HC Deb 18 December 1975 vol 902 cc1886-92

3.28 a.m.

Mr. Patrick Mayhew (Royal Tunbridge Wells)

I make no apology for raising the case of a constituent because the unjust anomaly of his case is only representative of quite a large number of other cases affecting officers who, since 1973, have retired from the Armed Services. The injustice is, however, displayed with particular clarity in the instance that I am about to outline, and it is therefore to the facts of my constituent's case that I shall address my remarks.

Contrary to usual practice, but, I hope, helpfully at this hour, I shall put the summary at the beginning. Admiral Dunlop by 1973 had served in the Royal Navy for 39 years. He was then 55 and was entitled to retire. He had earned the maximum rate of retired pay for his rank. But he had held the appointment of Flag Officer Medway and Port Admiral Chatham since October 1971. He was asked to stay on until the end of January 1974, when his relief would be appointed. He did so, with the result that following terminal leave he retired from the Service in April 1974.

What is the result? It means that £445 a year has been lopped off the pension that he would now be drawing if he had retired in 1973. If he dies before his wife—and if I were he I should stand to be carried off by apoplexy at any minute—her widow's pension will be reduced by, on my calculation, £175 per year, but I understand that the actual figure will be closer to £200.

I think I have probably overstated the case by saying that Rear-Admiral Dunlop was requested by the Secretary of State to postpone his retirement. It is correct to say that he was asked to stay on until January 1974 so that the relief might be appointed, and it was not until April 1974 that his retirement took place. Next year and in succeeding years the disparity between his pension and the pension he would have drawn had he retired in 1973 will grow even greater.

There is a sound maxim in common law that where there is a wrong, there should be a remedy. That should also be a maxim of government. I am grateful to the Minister for being here tonight. I first raised the matter with him on 23rd June, but his Department knew about it 11 months previously. Yet still nothing has been done. It is an absurd injustice.

The pensions of retired Service officers are governed by retired pay codes which link retirement pay to the pay on the Active List at the time of retirement. Pensions are subject to Orders in Council which achieve for the Services what the Pensions (Increase) Acts of 1971 and 1974 achieve for civil servants and ensure that pensions keep step with any rise in the cost of living. This is a happy state of affairs, envied by those of us in the House and many thousands of people elsewhere.

Active List pay was subject to the provisions of the last Government's counter-inflation policy. It was restricted by stages 1, 2 and 3 in 1973 and 1974. How distant seem those days when inflation was merely in single figures.

The effect is that officers who retired in 1972 are better off, in real terms, than those who retired a year later. They got their full increases in a basic rate that had not been held down by a counter-inflation policy. Those retiring in 1974 are in an even worse relative position. It was for this reason that the Government introduced the Pensions (Increase) Act for Civil Service pensions and made similar Orders in Council for Service pensions. They saw that this had to be put right and it was put right.

A rear-admiral retiring in 1973 had his pension brought up to £5,658—the sum that he would have been getting by then if he had retired in 1972. This became the new base rate upon which the provision of the inflation-proofing Order in Council would operate. An unjust anomaly had arisen and the Government had taken steps to put it right.

If Admiral Dunlop had resisted the request that he should serve on until April 1974 and had retired at the end of 1973, as he could have done, he would, without question, be enjoying the benefits of those Orders today. By falling in with the interests of the Service, as one would expect of an officer of his standing, and agreeing to serve on into 1974, he has been seriously penalised.

The class of '74 received much harsher treatment. Its members received no compensation for the reduction in their pensions brought about by the effects of stage 3 on their last year of Active Service pay. Compared with their colleagues who retired in 1973, their pensions will fall further and further behind.

For those retiring this year, the Boyle Report and the Government's acceptance of it have come to the rescue. A rear admiral retiring this year gets, in round figures, £5,280 a year. Those retiring in 1972 get today £7,133 and those who retired in 1973 receive the same amount. Those retiring in 1974—that is, Admiral Dunlop's category—dropped to £6,690. Those retiring in 1975 will get £7,275 but at the moment, because the Pay Code has not been adjusted, they get £5,820. For 1972 and 1973 there is level pegging—those who retired in 1974 take a drop of £445—and then the figures go up. The disparity will increase as the years go by.

There is a further twist to the story of Admiral Dunlop so exquisite in its subtlety as to drive to violence anyone with less than naval phlegm. When he was permitted to retire in April 1974, no doubt with the grateful thanks of the Secretary of State, he did so on the 1973 Pay Code, because it ran over into 1974. It was the current code. The 1974 code was no more than a twinkle in the eye of a kindly official. When it was brought in in June 1974, unbelievably, the 1974 code operated retroactively so as to bring in everyone who had retired after 31st March 1974 and Admiral Dunlop was brought into the 1974 code. Had the admiral been allowed to stay on the 1973 code on which he retired, all would have been well, but he was brought off the 1973 code into the 1974 code. There was thus removed from him retrospectively the benefit of statutory provisions today worth the annual sum of £445. That is the story. It is worthy almost of the great Beachcomber, who no longer will write in the Daily Express now that he has reached the age of 81.

