickness pension can be effectively adjudged only by the person employing the man who falls sick. We are not employed by anybody. It would be difficult to assess when, because of sickness or infirmity, a Member was unable to fulfil his duties as a Member. It is that kind of demarcation line and that kind of decision with which I should not want to be concerned.

Mr. Lewis

I was trying to hurry, and I used sickness only as an illustration. There may be hon. Members who want to pack up for various reasons. I used the sickness illustration because the hon. Member for Withington knows the hon. Member to whom I was referring.

A Member may want to pack up for any one of a number of reasons. He may feel that he has had enough, but he will not be able to retire. He may want to retire on other than health grounds. He may just be tired and feel that he has had enough. I accept that there has been an improvement by lowering the age from 65 to 60, but I ask the Minister to be more progressive and to reduce the age by five years and bring us into line with what is happening outside.

Amendment negatived.

1.45 p.m.

Mr. Arthur Lewis

I beg to move Amendment No. 11, in page 8, line 5, leave out 'one sixtieth' and insert 'one fiftieth'.

The Second Deputy Chairman

With this Amendment we are to take the following Amendments:

No. 12, in page 8, line 5, leave out 'one sixtieth' and insert 'one fortieth'.

No. 13, in line 9, leave out 'one-sixtieth' and insert 'one-fiftieth'.

No. 14, in line 9, leave out 'one-sixtieth' and insert 'one-fortieth'.

Mr. Lewis

I do not think that we can hurry our debate on these Amendments because, not only are they important, but for the first time I see that I have the support of 40 or 50 right hon. and hon. Members.

These Amendments raise the question of the entitlement of pension rights on a contributory basis for various periods. I have chosen periods of one-fortieth and one-fiftieth, but the Minister knows that Amendments such as these are tabled for the purposes of debate and that the hon. Member who tables them is not necessarily wedded to the form of words.

I pay tribute to the improvements made by the Boyle Committee in salaries, conditions of service, pensions, and so on. I pay tribute, too, to the Lord President of the Council who has kindly carried out his promise on Second Reading and sent hon. Members a circular pending the issue of the booklet which he has promised to send out, and which I assume is in the process of being prepared.

In his memorandum the right hon. Gentleman gives details which I do not think are good enough. I refer to the annex and the statement of facts. Because of the limited time at our disposal I shall not go into the ancillary benefits for widows, and so on, because if the Minister is prepared to accept my principle for the pensions of Members I assume that the principle for widows' pensions will also be accepted.

I want to upgrade the amount of the pension based on the qualifications laid down in the Bill. When the 1965 Act started, it was provided that after 10 years' reckonable service a Member would get a pension of £600 a year. Under the Boyle scheme, that figure will be increased to £750, which means an extra £150 a year. On the surface that seems reasonable, but then one realises that quite rightly, the Member has to pay increased contributions, and it is said that the contribution will go up by about £75 a year. I do not think that one can regard that as an adequate return on the extra money.

Mr. G. B. Drayson (Skipton)

Has my hon. Friend noted the footnote in the annex which shows that, under the Boyle Scheme, these benefits were increased by 20 per cent, in April, 1971, which raised them to £600? Adding another 20 per cent, to them would make £720. The gap between Boyle and the previous limit is much smaller.

Mr. Lewis

I thank my hon. Friend. I hope that I can call him that, in the same sense as that in which he referred to me—personally if not politically. I was about to say that the contributions have rightly been increased. I was saying that we have to pay about £75 a year.

Mr. Drayson

The benefits have been increased.

Mr. Lewis

Yes, but, as the hon. Member says, the differential has been lessened.

I think it will be agreed that my Amendments have been an effort to be helpful and not obstructive. I want to leave my right hon. Friend the Member for Sowerby (Mr. Houghton) the whole field in which to put his case, because on this at least he agrees with me and the 50 or 60 of my hon. Friends who have attached their names to the Amendment.

I should like to make one party point. I am pleased to see a number of able parliamentarians here on a non-political basis. But we have no representative of the Liberal Party. Even one of the six could and should have been here.

Sir R. Cary

I put the question to the Leader of the Liberal Party yesterday whether we could have a Liberal representative here. He said, "I have only six Members. I shall try very hard to find someone who is free of engagements to be here". Obviously, he did not succeed.

Mr. Lewis

I am grateful for that information. This affects every Member of Parliament and there are three parties. I should have thought that one Liberal could have been here. But I will leave it at that.

