§ Order for Second Reading read.4.38 pm
§ The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen)
I beg to move, That the Bill be now read a Second time.
The Bill is complex because in many places it amends existing statutes. I have, therefore, supplemented the guidance in the explanatory and financial memorandum by writing to all Members with a brief summary of the proposals. In addition I have arranged for the Government's notes on clauses to be available to Members on request. I hope that these arrangements have been for the benefit of the House.
The proposals in the Bill arise from three sources. Central to the legislation are the recommendations contained in the Twentieth Report of the Review Body on Top Salaries.
Secondly, there is the resolution of the House of 19 July 1983, which largely adopted the review body's recommendations, but increased the proposed Member's contribution.
Thirdly, the Bill reflects a number of suggestions that were made from within the House of Commons during the consultations that preceded the preparation of the Bill. In this context I pay tribute to the trustees of the parliamentary pension fund, for whose advice and collective experience I am especially grateful. The chairman of the trustees, the right hon. Member for Manchester, Wythenshawe (Mr. Morris), has explained to me the reasons that make it impossible for him to be present today. He and his fellow trustees have, however, been assiduous in protecting Members' interests.
That said, it is only fair to acknowledge that the Bill is dominated by the provisions of the resolution on parliamentary pensions passed by the House on 19 July 1983.
I now come to the Bill itself. First, the Bill seeks to secure a rate of contribution that will fund an index-linked pension. The resolution of the House of July last year agreed a contribution rate of 9 per cent. This compares with 8 per cent. paid by civil servants for a slower rate of accrual, and 11 per cent. paid by the police, whose pensions accrue more swiftly. Equally significantly, a contribution of 9 per cent. is more than double the national average for non-index-linked pension funds in the private sector. That is a point worth making, as criticism of index-linked schemes such as this often fails to take account of the substantial premium that is paid to secure the benefits.
Secondly, the Bill aims to provide a rate of accrual which will yield benefits appropriate to the vagaries of parliamentary life. The review body in its report recognised the difficulty of this when it said:MPs are not employed in the accepted sense; their career patterns are very different from those of most public servants; and they do not have the same general degree of security of employment. The need to have regard to the special nature of Parliamentary life has been raised frequently Ȇ and we have paid close attention to this point in the present review".
With that in mind, I shall briefly run through the major provisions of the Bill in terms of contributions and benefit.
783 As I have said, the resolution of the House in July 1983 accepted that a contribution rate of 9 per cent. would be appropriate for a scheme based upon retirement at 65 and sufficient to fund the envisaged benefits. It has been represented to the Government that as the pay of Members of Parliament is to be increased in stages the increase in contributions should be similarly staged. The Government accept this and the rate of contribution—at present 6 per cent.—will rise by 1 per cent. per year to reach the full 9 per cent. in 1987. This is covered by clause 1.
On the benefit side of the equation, the rate of accrual of a parliamentary pension is increased from one sixtieth of final salary per year to one fiftieth. This means that with effect from 20 July 1983 a Member will be able to earn a full pension in 33⅓ years instead of the present 40. The TSRB recommended this faster accrual rate to take account of the relatively advanced age at which Members embark upon parliamentary careers and, conversely, the relatively early age at which many are forced into a reluctant parliamentary retirement. This, too, is covered by clause 1.
I have said that the faster accrual rate will take effect from 20 July last year, but an order will be made when the Bill is enacted to allow Members who entered the House before that date and whose pension has been accruing at the one sixtieth rate to convert their back service to the faster accrual rate at 40 per cent. of the cost, which is also the proportion of the total new entrant contribution rate which Members will pay when the new arrangements are fully in operation. I hope that this provision will be generally welcomed as allowing Members increased flexibility in planning their pension arrangements.
An order under clause 5 will also provide that Members who have taken out contracts to buy added years at the existing sixtieths rate of accrual should be permitted to renegotiate those contracts to take advantage of the improved arrangements.
One area of particular concern to the trustees about the operation of the existing pension scheme relates to early retirement at the time of a Dissolution of Parliament. As we are all well aware, one of the ways in which a parliamentary career differs from some other occupations is that a Dissolution can occur at a time which is personally inconvenient. The normal retirement age is 65 and this Bill does not seek to change that. Indeed, I should emphasise that a retirement age of 65 is a significant feature of the parliamentary pension scheme and is reflected in the contribution rate. The existing scheme makes provision, however, for a Member aged 62 or over and with 25 years service to retire on his full accrued pension at the time of a Dissolution.
I think that that is a useful provision and clause 4 proposes that it be extended. In future, Members aged 60 or over with 20 years service who retire at a Dissolution will be able to take their full accrued pension. This facility will be available to those who retired at the time of the 1983 general election. This is a modest improvement, but one which in the opinion of the trustees and myself will be helpful in an area where hardship has been caused in the past.
