HC Deb 10 April 1978 vol 947 cc1145-54

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]

11.17 p.m.

Mr. Robert Boscawen (Wells)

I am glad to be able to raise the issue of Service men's families in receipt of means-tested beenfits at a time when the report of the Armed Services Pay Review Body is before the Prime Minister.

The fact that about 8,000 families have to go cap in hand for rent rebates and other benefit entitlements is a national disgrace. But for the fact that many Service men's wives are earning, the figure would be much higher. It is the most unacceptable tip of the iceberg of the Service pay problem as a whole that is present at all levels of the Armed Forces. There is widespread concern about the inadequate level of pay.

In a recent visit to a resident battalion in Londonderry that the Secretary of State permitted it was disturbing to find that more than a quarter of the 250 or so married families, despite the special Northern Ireland allowance, were in receipt of rebates to keep their pay above the poverty line. The men are often working an 18-hour day for prolonged periods without any overtime. They do their arduous job extremely well and with great good humour. However, their families a few miles away are badly off compared with many of their civilian friends and relatives. There are few jobs available for their wives and there is no chance of moonlighting. These circumstances are having an effect on the wives and families and on the Service men.

Service men are the last to complain. Often they are too shy or too proud to tell outsiders what they feel about these matters. However, the fact that many of the wives and families are showing a new militancy about the pay of their husbands is a matter for shame. The manifestations of the past few days demonstrate in no uncertain terms that they expect the Government to take action, and soon.

The young private soldier, sailor or airman with a family of small children is the prime example of the inequality of the poverty trap. I am astonished that the last two reports of the Armed Forces Pay Review Body do not mention that there are families which are not only taxed to pay directly for their own supplemental benefits, but which, when awarded a rise in pay, suffer an increase in their tax bite and immediately begin to forfeit their benefits, so that at the end they are left only a few pence better off. The Minister of State should know only too well after his experience at the Treasury that the poverty trap bites into this kind of family.

The excellent statistical section of the Library has prepared for me a list of figures which illustrate clearly how the poverty trap affects members of the Armed Forces. I shall mention only one in the time available, but it illustrates the situation very well.

A 10 per cent. pay increase for a private, grade IV, scale A, band I, married, with two children, will mean even if his accommodation charge is not increased, only 81p more a week in his pocket or a 2.1 per cent. increase in his take-home pay, which is £38.62. That is after allowing for all the latest increases in child benefits and the reduced contracted-out rate for his national insurance contribution. The explanation is that he loses some of his family income supplement automatically and some of his rent and rate rebates as a result of his increase in pay.

If Service men are given the Irishman's rise of last year, when accommodation and food charges rose at the same rate—in other words, this year up by 10 per cent. again, which is what is feared by many Service men at present—their take-home pay will be only 1.5 per cent. above what it is today. As things stand at the moment, to raise them out of this manmade slough of the poverty trap the Service pay of the family that I have illustrated will have to rise not 10 per cent. or even 20 per cent. from the present £41.26 gross, but much nearer 50 per cent.

I understand that for that grade of Service man's pay to be equal to what he would receive on short-term unemployment benefit together with the tax rebate that he would receive if he were unemployed, it would mean gross pay of about £65 a week. That is the measure of how disturbingly far behind the private soldier's pay lags compared with what he might earn as a civilian. It illustrates well the appalling muddle of the interrelationship of low pay, inadequate child benefits, over-dependency on means-tested social security and high taxation.

Service men on means-tested benefits cannot ignore the poverty trap. The Pay Review Body cannot put right the tangle of this inter-relation between tax and social security benefits, but it should at least pay attention to it and ensure that individuals who are affected by it have their pay jerked up substantially so that, in as short a time as possible, they can be moved outside it altogether.

I hope that the Government will take on board the effect of the poverty trap on these low-paid Service men. It will not be sufficient for the Government to say that the tax allowances may be raised tomorrow, or that the level of income tax will be reduced. Even if the tax take on the Service men were to be halved, the poverty trap would still mean that a 10 per cent. rise in gross pay would not make up for increases in the cost of living.