I should like to leave my right hon. Friend time to intervene, but if his contribution is not as vigorous on this Amendment as it was on the last, I may want to return to the subject.

Mr. R. A. McCrindle (Billericay)

I feel almost that I should apologise to the hon. Member for West Ham, North (Mr. Arthur Lewis) for preventing his right hon. Friend from entering the debate straight away after that challenging approach.

After having heard a fair part of the debate, I should like to congratulate the hon. Member for West Ham, North. I have not always felt that his Amendments have been as constructive as today. The Committee owes him a vote of thanks for allowing us to discuss these very important matters.

Having said that, I cannot support these Amendments, which I believe miss the mark. We must not underestimate the tremendous movement forward represented by the pensions and other proposals in the Boyle Report. It is a major step in the right direction, which, for the first time, gives us something approaching a reasonable occupational pension scheme. In all these circumstances, we have to be careful not to give the impression of ingratitude or of running before we have started to walk.

Why do I think that the Amendments are ahead of their time? Hon. Members—I am conscious of the considerable number who have put their names to the Amendments—have overlooked one thing. They are not comparing like with like. They are saying, "If we are only to get sixtieths, and are therefore liable to get only a quarter of our final year's salary, that compares very unfavourably with what the employee in the average private occupational scheme can expect."

Of course it does, but this difference arises for very important reasons. We are here over only a part of our working lives. The average age of entering this House, I should think, is between 35 and 40. Most of us have earned a living of some sort before we enter the House. Many of us—this will be so more and more as time goes by—have been involved in private superannuation schemes before coming here. Whether we like it or not, most of us have already earned some sort of retirement income.

Mr. John Hall

On what evidence does my hon. Friend say that a large number of Members already have payable to them an existing pension from their previous occupation?

Mr. McCrindle

I was careful, I thought, to say that this could be assumed to be more and more so in the future, if for no better reason than that the Government document "Strategy for Pensions", which it is hoped to enact later in this Parliament, will almost certainly mean that, either through the reserve fallback scheme of the State or through an occupational scheme, this will have to be so. But even if we did not look to the future, we might reflect that the House of Commons is a microcosm of society. The number of people in the past 20 years who have entered occupational pension schemes is considerable and growing all the time. Although most of them are white collar workers, again over the last few years pension schemes for non-white collar workers have become much more predominant throughout British industry. When most of us enter this place, because we have had a job, we have earned part of our future pension income.

Mr. Harold Gurden (Birmingham, Selly Oak)

What my hon. Friend says may be true, although much of it is hypothetical. But it is not enough to say that the majority—that is the best that can be said—will have some pension arrangements when they come into the House. We must legislate for all.

2.0 p.m.

Mr. McCrindle

I am glad that my hon. Friend raised that point, because I was about to move on to it. I have said, and I repeat with conviction, that a number of us have already earned a pension from our previous employment when we enter the House. I take the point of my hon. Friend the Member for Wycombe (Mr. John Hall). It may be said that a great many people could not earn a pension in their previous employment for the simple reason that no pension scheme existed in the firms for which they worked. But where they have had no pension scheme they have had the opportunity to effect self-employed retirement annuities, not because they are necessarily self-employed but because they have been in a firm where no pension arrangements existed. Nobody could have told them how to spend their money, but they could have chosen to take advantage of that opportunity. Whether or not a Member was employed in a firm with a pension scheme, he nevertheless had the opportunity between the ages of 20, or whenever he began work, and the age of 40 or so when he entered the House, to build up some sort of pension entitlement before entering Parliament.

There is the other aspect that a sizeable number of Members choose to earn some additional income outside the House. Under the same regulations, stemming from the Finance Act, 1956, they were allowed for many years to put up to 10 per cent, of such earnings into the same self-employed retirement annuity, and that percentage has been increased to 15 per cent. Even when we are here, very few of us have to rely on the one source of pension income alone.

In view of the likelihood of an average service of 15 years, the average pension is likely to be one-quarter of the terminal year's salary under the new rules. I accept that that does not seem at all good when compared with the half or often two-thirds which an employee is likely to take home if he is a member of a private occupational pension scheme. But that is not comparing like with like.

I have some sympathy with my two hon. Friends who have intervened. An hon. Member who gives 15 years' service here will receive a quarter of his terminal salary, plus what he has earned before entering the House, plus what he may earn in pension if he retires or is defeated in an election before he is 65, plus the opportunity he has of effecting a 1956 Act retirement annuity from the additional earnings over and above his parliamentary income while he is here. For that reason alone, what is provided for in the Bill is not as unfair as the hon. Member for West Ham, North tried to suggest when moving the Amendment.