§ Mr. Michael McGuire (Makerfield)
The right hon. Gentleman will recall that I wrote to him about a man who qualified under the service provisions with 29 years service but who, because he was under the age of 62 at Prorogation, would have to surrender quite a large amount 784 —26 per cent.—of his pension in perpetuity or wait until he was 65. In linking the age at which one leaves the House and the number of years of service, is there not a danger of perpetuating that anomaly? Should we not consider the possibility of a person being able to pick up his pension on reaching the age of 60 if he or she has 20 years' service?
§ Mr. Biffen
I appreciate the hon. Gentleman's point. As he said, he very kindly wrote to me about this. Another difficulty, however, arises when one begins to follow that line of argument. The care with which the scheme has been constructed around a retirement age of 65 is likely to be progressively undermined. It will be argued that the qualifying factor of Dissolution is no longer to be related to the age at which the pension is drawn. The 20 years' service will then be seized upon as an arbitrarily large figure so that in one way or another we shall drift substantially away from the present arrangements, which are based upon a retirement age of 65.
We have consciously made modest amendments to deal with the cases of hardship perceived in the past. If I sense the mood of the House correctly, however, I believe that we shall be returning to this aspect. Perhaps the House will allow me to rest my initial case there and we can debate the matter further in due course. I cannot, however, conceal from the House my concern to maintain the inherent integrity of the retirement age of 65 as being part of the scheme as I believe that otherwise we shall find ourselves bundled into reconsideration of the contribution rate.
There will, of course, be Members unfortunate enough to fall on the wrong side of the new line. All I can say to them is that the line has to be drawn somewhere, and drawn in such a restricted way as not to undermine the basic principle of the scheme, which is a retirement age of 65. Furthermore, I think that the House will also wish to reflect upon another proposal which should lessen hardship for those whose parliamentary careers are terminated ahead of retirement age. I refer to the review body's recommendation included in clause 3 which allows for a reduction from 60 to 50 in the age at which Members may apply for an actuarially reduced pension.
The Bill also provides for the abolition of the four-year qualifying period for benefits and for an increase in the maximum lump sums which may be obtained by commuting pensions. I intend that the revised figures for commutation limits should be incorporated in subordinate legislation.
There are a number of other improvements with which I do not propose to detain the House. One of them has, however, received some attention in the press and may be worth mentioning.
Clause 9 proposes the removal of the restriction whereby Members may only nominate a husband or wife to receive immediately the death benefit which is payable should they die in service. This has been referred to as a "mistresses' charter". For those who view the world from El Vino's I would point out only that the provision could be used to benefit a child or a child's guardian. Its main purpose is to enable Members to select whatever disposition best suits their circumstances.
It is something of an historical accident that the parliamentary pensions scheme has to proceed by primary legislation, and therefore attracts considerable publicity that is not always as fair-minded as we might wish. But 785 there is clearly a genuine and justifiable interest in the arrangements which Members of Parliament choose to make on subjects which so closely affect their own interests. For this reason it behoves us to proceed carefully lest we arouse the suspicion that we are treating ourselves more favourably than we would countenance for others. I believe that this Bill represents just such a cautious approach. Nobody studying with an objective eye of the report of Top Salaries Review Body and the subsequent debate can doubt that a tolerably fair balance has been struck between the need to provide a scheme that caters for the uncertainties of parliamentary life and a proper concern for the public purse. I therefore commend the Bill to the House.
§ Mr. Peter Shore (Bethnal Green and Stepney)
I, too, will have something to say later about the principal clauses of the Bill, but, at the start of the Second Reading debate, it is right for me to thank the Leader of the House for his clear exposition of the measure, his offer to make available the notes on the clauses of the Bill and, finally, for his deserved but generous tribute to my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) and the other trustees of the parliamentary pension fund, who have undoubtedly done their best to represent the interests of right hon. and hon. Members on both sides of the House in the period preceding the passage of the resolutions last year and the publication of the Bill.
I should also address myself, on Second Reading, to the main purpose and general context of the Bill. The Leader of the House referred to the antecedents of the Bill. I regret the fact that the general framework of the measure was, as it were, pre-set by the resolutions passed during the debate on the Plowden committee's report on parliamentary pay and allowances on 19 July last year. I regret that for two reasons. First, in the debate last July, which covered the whole field of parliamentary pay and allowances including allowances for secretarial and research assistance for Members, virtually no attention was paid to the complex and important subject of Member's pensions. I believe that the subject was referred to in only two speeches and that it occupied only a few minutes in a debate which lasted for several hours. I also regret the decisions made then because the Government successfully persuaded a new and inexperienced House of Commons to depart in two major respects from the recommendations of the Plowden report. First, the House of Commons accepted a much lower basic parliamentary salary—a decision which has, inevitably, a substantial and adverse affect upon pension entitlement. Secondly, there was the decision to raise pension contributions not to 8 per cent. as Plowden recommended but to no less than 9 per cent. It is against that background of smaller salaries, reduced allowances and increased contributions that we have to consider the Bill.
One major Plowden recommendation has been retained. The pension accrual rate is to be raised from one sixtieth to one fiftieth of final salary for each year of service. In addition—I willingly pay this tribute to the right hon. Gentleman—the Leader of the House has listened to many representations not only with his usual 786 courtesy but with an occasional and welcome flash of sympathy which will assist hon. Members and ease the passage of the Bill.