The overstretched, hard-working members of the Armed Forces do not expect to be given more than the country can afford, but they have a right to justice. Justice in their case means pay which is comparable with the earnings of skilled men in civilian life. They should be given that as soon as possible. For their self-respect, as for our self-respect in the House and the country, they should not have to do all the dirty jobs that we have served them and then stay below the level at which they must rely upon means-tested benefits.

Our Armed Forces are smaller than they have ever been in modern times. They should be properly paid and equipped. One young Doncaster-born wife of a guardsman in Londonderry to whom I talked a few weeks ago said "We really are very poor indeed. Yet I think that we are still happier than those at home because we feel that we are part of a team doing a real job." I believe that they are doing a real job—there and everywhere else where they are called upon to serve.

The Armed Forces of the Queen are poor yet honest defenders of our country's liberty. We value the job that they are doing. We demand that this Government set the record straight. If the Secretary of State cannot get his way in the Cabinet and go a long distance towards taking the Service men out of the poverty trap, he owes it to them to resign.

11.28 p.m.

The Minister of State, Ministry of Defence (Dr. John Gilbert)

I congratulate the hon. Member on his good fortune in having an Adjournment debate and on raising this important subject, which is of concern to all sides of the House. I accept his strong feelings on the matter, and I am grateful to him for the moderate tone in which he put his case. I hope that he will accept that Ministers feel as unhappy about this situation as he.

I speak with some difficulty this evening. As hon. Members know, the Armed Forces Pay Review Body report was submitted to the Prime Minister on 31st March. Everybody knows that a pay increase for the Services is on the way and that it will be backdated to 1st April. Everybody knows that I am able to speculate neither about what that report says nor about the Government's response to it.

The debate covers a certain amount of confusion in the public mind on the question of the military salary and some of the means-tested benefits. I shall start by trying to set the matter in perspective.

Perhaps I could take, first, the question of the military salary itself. As has been explained often before, this is based on the fundamental principle that Service men's and Service women's pay should be comparable with civilian earnings in jobs of equivalent weight, including those with similar skills and responsibility. To the resultant figure there is added, as hon. Members will know, as extra element, the "X" factor, which is currently set at 10 per cent., in recognition of the balance of disadvantages as against the advantages which exist in Service life. From the resultant military salary, which is set without regard to individual family circumstances—that is, whether the Service man is married, or how many children or other dependants he may have—are deducted charges by which he pays for his food and accommodation, except in very special circumstances, as for example when he is serving under field conditions on operations.

The concept, thus, is that the Service man should, like his civilian counterpart, receive the rate for the job, and, like the civilian, pay for his own living expenses, while being eligible, subject to a set of standard criteria, for the welfare benefits that are available to the community as a whole.

The military salary concept was introduced in 1970, following the acceptance by the previous Labour Administration of the recommendations of the National Board for Prices and Incomes, and the concept was endorsed by the incoming Conservative Administration, which established the Armed Forces Pay Review Body to make recommendations on Service pay.

As we all know, Governments of both major political parties have found it necessary to introduce pay policies. These pay policies have had the inevitable effect of disturbing the normal arrangements for wage determination, including the fixing of the military salary by comparison with civilian earnings. This is extremely unfortunate, but I do not think that any hon. Member would deny the necessity for the overall policies—leaving aside the difficulties that their implementation occasionally creates—which the Government have been seeking to pursue in the overriding national interest in the last three years by seeking to reduce inflation. I hope that not many people would attempt to deny the success of these policies in terms of a consistently falling inflation rate.

Everyone will benefit from the lower rate of inflation—Service personnel and Service families along with everyone else.