One or two other points must be borne in mind. There are in existence some very respectable occupational pension schemes where the pension is based not upon one-sixtieths but one-eightieths. Of the occupational pension schemes with which I have come into contact—a fair number over a long professional career—the number with one-eightieth as the final retirement basis is still quite considerable. Therefore, we are at one step going far better than quite a number of private occupational pension schemes. For that reason also, I beg the Committee to think very carefully before moving too far forward. We must be a little careful about running ahead of public opinion, about running ahead of what the great mass of the public still receive, particularly as we move towards a gradual development of the occupational pension scheme, or the State fall-back, as we legislate on the basis of "Strategy for Pensions".

For all those reasons, the House must go very slowly. We must be grateful that we have managed now to introduce a pension scheme with as many modern features as that which is before us contains, and we must be very careful not to run ahead of public opinion, ahead of a great many occupational pension schemes outside.

Mr. Drayson

On the publication of the Boyle Report I fixed on the question of pensions as one of the respects in which I thought the Committee had made a mistake. I wrote a letter to my right hon. Friend the Leader of the House, and subsequently had a long conversation with him on the subject. I then said that I thought that it was on the issue of pensions that the Committee had not put forward an entirely appropriate scheme.

The Committee states in Chapter 2 of its report: The average ape at which a Member entered Parliament in 1970 was 40". The average retiring age was 57 and the average length of service was 17 years. Therefore, if we base the pension entitlement on a sixtieth, no average Member will receive even a third of his final rate of pay as his pension. It would be necessary for a Member to complete 30 years before he was entitled even to half pay on retirement, which is roughly what I had hoped the pension proposals would bring about.

A Member entering the House at the average entry age of 40 would be 70 before he was entitled to half pay on retirement. Actuarially, the number of years for which one can expect to enjoy from the age of 70 whatever pension one has earned is not very great.

We should like a little guidance from my hon. Friend the Minister on what the actuarial reductions are likely to be for those who retire before 65 or draw the pension before that age. The figure is quite startling to some of my hon. Friends.

The Amendment has been supported by over 70 Members, and I am sure that many more signatures could have been obtained if efforts had been made to obtain them.

Mr. Arthur Lewis

I did not ask one Member to add his name to the Amendment. I do not know how they were added. There could well have been a number of others if there had been the usual lobbying.

Mr. Drayson

For the reasons I have given—the average age of entry, the average age of retirement and the average time spent as a Member—I have felt that a fortieth or perhaps a fiftieth was the most appropriate basis. It may well be that some of the newer Members come straight from the office desk, or wherever they have been working, with accumulated pension rights. But many of us entered the House from the Army. We were trying to build up our careers and were not thinking too much about our pensions at the time. I should not be happy about a young chap going after a job at the age of 20 whose first question was, "What is the pension?" Other things are more important in the early stages. If, when I started work in the City, I had been more concerned about what my pension would be, I probably would not be in the House. I was determined not to worry too much about the pence in those days but to try to move forward.

We should make an exception because we are individuals, we are private enterprise people. We should not be here, on either side of the House, if we were not. Members have struck out along an independent line and have not worried too much about future security and pensions because of their anxiety to come here. We make a mistake if we try and model our pensions of a scheme whereby people enter at 18 or 20 years of age and stay right through to the age of 60, accumulating 40 years, and setting a two-thirds pension. A junior official at the Foreign Office finishing up as ambassador does well if he gets two-thirds of his final pay. But we do not come in on that basis. It is difficult for anyone here to accumulate 40 years' service. Indeed, it is almost impossible under our system. Very few people, on the figures I have quoted, of 40 years average service, average retirement at 57 and 17 years' service in the House of Commons, will retire on one-third of permanent salary when leaving this place. That is why I support the Amendment.

Mr. Gurden

I support the Amendment because I believe that there is justice in it and that no one could sensibly argue against it. The right hon. Member for Sowerby (Mr. Houghton) said that there may be faults in the reports we have had, including the Boyle Report. I agree. I can see the force of the argument that he put to us—that we should take this as a package and not fix our own arrangements. But it is disturbing and difficult to do that when we know that this aspect is wrong. I believe that the Amendment must therefore be right.