First, there is the central issue of the pension accrual rate. The heart of the matter was stated in paragraph 63 of the first volume of the Plowden report, which states:The case for improving the accrual rate for MPs rests essentially on the unique nature of a parliamentary career, with its inherent unpredictability and the implications of this for pensions.No one would dispute that view. I know that the Leader of the House certainly agrees with it.
I would not go as far as Thomas Hobbes, describing the condition of parliamentary man as:solitary, poor, nasty, brutish and short".There is too much enjoyment and exhilaration in politics for that. However, uncertainty is built into the lives of hon. Members. We do not and should not complain about that, for the principal sources of that uncertainty are the working of democracy itself with the ebb and flow of party fortune, and the occasional great tides which sweep away what had been thought to be party bastions. There is also the decennial carve-up by the Boundary Commissions, changing the shape and allegiance of hundreds of constituencies in the interests, again, of maintaining a broad equality of electoral representation. We accept all these uncertainties but, while our democracy requires them, we should recognise them and their implications.
There is another marked feature of parliamentary life to which the Leader of the House referred. We can describe it as the late entry factor. With a handful of exceptions, most hon. Members first enter the House between the ages of 35 and 45. Even if their service, once they have entered, is unbroken up to retirement age—and for the majority that will not be the case—the most that they can expect to complete by the age of 65 is either 30 or 20 years of service.
Those two factors—the built-in uncertainty of the electoral system and the relatively late entry to the House — makes the pension accrual rate important. Most public services and professions, and many private occupational pension schemes as well, aim to provide, on retirement, benefits equal to two thirds of final salary. In most cases the assumption is that 40 years of pensionable service will have been completed by retirement age. Clearly, no such assumption can be made for Members of Parliament. Given the present one-sixtieth rate, to achieve a retirement pension of two thirds of final salary would require 40 years' membership and to achieve half pay would require no less than 30 years.
In the Plowden report we read that:A Member may derive little benefit from the parliamentary scheme if service is relatively short".Yes, indeed. The report also states:because a change of job is involved both on entering and leaving parliament, the pension obtained from other employment may also be reduced.The Plowden report then lists other pension schemes that are designed to reflect a shorter than average career length. For officers in the armed forces, for example, full pension accrues over 34 years. For the police, members of the fire service and prison officers, it accrues over 30 years and for the judiciary, which we all know is recruited from people who spend many years practising at the Bar, it accrues over 15 or 20 years. The Plowden report concluded that the accrual rate for parliamentary pensions should be reduced from one sixtieth to one fiftieth. There 787 can he no certainty when deciding the accrual rate as there are bound to be discussions about it, but the shorter career prospects, the late entry, the in-built uncertainty and the resolution that the House passed in July 1980 lead me to conclude that one fortieth would be the best basis for calculation. However, that is not available to us because of the 1983 resolution and the Bill. One fiftieth is undoubtedly an improvement and I therefore welcome it.
If one fiftieth is considered the right rate of accrual, it would be a considerable injustice if nothing were done for sitting members in respect of their past service. I therefore welcome the arrangements described on page 3 of the explanatory and financial memorandum in regard to orders under clause 5 and section 11 of the Parliamentary Pensions Act 1978 to enable Members of Parliament to purchasesufficient added years of reckonable service as a Member to increase their pension entitlement to what it would have been if the new accrual rate had applied throughout their period of servicethe purchase price of 40 per cent. of the total cost simply reflects, as I understand it, the share in total contributions that Members make, following the introduction of the 9 per cent. rate of contribution. As the total contribution from all sources is 22 per cent., the Member's contribution of 9 per cent is 40 per cent. of the total—hence the figure used for the purchase of added years.
The increase in contributions from the present 6 per cent. to 9 per cent., as set out in clause 1, is in excess of what Plowden recommended. Moreover, it is 9 per cent. of a considerably lower salary than the Plowden report recommended. In those circumstances, it is only common sense to stage the increase to 9 per cent. from 1 January 1985 to 1 January 1987, as clause 1 proposes.
Before dealing with the Bill's other major improvement, as provided by clause 4, I should like to touch on clauses 8 and 9, which have attracted some public attention. I welcome clause 8 which, for the first time, provides for pension rights to accrue to the widowers of women Members. That is overdue and is in keeping with the spirit of the times. I also welcome clause 9 which allows an hon. Member to nominate someone other than a husband or wife to receive the lump sum gratuity that is payable on death. That lump sum has been payable since the Parliamentary and Other Pensions Act 1972. To use the Leader of the House's vivid phrase, whatever they might think in El Vino's, there are circumstances in which an unmarried Member, or a Member who is a widower or widow, might wish to bequeath that entitlement to another member of the family, or to a friend. I understand that there has been much discussion on such provision in many parts of the public sector where improvements and revisions of pension arrangements are being discussed.
