HC Deb 03 May 1972 vol 836 cc552-62

11.12 p.m.

Mr. John Peel (Leicester, South-East)

On 14th February last my right hon. Friend told the House, in answer to certain questions that I put to him, that there was no shortfall "in the sterling value" of pensions paid by the Government of Malaysia in Singapore to retired expatriate officers recruited by the British Government for service on Malayan establishments, and no shortfall "in the sterling value" of pensions paid by the Singapore Government outside Singapore to the widows of such officers. He also said that anyone living in Malaysia or Britain received a pension "in the same sterling terms" after the devaluation of sterling as before.

I have the greatest respect for my right hon. Friend's complete integrity and sense of fair play, and it is because my belief in those qualities remains unshaken that I must tell him that what he said does not accord with the facts. I must, therefore, set out the facts in rather greater detail and more precisely, as the true position cannot easily be described in a short question and answer exchange.

In the inter-war years the British Government recruited British men—and women—to serve on what was designated the "Malayan establishment" in the countries now known as Malaysia and Singapore. These people were appointed, together with nationals of those countries, to career services known as the Malayan Civil Service, the Malayan Medical Service, the Police, the Public Works, Customs and other services.

They could be posted from time to time to any of the countries comprising the former Straits Settlements, the federated Malay States and un-federated Malay States. These countries all had ex common interchangeable currency, the Straits or Malayan dollar, and the currencies of Malaya and Singapore are still interchangeable. In the terms of service of these officers and in the regulations governing their pensions and those of their widows, their salaries, pensions and other emoluments were expressed in the Straits or Malayan dollar and not in sterling.

Following the war with Japan, when many of these men and their families perished or were in enemy hands, a series of constitutional changes resulted in the Settlement of Singapore emerging as a separate independent State and the former Settlements of Penang, Malacca and Lubua being absorbed together with the Malay States other than the State of Brunei into what is now the independent Federation of Malaysia. In connection with some of these changes the British Government in 1959 and 1963 concluded what are called public officers agreements with the Governments of Malaya and Singapore.

It is these agreements and not the devaluation of sterling which have caused this injustice. Let me explain why. The agreements included the extraordinary provision that pensions paid by the Malayan and the Singapore Governments outside their respective territories should be paid in sterling and calculated as if the dollar were worth 2s. 4d. in the old currency, nothwithstanding any variation in that rate. These agreements with retrospective effect introduced into the pension terms of these officers and their dependants whose pensions prior to the agreements were payable in Malayan or Straits dollars, a risk which was previously not there, namely a risk that if at any time the value of the Malayan or Singapore dollar in terms of sterling should exceed 2s. 4d. then their pensions, if paid by Malaysia outside the former Federation of Malaya, which is now West Malaysia, or by Singapore outside Singapore, would be reduced. When sterling was devalued in November, 1967, this is just what happened, because the sterling value of the Malaysian and Singapore dollar became 2s. 8d.

It was a few months before the Governments of Malaysia and Singapore decided to take advantage of the agreements and reduce pensions paid outside their territories while maintaining the value of those paid inside their own countries. They did so about a year later, towards the end of 1968. They claimed refunds from pensioners by instalments but the British Government, recognising the inequity of what was happening, stepped in and paid the refunds. But the British Government did no more, and these pensioners have since been paid reduced pensions.

Let me give examples of what is now happening. A pensioner who retired from Malaysia with a pension of 1,000 dollars a month and is receiving his pension in Kuala Lumpur is receiving 1,000 dollars a month, the sterling value of which, at the current rate of exchange, is £1,620 per annum. This is as it should be. But his unlucky colleague who also retired from Malaysia with a pension of the same amount but who asked the Malaysian Government to pay it to him in the United Kingdom is, owing to the public officers agreement between the British Government and the Government of Malaysia, having his 1,000 dollars a month pension converted to sterling at only 2s. 4d. so that he is receiving a pension of only £1,400 a year, that is a shortfall of £220 a year in the sterling value of the pension he receives compared with that of the pension he actually earned which was 1,000 dollars a month.