There is another important aspect. My hon. Friend the Member for Skipton (Mr. Drayson), when he spoke about hypothetical cases, suggested that a majority of hon. Members may get other pensions from some other source. That has nothing to do with it. Our job, as he rightly said, is to put the matter right on its own merits here in this place and on the facts as we know them. It would be quite wrong to have an arrangement suitable only to a majority, even if he is right in his argument.

But there is even more to it than that. I understand from the Treasury that the arrangement for self-employed persons which is favourable to private pension insurance—that is, 15 per cent, being allowed for premiums on one's earned income as a self-employed person—is not applicable to Members. This is a vital factor. Did the Boyle Committee ever take this into account? If it did not, the whole situation has changed and clearly the Boyle Report is not acceptable.

If one is fortunate enough to have employment outside, as I and many others have—infinitesimal though it may be—one can invest 15 per cent, of one's income tax-free because one is self-employed in that capacity. But although we are classed by the Treasury as being self-employed in this place, that rule does not apply to Members and to our salaries as Members. Thus, we do not get the 15 per cent, allowance on our earned income here. We can get only 5 per cent., which is the amount we contribute, and nothing more. We are at a great disadvantage, and this is a serious factor on the kind of figures about which we are talking. I should like the Minister to tell us why we are not allowed to invest the 15 per cent., why we cannot top up our 5 per cent, allowance to 15 per cent. There has been a reference to fees in this connection, but the Treasury says that the 15 per cent, tax allowance is for self-employed only.

Mr. McCrindle

Is my hon. Friend saying that, in addition to having the pension we are discussing, with deductions from the income which we are paid, we should also be able to invest another 15 per cent.?

Mr. Gurden

No. The Treasury rule is that one is allowed to invest 15 per cent, if one is self-employed. We should be allowed by the Inland Revenue the additional 10 per cent.

2.15 p.m.

Mr. Arthur Lewis

The hon. Gentleman is saying that we are allowed 5 per cent, for tax purposes, whereas if we were self-employed outside we should be allowed 15 per cent. He is saying, in effect, that the differential of 10 per cent, should also be allowable for tax purposes and that this would cover the point.

Mr. Gurden

Certainly. That is exactly right. I shall be interested to hear what my hon. Friend the Parliamentary Secretary says. Perhaps we ought to have the Chancellor of the Exchequer here to tell us why this situation is as it is. The Finance Bill is still in Committee, and if there is an injustice, let us put it right there if we cannot do it in this Bill. But in any case this is a side issue. It only aggravates the situation but does not detract from the justice of the Amendment.

I am told that there may be a review in 1974, but how long will that take to reach us? Might it not take up to 1976? I suggest that the earliest date for that would be 1975–76, and this is quite wrong. I am disturbed by the Boyle Report. I want to know whether the question of the 15 per cent, allowance was taken into account by the Boyle Committee. If not, why should we not adjust the matter by this Amendment? If we cannot do it in this Bill, let us do it in the Finance Bill.

Mr. Houghton

I thank my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) for his co-operation in facilitating the business of the Committee today. I am sure that the Committee appreciates it. It seems to be very much his day, and if it were not that we do not like commercials in this place I would say "Why go to Lewis's when you can come to the House of Commons?"

I hope it is not presumptuous of me to say that it would probably be in the best interests of the House if we could dispose of the Bill this afternoon. Time is running on and we still have some business to do. Having said that, it would ill become me to occupy the Committee for too long.

Nevertheless, this is a very substantial matter and we are speaking, so to speak, for the record, for the guidance of those who may come after us to consider this matter afresh, rather than with any immediate hope of writing a new Members' pension scheme now. There are one or two observations that may be valuable.

Again, we have to get the matter into perspective. We had no pension scheme as of right before the Lawrence Report in 1964. Within six years of the first ever pension scheme as of right for hon. Members, we sent it to another Review Body to consider, along with other conditions of service.

It is a rather speedy review of a superannuation scheme, as the hon. Member for Billericay (Mr. McCrindle) will admit. Here we are with the product of that review after only six years. I join with the hon. Member in saying that we must not under-estimate the value of the improvements that have come from this review, for they are substantial. Nevertheless, the climate of superannauation and occupational schemes is changing rapidly all the time.

The Lawrence Committee was considering the matter in a different epoch in superannuation terms in 1963 from 1971, and the next Review Body in several years' time will find that things have moved more rapidly still. Nevertheless, there are some things about the present proposals which it is important to consider, while not under-rating the speed of progress and the value of changes now proposed.