On clause 4, many right hon. and hon. Members have been worried by the operation of our present rules under which an hon. Member is entitled to draw his unabated pension rights only if he fulfils two conditions—he has served 25 years in the House and has reached the age of 62. They are both restrictions but, acting in combination, they are extremely restrictive. Cases have been cited of Members who have served 30 years and more but not reached the age of 62 and therefore had a right only to a severely abated pension. There might be other Members who conform to the age limit of 62 but have not completed 25 years of service and are therefore not entitled to a pension until they reach the age of 65. I am glad that those 788 conditions are now to be changed and that we can now provide an unabated pension to Members who, on Dissolution, have completed 20 years of service and reached the age of 60. It goes without saying that the possibilities of Members of that age who lose their seats finding alternative employment is negligible. I am glad that the new 60–20 formula, if I might use that shorthand, is to be made retrospective to the Dissolution of June 1933.
I have a question to ask and a suggestion to make. The question arises from the wording in the explanatory and financial memorandum on clause 4. I shall remind the Leader of the House of it. It says:Provision is also made for Members to become entitled in certain circumstances to a full pension on retirement at a dissolution … with at least 20, instead of 25, years of set-Nice and at an age of 60 or over, instead of age 62.> What do the words "in certain circumstances" mean? I should have thought that the circumstances were already fully spelled out in the text. I should be most grateful if the Leader of the House or the Minister of State, Treasury would say whether anything is concealed in that phrase and let us know what those circumstances are.
My suggestion concerns an anomaly to which we shall have to return in Committee. It is close to, if not the same as, the point made by my hon. Friend the Member for Makerfield (Mr. McGuire) in his intervention. There will be Members who qualify in terms of service, having completed at least 20 years. but who nevertheless at the time of their exclusion from the House are under the age of 60. They might be just a few months short of 60. It would seem reasonable that when such a Member reaches the age of 60, he or she should become entitled, like others, to an unabated pension. As I understand it, under our present rules no unabated pension becomes available until that Member reaches the age of 65. That cannot be right, and I strongly hope that we can persuade the Government and the House to make the necessary change.
This is the fourth piece of Parliamentary pensions legislation that I recall the House being invited to pass since the Ministerial Salaries and Members' Pensions Act 1965. The original Act was followed by the Acts of 1972, 1978 and 1981. It is now being followed by what we hope will become the Act of 1984. We have not yet got parliamentary pensions right, but we are making progress. Some amendments on Friday might take us a step or two further forward. In that spirit, I accept the Bill receiving a Second Reading.
§ Mr. Edward du Cann (Taunton)
The right hon. Member for Bethnal Green and Stepney (Mr. Shore), speaking for the Opposition, made, in effect, two points, both of which I agree with. I thought that he put them wholly admirably. His first was to give a welcome to the tabling of the measure. As the first speaker from the Back Benches, I am glad to accord with him exactly in that respect. As he said in his last few words, this is the fourth pensions measure affecting Members of Parliament with which the House has had to deal during the last 20 years. It follows from that that the previous measures fell far short of perfection. Indeed, I would go so far as to say that we have been excessively modest in our own interests in making proper pension provision for our fellows. There it is. We have advanced slowly. Perhaps, as my right hon. Friend the Leader of the House said, that is the best way. We have to hold a difficult balance and set an example.
789 The right hon. Member for Bethnal Green and Stepney also talked about the context in which we should consider the matter. At the beginning of his speech he went out of his way, rightly, to pay a tribute to my right hon. Friend the Leader of the House and I heartily join in that tribute. Obviously, before a measure of this kind is produced discussions must take place. A number of us have been involved in those discussions and all of us who have been involved, directly and indirectly, have appreciated the unfailing courtesy and trouble that my right hon. Friend has always taken to do his best to listen to and accommodate every point of view. It is particularly appreciated that he produced an explanatory leaflet for every Member and, by no means least, that we are having this debate in prime time. I think that this is the first occasion since I have been a Member of the House, almost 30 years, that we have debated a matter affecting Members so directly at a convenient hour.
We have had the good fortune to have a very pleasant atmosphere in which to discuss the matter, but the factual reality is less attractive. As the right hon. Member for Bethnal Green and Stepney said, we are discussing this measure at a time when Members of Parliament are in receipt of lower salaries than the Top Salaries Review Body has recommended. The measure will also involve us in contributions greater than recommended. Last, but by no means least, Members of Parliament will, as a result, be in receipt of lower pensions than they might perhaps have expected.
My right hon. Friend the Leader of the House used a phrase, quoted again by the right hon. Member for Bethnal Green and Stepney, which struck us all forcefully when he referred to the carelessness with which sometimes, in an effort to court easy popularity, matters affecting the service of Members are referred to by the popular press. The reality is that Members of Parliament have been underpaid for very many years. It is worth while having a general look at the position of Members of Parliament in that respect.
The remuneration of Members of Parliament is, comparatively speaking, a new affair. It is true, as one of the fact sheets now available points out, that Members were paid for 400 years between the 13th and the 17th centuries. But then it was only after considerable pressure and the debate of, I think, no fewer than six motions that some sort of payment was arranged in 1911, and a very modest payment it was. Certainly it bore no relation to the degree of service given by Members of Parliament, nor to the devotion that they show. Still less — this is increasingly true—it bore no relation to the work load which they experienced.