In these circumstances, how can my right hon. Friend tell us as he did on 14th February that, as there is no shortfall in the sterling value of these pensions, the question of the Government making compensatory payments does not arise? There is a shortfall, and the question does arise.

But for some pensioners injustice does not end even there. I explain why, as briefly as I can. It was compulsory that an officer on the Malayan establishment should contribute throughout his service 4 per cent. of his pensionable emoluments to the widows and orphans pensions scheme of the particular country in which he happened to be serving when he completed his probationary period and was placed on the pensionable establishment. After retirement officers could, if they wished, continue to contribute, for up to a total of 35 years, so as to secure higher benefits under the schemes for their widows and children in the event of their own deaths.

Let us now look at what has happened to the pensioner who served for 25 years or more both in Singapore and Malayasia, who had to contribute throughout that period to the Straits Settlements widows and orphans pensions scheme, who, in order to obtain maximum benefits for his widow and children, opted to continue contributing 4 per cent. of his salary prior to retirement to what is now the Singapore widows and orphans pension scheme, who retired from Malaysia with a pension of 1,000 dollars a month and who asked to have his pension paid in Singapore to facilitate deductions from it as contributions to the scheme.

To start with, he is hit by the United Kingdom/Malaysia public officers agreement of 1959, because his pension of 1,000 dollars a month is to be paid in Singapore, which is not in Malayasia. Accordingly, although the Singapore and Malaysian dollars have exactly the same value and are in fact interchangeable, his 1,000 dollars is notionally converted from Malaysian dollars into sterling at 2s. 4d. and re-converted back into Singapore dollars at 2s. 8d. Thus he is paid in Singapore a pension of 847 dollars instead of 1,000 dollars a month to which he was entitled.

From this reduced pension he makes his contributions to the Singapore widows and orphans pensions scheme in Singapore dollars currently worth 2s. 8d. In the event of his death, though, his widow will be hit by the United Kingdom/Singapore public officers agreement of 1963. If she is paid her pension in the United Kingdom or elsewhere outside Singapore, it will be converted into sterling as if the Singapore dollar were worth only 2s. 4d. although her husband had been contributing dollars worth 2s. 8d. to the scheme.

It is hard to imagine any Government countenancing pensions arrangements so fraudulent and actuarially crazy. Nor have I thought up a freak possibility. I know a pensioner whose circumstances are almost exactly as in this example.

One might ask why, in order to stop their pensions being paid at reduced rates, these pensioners do not cancel the requests they made years ago for payment of their pensions outside Malayasia or Singapore, as the case may be, and request payment in Kuala Lumpur or Singapore. The answer discloses yet another inequity in these public officers agreements. Under the agreement with Malaysia, a pensioner who asked to have his pension paid outside Malayasia cannot later ask to have it paid inside unless he first becomes resident in West Malaysia. Under the agreement with Singapore, however, he is free to switch the place of payment to Singapore. Perhaps the Minister can say why the two agreements differ in this respect.

I should, perhaps, add that all pensioners in receipt of pensions from Malaysia outside the country have to pay 40 per cent. tax on them to the Malaysian Government.

I apologise for this tedious but necessary exposition of what I can only describe as these appalling public officers agreements with Malaysia and Singapore. They seem to have been designed not to protect pensioners but, rather, to ensure that if the Malayan or Singapore dollar were devalued, the British Government could avoid the liability of making good the sterling value of expatriate pensions. It was a dishonourable exercise which has, in the event, enabled the Malaysian and Singapore Governments, with the agreement of Her Majesty's Government, to reduce their pensions liabilities solely at the expense of expatriate pensioners.

In his Written Answer to my Question on 14th February, my right hon. Friend said that he first received representations about the pensions of these officers and their dependants in September, 1970. In fact, formal representations we made to his predecessor in August, 1969, but he did not reply. It was not until further representations were made in September, 1970, that a reply was given stating that immediate representations were being made to the Malaysian authorities.

I hope that I have shown that both the Malaysian and Singapore Governments are involved in this matter, but the responsibility for the present injustice rests, it seems to me, with Her Majesty's Government for unwittingly signing away these pensioners' rights.