I turn, briefly, to the response of the Government to suggestions that they might care to correct so absurd an injustice. Two courses of action have been offered to them, both extremely sensible. The first was that as Admiral Dunlop stayed on for the extra part of a year at the express request of the Navy he should be exempt from any penalty that the Government might see fit to impose on the class of 1974 relative to the class of 1973. The second alternative was that if that suggestion was too much for the Government Admiral Dunlop should be permitted to revert to the 1973 code, from whose provisions he had in July—when he had a letter to this effect—been retrospectively removed. He acknowledges that in that event he would have to pay back the appropriate proportion of his terminal grant.

So far, neither of those suggestions has been accepted. The first is so obviously equitable as to call for no further argument from me. To allow, let alone to ask, a man to go the extra mile and make him worse off for ever after, is hardly consistent with most people's idea of decent behaviour.

If there is some hidden snag in that course of action, let Admiral Dunlop revert to the 1973 code, upon which he would in the ordinary event have retired, and did retire, until he was removed from it by retroactive Order in Council. He has twice been told by a senior official of under-secretary rank in the Ministry of Defence that he has the right to revert to the 1973 code. Letters to that effect are dated 6th August and 23rd October 1974. That was the official view, no doubt formed on the basis of legal advice available to the Department.

It was greatly to his surprise that Admiral Dunlop learned from the Minister on 6th May this year that in the Minister's view there was no reserved right for him to revert to the 1973 code. I hope to hear tonight that the Minister has made up his mind to do justice. I wrote to him on 23rd June, and I raise the matter tonight only because I have had nothing but holding replies from him since then.

This has dragged on long enough. Numerous other officers have found themselves worse off than those who retired before them. At present, rear-admirals who retire in 1975 are worse off than rear-admirals who have retired in the past 10 years.

I hope that the Minister will say that his Department will now adopt one or other of the two alternatives which I have suggested and that the arrears incurred by the Department in the payment of this officer's pension will then be made up.

4.41 a.m.

The Under-Secretary of State for Defence for the Royal Navy (Mr. Frank Judd)

The House should be grateful to the hon. and learned Gentleman for raising this issue which, as he has stressed, is particularly difficult and complex, with wide repercussions going beyond the personal case of Rear-Admiral Dunlop himself; I should like to take this opportunity to pay my tribute to a very distinguished officer with an outstanding record of service to the country and the Navy. It may help, therefore, if I first give the House a brief picture of the broader problem. Pensions in the Services are determined, of course, by reference to pay. When pay changes, the pensions to be awarded to those leaving the Service in that year are reassessed in proportion. Separately, there is a system of pension increases applying to those already in receipt of pensions and this is linked to the retail price index. The broad practical effect of this arrangement in recent years has been that pensions awarded to those leaving the Service, and the increased pension of those who have already left, have kept roughly in step.

As the hon. and learned Gentleman has said, the last Conservative Government's statutory pay policy gave rise to some problems. Under the original pay standstill and then stage 2 of that policy, increases in pay were restricted to an amount less than the proportionate increase in the retail price index, which, as I have said, is the basis for determining pension increases. Thus, those leaving the Services in the period between April 1973 and April 1974, would have received smaller pensions—the hon. and learned Gentleman made this point—than their predecessors as enhanced by pension increases. This problem, of course, went much wider than the Services.

The last Conservative Government took steps to deal with the situation by way of awarding extra pension increases under the Pensions (Increase) Act 1974. However, this was intended only to cover those affected by stage 2 of the counter-inflation policy and did not apply during stage 3. Subsequently, the 1974 pay increases for the Services largely removed the anomalies, except in respect of a comparatively small number of senior officers. A similar situation arose in the public sector generally. The Pensions (Increase) Act 1974 does not provide for a general remedy, and we did not feel justified in making special provision in the Pensions Regulations.

However, it has since appeared that the officers affected may, indeed, have a claim concerning reserved rights by way of certain provisions in the prerogative instruments relating to Service pensions. When taken together, these have the unintended effect of giving these officers the right to elect to receive a pension under an earlier and more favourable code. For example, the provision under the Order in Council affecting Naval pensions, allows an officer who was serving on 31st March 1974 to receive, in place of the 1974 code award, a pension under the previous code.

The true purpose of such provisions, which have existed since long before the current system of pension increases, was simply to provide protection where there had been detailed changes made in the pension rules. I must emphasise that it had never been the intention to provide a guarantee against changing pension rates, as such.

Having now considered the matter comprehensively, and recognising that it would put 200 senior officers in a more favourable position than their colleagues in the public service generally, we are clear that, as the right exists, it cannot very well be denied. If, therefore, these officers exercise their option, they will be eligible for the subsequent pension increases attaching to pensions under the appropriate earlier code for their service.

The precise benefit for each officer—I note what the hon. and learned Gentleman said about arrears, and so on—would vary according to rank and individual circumstances. It will obviously and inevitably take a little time for the details to be worked out for those officers who, like Rear-Admiral Dunlop, may feel that it is in their interests to elect to exercise this option, although as I have argued, I believe that it was an unintended option.

We have had to accept the existence of the legal right to this option, but I must stress that we shall have to take steps to remove it for those retiring in future. It is clearly essential that arrangements for Service officers are in line with those for the public sector generally.

I again express my gratitude to the hon. and learned Gentleman for having given me this opportunity, albeit at a late hour, to clarify the situation.