The pay of Members of Parliament is by no means remuneration in the ordinary sense of that word. It is not recompense, nor is it a salary by comparison with what people accepting substantial responsibilities might achieve outside the House of Commons. It is simply an allowance to enable men and women to come here who otherwise might be debarred from giving service to the nation.
Parliament has sought to open the door to all those who wish to give service to the state. This is a poor profession to practise, but it is at the same time a most honourable calling.
Members of Parliament are certainly poorly paid by comparison with other countries, as the House allowed me 790 to point out in a speech some time ago. Three years ago the House magazine published a list of salaries for Members of Parliament in Belgium, the Federal Republic of Germany, France and the Netherlands, among others. Of the nine nations quoted, two pay less, two pay the same and four pay more. By comparison with some nations within and outside the European Community, British Members of Parliament are very badly paid.
Perhaps it is right that there should be an element of sacrifice. Certainly on three occasions when the Top Salaries Review Body has reported it has been thought right for Members here to draw less than the amount recommended. That still applies in the case of the latest report from the Plowden committee, as the right hon. Member for Bethnal Green and Stepney pointed out. Therefore, this is far from any kind of exercise for Members of Parliament to feather their own nests. This is a simple adjustment in an endeavour to improve the pension position of Members beyond the unsatisfactory state in which it has been hitherto.
The principle, then, is accepted, and we all rejoice in that. In regard to its execution, it is possible to argue that we might have gone, not merely further, but very considerably further. During the debate in July last—late at night, when my right hon. Friend was inevitably obliged to make a very short speech of introduction—a number of my right hon. and hon. Friends thought that the proposal to change the rate of accrual from one sixtieth to one fiftieth would be back-dated to include every serving Member of the House. I have read carefully the words of my right hon. Friend, and he obviously had no intention of misleading anyone. He referred specifically to Plowden and what Plowden had recommended. Plowden did not recommend back-dating. However, a substantial number of hon. Members thought that back-dating would come. I am sorry that it has not come. None the less, the proposal in lieu—an opportunity for purchase—goes a long way to alleviate any complaint that there might have been about that matter.
The right hon. Member for Bethnal Green and Stepney referred to the rate of accrual. As my right hon. Friend the Leader of the House has said, we are moving from sixtieths to fiftieths. The statistics adduced by the right hon. Member for Bethnal Green and Stepney about ordinary length of service and so on, with which we are all familiar, are enormously impressive. Undoubtedly the move from sixtieths to fiftieths is to be welcomed. My right hon. Friend has made the point that that is what the House voted for in July last. I remind the House that on more than one occasion we have also voted for fortieths. It is a great pity that the command of the House in votes in the past has not been followed on this occasion. We have missed an opportunity. As the right hon. Member for Bethnal Green and Stepney said, it is inevitable that we shall have to return to this matter sooner or later.
Thinking more about these matters, I must say that this is a reflection of our failure to get as permanent a settlement as possible, whether one speaks of pay or pensions. Of the 20 reports published by the Top Salaries Review Body over the years, no fewer than 11 have been concerned with the remuneration of Members of Parliament. In the last Parliament alone we had no fewer than six debates on the subject. This is the second such debate in the new Parliament. We should not need to be embarrassed by constantly having to refer to these matters.
791 I feel a little guilty about the debate today, because an amendment in my name raised the rate of contribution to 9 per cent. I thought it right that we should set an example in terms of contribution. I thought that hon. Members should show that they understood that pensions had to be paid for and be willing to make a comparatively high contribution. It is a great privilege to have an index-linked pension. My right hon. Friend the Leader of the House, is right to point out that the contribution rate in the private sector is usually about 5 per cent.
The House agreed by a majority of about 5 per cent. of those who voted that we should accept that responsibility. It goes far beyond that which Plowden proposed. The pension fund is extremely rich in cash in the sense that it is well funded. It is unreasonable that the Treasury has been allowed to exercise so strong an influence over decisions on the fortieths principle.
The right hon. Member for Bethnal Green and Stepney was right to mention those who serve in the judiciary, the armed forces, the police and fire services and other categories. The argument against the introduction of fortieths for Members of Parliament has been that it would set an undesirable precedent. That precedent already exists. I cannot believe that anyone would be the least influenced by this extraordinary additional self-sacrifice by hon. Members.
I regret that we have not tried to work out a permanent settlement. However, all progress is welcome. The nine detailed matters in the Bill represent a substantial move forward and, most important, will remove from the public gaze one or two unhappy cases which received publicity after the last election. The movement from sixtieths to fiftieths and the arrangements for purchase are welcome. I thank and congratulate my right hon. Friend the Leader of the House on his consistent helpfulness.