In proposing the first scheme on a contributary basis the Lawrence Committee naturally gave deep consideration to what type of scheme it should be. When the Boyle Committee was asked to review that scheme, it must have thought even more deeply about what changes should be made in a scheme which had been in operation for only six years. The Lawrence Committee devised a scheme which in important respects appeared to have no clearly recognisable relationship with occupational schemes. It took fixed amounts of £60 and £20 as the multiples on which to calculate a pension. It gave more credit to the first 15 years of service than to service after 15 years, another remarkable feature.

The Lawrence Committee provided for a maximum pension of 60 per cent, of salary after 45 years. That length of service is almost unobtainable, as the hon. Member for Skipton (Mr. Drayson) has pointed out. I will not comment on what hon. Members might think of one who had been here for 45 years. I once saw an hon. Member celebrate his 90th birthday in the House, but I am not sure that we should think him deserving of an even greater affluence in his retirement than other hon. Members. It is all a matter of opinion, but at least the Boyle Committee brought the maximum qualification for pension down to 40 years. In paragraph 55 of its report it acknowledged the difference between service here and service in an occupational scheme.

Another important feature is that the Boyle Committee's proposals evidently bear the mark of Civil Service change. Some proposals reflect changes being brought about in the Civil Service, too. The change in the assessment of pension on an average, and on the remuneration of the final year, and the calculation of reckonable service by reference to days instead of years as formerly, are changes also being made in the Civil Service. The death grant is a feature being brought into our scheme which looks very like that being introduced into the Civil Service.

The factor of 1/60th of salary for each year of service is a feature of public sector schemes. The hon. Member for Billericay said that in many occupational schemes the factor was 1/80th and not l/60th. That is true of the Civil Service, but the Civil Service exchanged 1/60th for 1/80th in 1909 when taking a lump sum tax-free gratuity on retirement. It was a useful exchange at the time, and it has never since been reversed.

One feature of the Boyle Report misses an essential characteristic of service in the House. There is only one hon. Member who has completed 40 years of unbroken service in the House, and that is the Father of the House the right hon. Member for Thirsk and Malton (Sir Robin Turton). There are other right hon. and hon. Gentlemen who are getting very near to 40 years' service and some who have been here for more than 40 years with a short break. However, owing to the disregard of service prior to October, 1954, a matter which we were debating a few moments ago, none of those Members can possibly qualify for a full pension under the Boyle Report. Indeed the earliest day at which any Member can qualify for full pension rights will be October,1994. This shows the significance of the combination of the total service requirement to get the maximum pension with the fact of disregarding service prior to October, 1954.

No scheme based on an expectation of 40 years in the House is realistic. We have different ages of recruitment, and anyway there is no career expectation in the House. One might say that 25 years, with a limit of 30, was about as long as the general run of Members would serve before retiring, and even that length of service might well have a break because of electoral changes which send hon. Members into the wilderness at intervals.

A pension of two-thirds' pay after 40 years is not of real interest to the general run of hon. Members because it is unattainable, and it will be unattainable even if every year of service counts towards 40 years in the House. What we need is a scheme related to the average length of service in the House, or even something more than average, something reasonable, something substantial, and 25 years may be the sort of basis upon which a pension scheme should be devised.

Even 25 years is a long time. A Member has to be politically lucky and keep in good health and strength to spend 25 years coming to retirement age. We have to remember that there is no provision for a breakdown pension and no one gets a pension on retirement on the ground of ill health. A scheme giving half pay on retirement at 65 after 25 years' service would be better and more realistic. The Boyle Committee suggests half pay after 30 years' service. It is on the high side. If the qualifying period for half pay were somewhat lower than 30 years, we should be within sight of a more realistic superannuation scheme for hon. Members.

An additional pension for service beyond 25 years may be important to a few, but much more important to the general run of Members is to buttress the pension scheme for service between 15 and 25 years. This is the service which has to be regarded as the material band for the appraisal of an adequate provision on retirement.

2.30 p.m.

I know that this could be regarded as exceptional in comparison with many schemes outside, but I do not think that it is when considered in the perspective of the life work of a Member of Parliament. Most Members have put in a good deal of service in one field or another, often in public life, before coming here.