The Armed Forces are not unique in having had their pay affected by pay policies. I would be the first to recognise that the consequences for the Armed Forces that have resulted from pay restraint have been particularly harsh in many cases. It is the loss of comparability with civilian earnings which, as the Government have accepted on many occasions—myself and my right hon. Friend the Secretary of State, at this Dispatch Box—is the fundamental problem to be put right as soon as economic circumstances permit.

Sir Timothy Kitson (Richmond, Yorks)

With Catterick in my constituency, I recognise the difficulties of so many soldiers at present. What makes the comparison difficult is the fact that a civilian in a comparable job, as the right hon. Gentleman has suggested, is able to choose his living quarters. The problem with so many people in the Army is that they are allocated quarters which at present are extremely expensive. A man who, as the right hon. Gentleman said, has a comparable job in the Army finds himself £7 or £8 a week worse off than he would be on the dole, because not only are his accommodation charges so high but very many of the quarters in Catterick are heated only by electricity, and the inflation in electricity charges is a great deal more than the compensation for inflation represented by his salary increases. Therefore, one cannot compare the two positions. A civilian can at least choose his own accommodation. A man in the Army is allocated quarters over which he has no choice.

Dr. Gilbert

I am obliged to the hon. Gentleman. I dissent from only one element of the proposition that he puts forward—that is that the Service man would normally be worse off than someone on the dole. It goes rather wider than this debate. If I have time, I shall comment on that matter. But I certainly take the points that the hon. Gentleman has raised. These are intended to be compensated for, in part at least, by the "x" factor, which takes cognisance of the turbulence in Service life and the fact that the Service man does not have the freedom of choice of accommodation that the person in private life has, as the hon. Gentleman points out.

As I have said, it is the loss of comparability which has to be put right as soon as our economic circumstances permit. In the meantime, it is inevitable that the wholly understandable and proper concern about the central issue results in attention being focused on conditions of service and on such matters as are the subject of the current debate. I hope to show that the remarks made on this subject by the hon. Member are rather off target, although I do not for a moment dispute the genuineness of the concern for the forces' welfare which has led him to introduce this subject for debate.

The hon. Gentleman refers to "means-tested benefits". This is an expression which in some people's mind conjures up images of the 1930s dole queues and carries with it the implication that the recipients are in dire poverty. However, the situation nowadays is considerably more complex, since there exists a wide range of benefits for which the qualifying levels vary widely. Entitlement is generally dependent on family size and sometimes on net income after tax, rent or mortgage and other expenses have been deducted. Consequently, many individuals with the same gross pay may find themselves on different sides of the qualifying line.

When replying to a Question from the hon. Member on 21st March, I reminded the House of an important point made by the Armed Forces Pay Review Body in its 1974 report. It was made in connection with rent and rate rebates and it therefore bears repeating. The body stated that disqualification from rebates altogether would require a minimum weekly rate of pay for all Service men of the income needed by the Service man with the largest family to exclude him from entitlement. It concluded that such a proposition was patently absurd.

Mr. Boscawen

That was before child benefit was introduced. Child benefit is paid automatically as of right. That makes a difference.

Dr. Gilbert

I accept what the hon. Member says.

I turn to the question of rent and rate rebates, which was the main subject of the hon. Gentleman's remarks. This is the one area in which Defence Ministers are responsible, in so far as the scheme for members of the Armed Forces in public accommodation is administered by the Ministry of Defence. The qualifying levels and the amounts payable under the MOD scheme are essentially the same as those which apply under the local authority schemes. The MOD scheme operates on a world-wide basis, since married quarters charges are the same everywhere and because allowances paid overseas compensate Service personnel only for the extra costs that they incur. Thus, a man's eligibility will not change if he moves with his family from, say, Aldershot to Hong Kong or any other place.

Mr. David Walder (Clitheroe)

The hon. Gentleman may be missing the point, that certainly there is considerable doubt whether some of the family benefits are payable overseas.

Dr. Gilbert

I am advised that in respect of rent and rate rebates what I have said is correct. I shall look into any point that the hon. Gentleman likes to put to me. I hope that I shall not have to give way again, because I am trying to reply to the debate.