§ Mr. Gordon Oakes (Halton)
The Leader of the House was kind enough to pay tribute to the trustees of the parliamentary pension fund, of which I am one. The chairman of the trustees, my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) is away with a parliamentary delegation, otherwise he would certainly have wanted to participate in the debate. I thank the Leader of the House for the sympathetic way in which he responded to the points put to him by the trustees and to which, with one minor exception, he agreed. This is the only opportunity that we shall have for many years to put right the anomalies.
The trustees have a number of responsibilities. We have a responsibility to Government funds, a responsibility to ensure that our proposals are viable within financial limits, and thirdly, we have a responsibility to our fellow Members. We are appointed by the House to administer the fund on behalf of fellow Members. The trustees know most about the hardship cases. They have the painstaking and heartbreaking task of dealing with some of our colleagues' circumstances when they must leave the House. We must try to help them.
When we put our proposals to the Leader of the House, he knew that we were not being irresponsible. Many hon. Members might even think that we were far too modest, but we have to exercise a high degree of responsibility when asking for something for fellow Members.
My hon. Friend the Member for Makerfield (Mr. McGuire), my right hon. Friend the Member for Bethnal 792 Green and Stepney (Mr. Shore) and the right hon. Member for Taunton (Mr. du Cann) each dealt with clause 4. It contains an anomaly which the House must consider. I hope that the leader of the House will put it right at the end of the debate, so that we do not have to table amendments for consideration on Friday.
My hon. Friend the Member for Makerfield referred to a gentleman who was an hon. Member of the House for nearly 29 years. He belonged to the Government party, but he was a personal friend of mine. He left the House because his constituency folded beneath him. He was not reselected for either of the two replacement constituencies. He was eight months short of his 62nd birthday, He had spent nearly 30 years in the House loyally serving his party, and at one time was a junior Minister. That man received not a penny in pension. It is a disgrace to the House that we should treat a former hon. Member in such a way.
That man's plight results not from any wickedness by the Government, but from the inflexible way in which the legislation was written. The trustees were powerless because of that inflexibility. That ex-Member had to be 62 years of age at the date of the dissolution of Parliament before he could qualify for a pension. Nothing could be done to help him. I regret that in clause 4 the Government are continuing that inflexibility. It will lead to headaches for the Leader of the House, whoever he is, and it will certainly lead to headaches for the trustees, because those involved come to us first.
Let us suppose that someone is an hon. Member of the House for 25 years, having been elected at 33 or 34 years of age. If for some reason he departs from the House at 58 or 59 years of age, he will receive not a penny in pension for six or seven years. He will have to wait until he is 65.
Another, older person may enter the House two Parliaments later and serve for 20 years. Because by then he will have reached the magic age of 60 at the date of dissolution, he will receive his full pension. That cannot be right. The anomaly cannot be defended and is intolerable. The Bill repeats the inflexibility syndrome, which must prick the conscience of the Leader of the House and all hon. Members.
We are discussing hon. Members with 20 years' service in the House, not parvenus who have come to the House looking for a pension. Some hon. Members get disillusioned and fed up with the House, but that happens long before 20 years are up. They get fed up at the end of their first Parliament or in the middle of their second. If an hon. Member has to leave the House before he is 60, he leaves because he has been forced out for some reason. Having served for 20 years, he would not willingly go. He would want to complete his term until he was about 65, as most of us would want to do.
Three reasons may cause an hon. Member to leave the House prematurely. The first is ill health. Although an hon. Member is covered and receives an income if he leaves because of ill health, the scheme is far from generous and I should like to see it improved. The formula for assessing the pension that he would obtain is complicated, but the position is covered.
The other two reasons are that he has not been reselected by his constituency party, or that he has been defeated at a general election. We faced a tide of defeats in the previous general election—this is not a party political point—and given the ebb and flow of politics 793 in this country, it will follow inevitably that that will happen in reverse. Conservative Members who have done no harm and have served their party and constituency loyally will suddenly find themselves out of work. They will have given the best years of their lives to serving the House and their constituents, not to serving themselves in their own professions. Indeed, many people are too old in their late fifties to return to their professions in this fast-moving world, even if the jobs were there. It is too late for them to go back and pick up the traces again.
All that I am asking of the Leader of the House—I hope that all hon. Members will echo this in their speeches — is to be flexible on clause 4 and to allow an hon. Member who retires below the age of 60 to receive at the age of 60—not before—the pension to which he would have been entitled after serving the House for 20 years. We are asking for a minor change. I hope that we can avoid adding amendments to the Amendment Paper in Committee and that the Leader of the House—he is not a Minister, but our leader, the leader of both sides of the House — can see the justice of the case that I am deploying, and especially the hideous anomalies that could result from leaving the Bill in its present form.
Hon. Members who leave the House in their late fifties do not go voluntarily, but leave because they must go. It would be criminal for us to repeat what we have done to an hon. Member in the past. This is the opportunity to put it right. Therefore, I plead with the Leader of the House not to leave the matter to be dealt with by later amendments tabled by the trustees or by Back Benchers. He has dealt with the trustees in an excellent way, and is so fair-minded that it would be a shame for us to differ on this very minor point. I hope that he will put the matter right when he winds up the debate.