The public officers agreements should have provided that Malaysia and Singapore would pay pensions in their own currency, and, in the event of the Malaysian or Singapore dollar being devalued to less than 2s. 4d. sterling, Her Majesty's Government should have guaranteed to pay the amount by which the sterling value of the pension fell short of its value calculated at a dollar worth 2s. 4d. As it was, the Government imposed as a condition of independence on the Malaysian and Singapore Governments an obligation to pay expatriate pensions in sterling at 2s. 4d. to the dollar. It is quite unreasonable to expect a country to meet its pension obligations in foreign currency, and the pensioners are now paying for Her Majesty's Government's unreasonable requirement.

I submit, therefore, that the only just remedy is for Her Majesty's Government to pay to the pensioners concerned the amount by which their pensions have since 1968 fallen short of those they earned, and to pay to their widows and children pensions which reflect the value of the husbands' contributions to the widows and orphans pension scheme.

11.27 p.m.

The Minister for Overseas Development (Mr. Richard Wood)

I am grateful to my hon. Friend the Member for Leicester, South-East (Mr. Peel) for raising this matter. I know his strength of feeling about it, since he has raised it on a number of occasions at Question Time. But I think he will agree that, while he feels strongly about it, it is a most complicated and difficult subject.

My hon. Friend has been speaking on behalf of a particular group of Malaysian pensioners, but there are, as he knows, pensioners of other Governments who face similar problems. I wish, therefore, to begin what I have to say with some general remarks about overseas pensions in general before coming to the particular question which my hon. Friend has raised.

The overseas public service officers who served in former dependent territories were employed not by the British Government but by the Governments of the countries in which they served. Their entitlement to pensions, therefore, derived from legislation of the particular country, not of Britain. The pensions we are talking about were awarded under that legislation and held to be paid by the Government concerned from the local revenues. When a country achieved independence, the Government which succeeded the colonial Government assumed all the assets and liabilities of the former Administration, including responsibility for paying public service pensions.

My hon. Friend mentioned the public officers' agreements which the British Government—this Government and their predecessors—have negotiated with newly independent Governments. These agreements did various things. First, they aimed, contrary to what my hon. Friend suggested, at safeguarding the pensions and other benefits for which the overseas expatriate officers and their dependants may be eligible. They also gave pensioners the choice as to where their pensions should be paid. Some of the, agreements allow the pensioner to change the choice which he first made. Under other agreements the pensioner who chooses to be paid outside the country which is awarding the pension can change his place of payment only by first taking up residence in the country where he wants to be paid.

A large majority of the overseas pensioners we are discussing live in this country, and one of the important objectives of the public officers agreements has always been to safeguard the pensioner living in this country against the effects of a devaluation taking place in the overseas country where he served. These agreements therefore include a provision under which pensions which are paid externally are tied to the rate of exchange with sterling which is prevailing at a specific date, normally the date at which the country achieved independence.

The public officers agreements lay down certain minimum requirements. There is obviously nothing to prevent the overseas Governments from paying their external pensions at a rate above the guaranteed level. Some of the countries obviously did not devalue when Britain devalued in 1967, and these countries are paying pensions at the current rate of exchange to the benefit of the pensioners concerned. But most countries are applying the exchange rate provisions contained in the public officers' agreements.

In order to corroborate the answer which I gave my hon. Friend on 14th February, I must point out that the sterling value of pensions paid outside the awarding country has not been diminished in these cases by sterling devaluation. But unfortunately—I think this is the nub of my hon. Friend's case —the pensions of a number of people living in a third country which did not devalue in line with Britain in 1967, or later, have been reduced in value in cash terms in the third country because of the way they are linked together with sterling under the public officers agreement. But neither the present Government nor their predecessors have accepted the obligation—nor can they—to protect every pensioner from currency changes that might adversely affect the value of his pension irrespective of where that pension was paid.