I take the point made by the hon. Member for Billericay, who made a very thoughtful analysis of the situation, that some hon. Members may come here with accumulated pension rights. Those rights may be frozen or, presumably, they may be transferred. The hon. Gentleman said that cover for previous service might in a number of cases be part of the ultimate reckoning of provision for retirement. I doubt whether that for a long time to come will be the general experience of Members. Many Members come with too short service in the occupational scheme to have earned any accumulated rights worth having. Others are in schemes that are not transferable. Others are not in schemes at all.

What we are considering, and what we would like another Review Body to study very carefully, is how to provide for the retirement of Members at the end of their public life with a reasonable amount to live on, adequate but not generous.

Although a general sense of the fitness of things requires a reasonable period of service as Member of Parliament to justify the provisions that should be made, there is another aspect of the matter. There is in the case of Prime Ministers and Ministers an acknowledgment of the position they have held. That can reasonably enter into the appraisal of the retirement conditions of Members. We do not regard ourselves as comparable with high officers of State, but we are Members of Parliament and we are, along with high officers of State, the leaders of the nation. We are the institution in which the people are asked to put their faith in democratic and parliamentary Government. We have a high responsibility, and we are entitled to reasonable respect and generosity from those who send us here.

Although we would not dream of asking to be pensioned off on the conditions of Prime Ministers and Lord Chancellors, nevertheless if we have put in a reasonable period of service the criterion for appraisal of our pension expectations should be: what sort of retirement should a Member reasonably have when he leaves the House of Commons on the ground of age?

Late entrants into the Civil Service are now to have the opportunity to buy themselves in—on a transfer value basis and on an instalment plan—to make up for their loss of pensionable service. This is in the case of civil servants who have previously been undergoing a period of training to equip themselves for their professional life. After all, those who come here usually undergo some experience to equip themselves to be a Member of Parliament. We do not get the opportunity of buying ourselves in for service we have not put in. We do not get an opportunity of buying ourselves in for the service we have put in if it is prior to 16th October. 1954.

Nevertheless, there is something unseemly in any country in which Members of Parliament appear to be greedy or grasping or to be acquiring for themselves conditions which are substantially out of scale with those of the people generally. So we must be modest in our claims in this regard. The nub of the problem is that we are late-age entrants into a vocational pension scheme. What provision is to be made for late entrants in the circumstances? Members are, after all, recruited after the normal age.

It may be thought, returning to what the hon. Member for Billericay said, that those who have accumulated pension rights from other schemes and who might, if they get the benefit of this more liberal pension scheme for Members, cumulatively have excess provision for their retirement. I would not be averse to some limitation to the overall provision for the retirement of a Member in those circumstances, but it would be a difficult question of scaling pensions to individual circumstances. I do not think that any such possibility need arise for quite a long time to come. This may be a point that will have to be considered by a future Review Body.

We cannot demand from the Government today that they should depart from the Boyle recommendations, favourable in many respects as they are, and make provision for the extra benefits as the Amendment proposes.

Mr. Kenneth Baker

This is probably one of the most important, from the point of view of the likely benefit to Members, of the various Amendments we have been discussing. I am grateful to the hon. Member for West Ham, North (Mr. Arthur Lewis) for the brevity with which he moved it.

My hon. Friend the Member for Skipton (Mr. Drayson) asked what would be the actuarial calculation for drawing one's pension earlier. I am advised by the Government Actuary that it could be as much as 6 to 7 per cent, for each year reduced. The matter is somewhat complicated. If the hon. Gentleman would like to take it further, I should be pleased to write to him.

My hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) raised the question of tax relief. No one is eligible to claim tax relief under the self-employed pension provisions while being in pensionable employment. The law is that a person cannot get both. One can get tax relief for up to 15 per cent, of one's pensionable salary if one makes a contribution equivalent to 15 per cent.

In our scheme we make a contribution of 5 per cent, and the Exchequer makes a contribution of 8½ per cent. If my hon. Friend wanted to increase our contribution to 15 per cent., pro rata the Exchequer contribution would have to rise and it would be very costly. I am not sure that I understood the point. Again, as this is not so germane to the Amendment, I will write to my hon. Friend if he wishes to pursue the matter. I am advised that the Boyle Committee was aware of the tax relief provisions because it took advice from the Inland Revenue.

The effect of this group of Amendments would be to change the accrual rate of the scheme. The Boyle Committee considered this matter with care. The Boyle Committee was bound to start afresh, as it was confronted by the somewhat strange differential accrual rate under Lawrence. Under the Lawrence provisions, there was £60 accrual for the first 15 years of service and £24 for each of the next 30 years. As I said earlier, that gives an accrual rate for the first 15 years of l/54th and for subsequent service of 1/135th. This was the Lawrence attempt to meet the point raised by the right hon. Member for Sowerby (Mr. Houghton) that some emphasis should be placed upon the shorter parliamentary career rather than the long one because the long ones are something of an exception.