§ Mr. Cranley Onslow (Woking)
I shall not detain the House for long. I welcome the Bill, which is a complex one, as my right hon. Friend the Leader of the House has said. I have one question about the provisions in clause 9 that I hope my right hon. Friend will be able to answer in Committee. Are the provisions under clause 9 such, or could they be extended to be such, as to enable an hon. Member who wished to do so to leave the lump sum payable on death to a charity rather than to an individual? Some hon. Members would prefer to do that. We should make that provision now, if it is possible.
Apart from that, I shall make only two general points. First, if my right hon. Friend the Leader of the House were tempted to suggest that the provisions of the existing or amended Bill err on the side of generosity, it would be possible to defend that state of affairs as a justifiable compensation for any shortcomings in the terms upon which hon. Members serve.
Parliamentary pay has much improved in the past 20 years. I do not complain about that, but, equally, I do not suggest that we are overpaid; my right hon. Friend the Member for Taunton (Mr. du Cann) made some comparisons on that score. Nor am I suggesting that we should be overpaid or be seen to be overpaid. I have been led to argue from time to time that we should be underpaid, and be seen to be underpaid — not excessively, but perceptibly. I believe that hon. Members would be able to set for themselves the margin that perception represents.
794 It must be open to hon. Members to show, by our act in volunteering to come to the House, that we are not here for the money. There must be an element of perceptible service in our seeking to be elected. Inevitably, that must transfer to the terms that we undertake to accept. The same goes for Ministers. Neither their remuneration, nor the gap between their remuneration and the salary of an ordinary Back Bencher, should be allowed to reach a level at which they might be tempted to accept or retain office because they could not afford not to do so. That is another factor to bear in mind when we consider these difficult questions of parliamentary pay.
My second point is that I hope we shall finish dealing soon with these and other financial ramifications of our terms and conditions of service. It is right that hon. Members should take decisions on these matters. It is wrong for us to shuffle our responsibility on to a third party by using an apparently anodyne formula. If we do not take decisions in the House about ourselves, we forfeit the right to take them for anybody else. If we cannot bring ourselves to answer for setting our own pay levels, it is difficult to see how we can take to ourselves the right to set the pay of other servants of the state.
It is wrong that we should, albeit inadvertently, appear to be obsessed with such matters. It did Parliament no good when, last summer, we spent so much time and energy as a newly-elected Parliament on debating our salaries. Perhaps I carry my right hon. Friend the Member for Taunton with me in saying that it does no good to his office as chairman of the 1922 Committee, or to that of the chairman of the parliamentary Labour party, of Liberal Chief Whip or even of the Leader of the House, if the holders of those offices are preoccupied with what are virtually the functions of a shop steward or trade union negotiator. There are more important, and more political, matters that should have a prior claim upon their time.
I was, correspondingly, disappointed to hear the right hon. Member for Bethnal Green and Stepney (Mr. Shore) say, and my right hon. Friend the Member for Taunton echo, the feeling that we do not have the matter right yet, and that we must return to it. I do not think that the Bill should pass its Second Reading while we are in that frame of mind.
Just as the outgoing Parliament ought to lay down the salaries to be paid to its successors in the new Parliament and to let the answerability go with that, so our objectives should be to set up, at the fourth attempt, a system to determine the conditions of our parliamentary pensions that will stand the test of time. Having done that, we should resolve to leave the matter alone and to think about matters that are more important to the people whom we represent.
§ Mr. Richard Wainwright (Colne Valley)
Liberal Members welcome the fact that changes in the pension arrangements of Members of Parliament require a Bill, fully debated at each stage of its passage through Parliament. We welcome likewise the fact that the Leader of the House initiated discussions on these matters, in good time and in an admirable spirit, not simply through the usual two party channels, but with the all-party trustees of the parliamentary pension fund. Tribute has already been paid to the value of those pre-legislative discussions. In my short period as a trustee, I have believed—and still do 795 —that a substantial overlap exists between the public interest and the perfectly proper interest of Members of Parliament to ensure fair play for themselves.
The public interest has been recognised for centuries in the fairly formidable apparatus of law for protecting free speech and free votes in the House. It is important that, as far as possible, we should keep that apparatus up to date, and that includes financial considerations. There must not be any serious risk of an hon. Member feeling inhibited in his freedom of speech or vote by the fact that his family, or he himself, may suffer hardship as a result of losing his membership of the House. It is important that Members of Parliament should be provided with adequate retirement benefits so that they are not inhibited in that way. The public interest benefits by such a measure.
The Bill takes some account—although not enough—of two current trends. I refer first to the increasing specialisation in jobs outside the House. Most hon. Members would have to seek such jobs on losing their seats. I refer, secondly, to the degree of current and rapidly advancing knowledge which most of those jobs require. It is a very lucky hon. Member who can attend to the business of the House and constituents, and at the same time keep abreast of rapid advances in the subject of his previous career. Indeed, it requires super powers to be able to do that for years on end.