The total numbers in receipt of rate rebates fluctuates throughout the year, the main determinant being the pay award in April, which brings them down very considerably, and then the figures tend to move upwards through the year and to be raised in a step increase in November each year when the qualifying levels are revised.

I have tried to make some investigations into how those in the Services compare with those in the civilian sector. Such comparisons are very difficult to make, and all the figures would have to be treated with very considerable reserve because necessarily they are estimates. The total in receipt of benefit—that is, rent and rate rebates—as a proportion of the total number of occupied married quarters and hirings is about 9½ per cent. compared with the percentage of employed council tenants—which is roughly the same analogue for the civilian sector—of 13.3 per cent. for the population as a whole. In other words, 50 per cent. more civilians in public accommodation receive rent and rate rebates. I do not say that either situation is satisfactory, but it helps us to get the matter in perspective.

I have already referred to the views expressed by the AFPRB in 1974 on the question of pay in relation to rebates. In its report of the following year, it returned to the same theme, expressing itself in stronger language: There appears to be a great deal of misunderstanding, both in the Armed Forces and outside, about the nature and purpose of rent and rate rebate schemes. So far as they apply to the Armed Forces, they have been misinterpreted, in some instances misrepresented, either as some kind of social stigma or as evidence that the earnings of some members of the Armed Forces are below what is described as the 'poverty line', or both. Interpretations of this kind are erroneous. The purpose of the rebate scheme is to assist people according to their family means and their family circumstances. Again, that is not me speaking as a Minister but a direct quotation from the AFPRB report of 1975.

Sir Timothy Kitson

Could the Minister explain one thing? A private with 12 years' service and three children in a C-type quarter has gross pay of £53.90. His income tax is £5.26, his national insurance is £2.76 and his quartering charges £9.59. His net entitlement is therefore £36.29. He gets £2.31 rent rebate, £4 allowance for his children, and ends up with £42.60, so he is £4.50 a week worse off than in civilian life. That is the point that we are trying to make and that is the matter in respect of which there is not a fair comparison with civilians.

Dr. Gilbert

The hon. Gentleman threw about eight statistics at me. I would not seek to impugn any of them, but before I could answer I should have to have them before me in writing. I shall write to him after I have had a chance to study his remarks in Hansard.

I should say something about the poverty trap, a subject the hon. Gentleman raised with me both today and in a supplementary question to a Question that he put to me a couple of weeks ago. It is true that when anyone receives any benefit determined by reference to his family circumstances and income, the amount of benefit payable will be reduced when his pay is increased. That is an inevitable product of means-tested benefits, and the problem could be solved only by a much higher level of flat-rate, universal benefit. It would be an excellent idea if we had unlimited resources, but, as Conservative Members are the first to point out when we are discussing many subjects, resources are not unlimited.

Many factors affect the Service man currently receiving benefits. The April pay rise, about which I am unable to speculate, and the Chancellor's Budget proposals, yet to be announced, will undoubtedly be major factors. However, setting aside tax changes, I shall be extremely surprised if no one receives a net gain in income levels after the Services pay award of this year.

I should stress that nothing that I have said is meant to deny that Service pay is currently lower than it should be under the military salary concept. This is a situation of which the Government are fully aware and in which Ministers take no pleasure. I assure the hon. Gentleman that it will be taken into account fully in our current consideration of the AFPRB's 1978 report.

What I have to reject, however, is the suggestion that the claiming of benefits such as those to which I have referred in itself shows that large numbers of Armed Forces personnel are below the so-called poverty line. That simply is not so, though there are of course certain families in very straitened circumstances. One fully understands that, and we all regret it. Neither the Service men nor any other claimant is helped by anyone trying to make out that some sort of stigma is attached to the benefits designed to aid a substantial proportion of the community according to their family circumstances.

Question put and agreed to.

Adjourned accordingly at fifteen minutes to Twelve o'clock.