This was clearly an undesirable system, and the Boyle Committee thought that this clear discrimination in favour of shorter service was inappropriate and it chose sixtieths, explaining its reasons for doing so in paragraph 64.

Hon. Members may be interested to know what the cost of the change proposed in the Amendment would be. It would increase the total cost of the scheme—the contribution that we and the Exchequer jointly have to make—from 13½ per cent, to 16 per cent. If the split recommended by Boyle—that we contribute three-eighths and the Exchequer contributes five-eighths—were retained, it would mean that our contribution would have to rise to 6 per cent. The increase in the Exchequer contribution and contributions by hon. Members would be in the region of £100,000.

However, I do not rest my argument on the cost—

Mr. Gurden

I think we are coming to my point in a round about sort of way. I fail to see why Members should not increase their contribution over 5 per cent. I do not see why they should not be able to contribute more as other people can to get benefits thereby, if it is argued that the Treasury and the taxpayer are already paying enough.

Mr. Baker

I cannot quite see whether my hon. Friend wants to increase the 5 per cent, to 10 per cent, or 15 per cent, and buy higher benefits as a result?

Mr. Gurden

Yes.

Mr. Baker

That represents a substantial departure from Boyle. It would certainly have the effect—I will not deny that—of increasing the eventual amount of the pension, but it would represent a very substantial departure from Boyle. I do not have the figures before me, but I will try to determine them, and perhaps, if it is not possible to do so today, I can otherwise let my hon. Friend know.

I mentioned that I am not resting my argument upon the cost of this proposal. I cannot pretend to be able to say exactly what was the thinking behind the Boyle committee's recommendations. I was not a party to its deliberations. However, it is my clear impression from its report that it was suggesting that one-sixtieth would give a fair pension. That, as I see it, was the thinking behind it. I will try to interpret the Boyle Review Body's philosophy. Perhaps this will not meet with great approval in this Committee, but I will try to interpret it, if I may.

The thinking was that there is a pensionable career here extending some 40 years and that this scheme should not be solely on the basis of pension for years of service in the House. No committee chaired by Lord Boyle, I am sure, would assume that a Member normally spends a full career in the House. The assumption, as I hope to show, was rather that one-sixtieth would provide a reasonable rate linked with another pension arising from an earlier career and that the one-sixtieth would provide for that part of the career spent in Parliament as a Member of the House of Commons. The assumption—of course, this is the basic assumption—is that a Member, prior to becoming a Member of Parliament, would have had some sort of not dissimilar right to pension elsewhere. This was the argument put forward by my hon. Friend the Member for Billericay (Mr. McCrindle). That, I believe, is what Boyle had in mind, that before entering Parliament a Member would have worked in business or a trade union or a profession, let us say for 10 years, and would have earned in that earlier occupation certain pension rights which he would plug out of that occupation, when he left it, and plug into our scheme when becoming a Member of the House of Commons. Let us suppose that he remains a Member for 30 years. That would give a total of 40 years' pensionable service. If he were to be a Member of Parliament for 20 years and there were 10 previous years elsewhere which he could plug into our scheme, that would give a total of 30 years.

That is the philosophy behind Boyle. Hon. Members may disagree with that interpretation, but I thought it was my duty to the Committee to explain it as I saw it. The right hon. Gentleman the Member for Sowerby (Mr. Houghton) put forward a different philosophy.

Mr. Michael English (Nottingham, West)

I personally happen to be in exactly the situation the hon. Gentleman is describing, with this difference—that one cannot do that. One cannot pluck out what was in my case 11 years' pension rights in a certain large company and then plug them into this scheme. If the hon. Gentleman is suggesting that an Act should include a section which says that one can do this, that would be, surely, completely the argument which is being put forward today, but since it is not the case the hon. Gentleman is putting forward a beautiful piece of airy-fairy philosophy.

2.45 p.m.

Mr. Baker

Not entirely, because I understand from the Fees Office that a large number of Members are at the moment, and in the last few months have been, transferring pension rights earned in other schemes. I regret that the hon. Member should have worked for a company which would not accept transfer-ability of pension. Upon a Bill of this kind I could not accept that sort of commitment, to go for full transferability, however much hon. Members, and I in a personal capacity, might like to.