I want to turn now to the specific problem raised by my hon. Friend, the position of the Malaysian pensioners. Their pensions are governed by Malaysian pensions legislation and by the Constitution. They are earned in local currency, but Malaysian law confers no entitlement to their being paid outside Malaysia, and the right of a pensioner to draw his pension outside that country derives only from the public officers agreement. This position is similar to that in many other overseas countries. The Malaysian Government have chosen to make their external pension payments not at the current rate of exchange but at the sterling level provided in the public officers agreement. In deciding this, they are entirely within their legal rights. Singapore is now outside Malaysia and is, therefore, regarded rightly by the Malaysian Government as being an external payment area. Therefore, Malaysian pensioners who live in Singapore and draw their pensions there have suffered a loss on their pension income in terms of Singapore dollars.

I am naturally sorry, with my hon. Friend, that they have suffered this loss, but they are no worse off than other former colleagues of theirs who are paid outside Malaysia in other countries which also did not devalue. Their position is in no way more difficult than that of many expatriate pensioners of other overseas Governments who are living in third countries and to whose pensions the exchange rate provisions of the public officers agreement are being applied. There are a number of British pensioners living abroad who have found their sterling pensions reduced in terms of local currency.

My hon. Friend drew attention to the provision in the public officers agreement between Britain and Malaysia for external pension payments to be made in sterling and to the right of Singapore pensioners covered by the public officers agreement between Britain and Singapore to receive their money in the currency of the country in which payment is made. I admit that there are differences in the wording of the agreements with the various overseas countries, but, regardless of the differences the effect of the exchange rate provisions on external pensions is essentially the same because all pensions of this kind are converted either to sterling or, through the intermediary of sterling, to the currency in which they are paid.

There are also differences in the various agreements in their provisions about the choice of the place of payment. All of them allow pensioners the initial choice whether to be paid inside or outside the awarding country. The Malaysian agreement requires that pensioners who have chosen to be paid outside Malaysia can change to be paid in Malaysia only by first taking up residence in that country. There are some other agreements which have similar provisions.

I have considered the position of the Malaysian pensioners to which my hon. Friend drew attention, who, until 1954 belonged to what was known as the joint Malayan establishment and were liable for service not only in certain Malay States which now form part of Malaysia but also in Singapore. Some of these arranged for their pension to be paid in Singapore, although only a few are now living there. As I told my hon. Friend, I asked the Malaysian Government whether they would look particularly at the position of these pensioners, but I had to tell him, on 14th February, that the Malaysian Government had said that they were not prepared to change the arrangements regarding these pensioners.

That is a decision which my hon. Friend may find unfortunate, but it is a decision which the Malaysian Government had a perfect right to take. Therefore, it is suggested by him and by others that Her Majesty's Government should make good the difference between the cash these pensioners receive and what they would get if they were paid at the current rate of exchange between Malaysian and Singapore dollars. It is fair to point out—and my hon. Friend will take the point—that since the date of the public officers agreement any Malaysian pensioner who chose to be paid in Singapore implicitly accepted that his pension was linked to sterling.

My hon. Friend mentioned the position of the Singapore widows and orphans. There is the question which he has raised before of dependants' benefits secured by contributions which certain former officers of the Malayan establishment are still making to the Singapore widows' and orphans' pensions scheme. I assure him that there seems to me no problem about getting payment in Singapore dollars if that is what the widow would like to have. The Singapore Public Officers Agreement entitles her to be paid in Singapore if she wants to be, and the pension award would then be paid at the full dollar value.

I am very grateful to my hon. Friend for raising this matter and for giving me the opportunity of explaining at rather greater length what I believe to be a very complicated matter perhaps more easily in an Adjournment debate than is possible at Question Time and of explaining the difficulty, as I see it, of treating these pensioners differently from other categories who have also suffered loss from similar causes.

It is perfectly natural that my hon. Friend should feel sympathetic towards these pensioners. We all respect that sympathy and the active discussion which he has arranged on their behalf. Many of us share that sympathy. But I hope that I have been able to make it clear that I do not believe that it would be right for the Government to take special action to protect a particular group who have undoubtedly suffered from devaluation but no more severely than many others.

Question put and agreed to.

Adjourned accordingly at twenty minutes to Twelve o'clock.