However, the main argument concerned with this Amendment is an argument which was put forward so eloquently by the right hon. Gentleman the Member for Sowerby. I am asking the Committee to accept Boyle in to to, just as the previous Government asked the House to accept Lawrence in to to. I am not suggesting in any way that the House would be precluded from amending the Bill. That would be a great presumption, because the Committee and the House can amend any Bill.

However, I would remind hon. Members of the very strong argument for implementing the Boyle recommendations on the pension scheme as they stand without variation. Indeed, the whole of the Boyle Report is rather like a jigsaw puzzle. It is very difficult to change one piece and fit it into all the other pieces interlocking. This is the point which was made by the right hon. Gentleman the Member for Sowerby on Second Reading when he said: We were all embarrassed about fixing out own pay and determining our own conditions of service."—[Official Report, 22nd May, 1972; Vol. 837, c. 1160.] It is a difficult and embarrassing task for the House, and we have found a way of having done for us this difficult and distasteful task by Review Bodies.

I refreshed my own mind by looking up the debates that there were on the 1964 Bill and the Lawrence Report. I came across these words of the then Chief Secretary, now Lord Diamond, somebody for whom I had a great deal of respect—indeed, still have. He said: Everyone hopes that we are coming to the end of a difficult road when Members were put under the personal difficulty of having to debate our own remuneration. There is only one way out of this difficulty, and that is to invite an outside body to consider what is the right solution … I hope, therefore, that the House will feel, as the speeches have shown, that the wisest course is to rely on the Report of this Committee of such authority which has considered this matter so well and considered the consequences which flow from it."—[Official Report, 18th December. 1964; Vol. 704. c. 810–11.] My hon. Friend the Member for Manchester, Withington (Sir R. Cary) made very much this point this morning. I would recommend that principle to the Committee.

Having said that, I will further say that I recognise the strength of feeling in the Committee today and that I appreciate that a large number of hon. Members have supported this Amendment. While I must recommend rejection of the Amendment, I should like to assure the Committee that when the Review Body next considers pensions I will ensure that this Amendment, with the list of the names of Members supporting it, with the record of this debate, is drawn to the attention of that body and tabled as evidence which it will have to examine. I am sure the Committee will understand that I cannot go beyond this without trespassing on the territory of the Review Body.

I would conclude by saying that I am sure the Review Body will take careful note of the debate.

Mr. Arthur Lewis

I am very much obliged to the hon. Gentleman for his last few sentences, for their content and the manner and tone in which he put them. I agreed hardly at all with any of the forerunning commentary. However, that does not matter, because the main point is that he has given in the last part of his speech what I wanted and I can forget the earlier part.

Having said that, and in the hope that the Review Body will be looking at this debate, I should like to get something on the record, a statement by the Lord President of the Council. I know that the hon. Gentleman cannot answer for him, but he will be aware that the Lord President issued a statement—I think to all Members of Parliament, and if they have not got it their copies are in the post and they will get them. I should like the statement to go before the Review Body, because the Review Body will then see that we really have a grievance which is in the statement which I want to put on the record. It says: We shall in the new arrangements be paying £225 a year in contribution as compared with £150. That is £75 a year extra. The 1965 scheme, the old scheme, was for 10 years' reckonable service. The figure was £720. Under Boyle that would increase to £750. That would mean an addition of £30 a year to the pension for a £75 a year additional contribution, and I do not believe that to be very generous. In the Minister's table of figures where the 20 years' reckonable service is concerned, the pre-Boyle arrangement was a pension of £1,224. That will increase to £1,500, which is £226 extra. But to get this will require an extra £75 a year for 20 years, and the 20-year period does not take account of the fact that it may affect a number of hon. Members who have served perhaps 30 or 45 years.

I hope that when the Review Body examines the matter it will ask the Lord President of the Council to provide this table of figures because if it sees these figures it may produce another scheme.

Mr. Gurden

This is very interesting. No one today has attempted to justify what we are about to do. That includes both the Front Benches. We have had an explanation but not justification.

Mr. Lewis

I take the point. The hon. Member is saying that perhaps Boyle should have done better. He then infers that neither of the Front Benches is prepared to correct what is an admitted fault. But if the Minister will not put it right, there is not much we can do about it, although at least he said that he hopes that the Review Body will put the matter right. That is the best we can hope for. I therefore beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.

Clause 8 ordered to stand part of the Bill.