Therefore, the Top Salaries Review Body was right to point out the uniqueness of a parliamentary career and the great difficulties encountered—which most of us have sadly observed — when middle-aged colleagues who have lost their seats have to try to resume work outside the House. I am glad that the Bill takes some additional account of that. Furthermore, the House is becoming a source of increasing preoccupation for most hon. Members, because of the ever-growing work load, the extension of Committees, and so on. We do not grumble about that, but it is a fact of life that must be taken into consideration.
I do not claim to have done any research on spouses but although the spouses of hon. Members may still manage to work, they are bound to have rather reduced opportunities of earning money for the family treasure chest because of family duties in the Member of Parliament's absence and, often, involvement with constituents. That should also be taken into account when assessing the uniqueness of the job.
Thus, I welcome the Bill on those counts, although I agree with the comment made on both sides of the House that it is still far from adequate in all respects. The right hon. Member for Halton (Mr. Oakes) made the point well when it comes to the Bill providing a clear improvement for those who reach a fairly advanced age and do not wish to continue into a further Parliament, but whose pensions could be jeopardised by retiring before the age of 65. Of course the Leader of the House must be right to say that a line has to be drawn somewhere, and that wherever it is drawn some people are bound to be on the winning and some on the losing side, but that admirable and incontestable precept does not justify drawing a line at a point where the distinction between the two classes of hon. Member is most painful and unfair.
The Leader of the House knows very well that in taxation law and many quota arrangements passed by the House there is the principle of marginal relief. The House establishes a benchmark—in this case, 60 years of age and 20 years service—but instead of making that a total 796 cut-of point it arranges for some flexible reduction of benefits down the scale to a further point, possibly to the age of 58, 56 or thereabouts. It is perfectly possible to establish the benchmark which the Leader of the House wants, and which is broadly justified, of 20 years' service and 60 years of age, but still to allow marginal relief down to a somewhat lower age in order to deal with the example which the right hon. Member for Halton gave, which was entirely valid. If we stick solely to the Bill's benchmark, without any flexibility or relief at the margin, we shall ultimately face some appalling anomalies. The House will then be shocked at the injustice done to some retiring hon. Member, and we shall have this whole debate all over again.
The Leader of the House has already been asked to give thought to the issue before replying to the debate, and I hope that he will also give some thought to the possibility of flexibility along the lines of the marginal relief embodied in many Acts. Subject to that, my right hon. and hon. Friends and I wish to give the Bill a fair wind, as a measure that represents a considerable advance.
§ Mr. David Crouch (Canterbury)
I, too, thank my right hon. Friend the Leader of the House for introducing a measure that is an advance on what we already have, and is certainly overdue. However, in a short speech I wish to refer solely to the question of the "accrual rate" or "the appropriate fraction", as it is described in the Bill, and to consider what we thought we decided on that night and early morning of 19 and 20 July.
Pensions for Members of Parliament are a House of Commons matter. I do not think that my right hon. Friend the Leader of the House misled the House then. However, I believe that the House was collectively misled by what we decided that night. We did not vote on the Question. The House was unanimous. At about 4.12 am there was no Division, as the House resolved unanimously to accept the recommendations of the Plowden report on pensions for Members of Parliament. That is what happened on 20 July, although as the debate on 19 July ran into the next day, the House calls it 19 July. It is rather a burden to have to lift up this vast Hansard in order to quote from it. Some years ago I complained, but I now appreciate what a wearisome business it is to lift it up in order to quote from it. However, I wish to refer to what we considered in the early hours of that morning.
My right hon. Friend the Leader of the House put before us the various resolutions that we had to consider. The last but one was No. 9 which said:That this House takes note of the Twentieth Report of the Review Body on Top Salaries (C'mnd. 8881) and agrees with the recommendations contained in that Report with respect to the pensions of Members of this House, being recommendations (v) to (x) set out in paragraph 226 of Volume 1 of that Report.
I now want to draw the attention of the House to the recommendation referred to there which the House was considering and on which it might have voted that night just under a year ago. The first paragraph, that I have referred to as sections (v) to (x) is headed "Pensions and severance pay (Chapter 3)". It says:(v) The pension accrual rate for MPs should be set at one fiftieth of pensionable salary as at present defined for each year of pensionable service. (Paragraph 65)That is the reference to the recommendation—not the conclusion—in the report.
797 Let me take the House back to the recommendation on page 20 of the report which we were considering, on which we might have voted and which we resolved that night. It said:We recommend that the pension accrual rate for MPs should in future be set at one fiftieth of pensionable salary as at present defined for each year of pensionable service.
Members of Parliament must equip themselves with as much knowledge as they can when they come into the Chamber to take part in a debate. What I have read to the House this afternoon makes it clear that we were thinking of one fiftieth as the fraction—not one fiftieth applied to just some years of our service but one fiftieth of the years to be reckoned with. I heard no one that night who thought that we would apply one fiftieth only from the date when the resolution was made in July last year.
I do not want to mislead the House. The Plowden report did not recommend retrospection. It said that retrospection was not thought to be appropriate. But that was not in the conclusion. It was not what we were considering. The conclusion was clear to any hon. Member who might ultimately have to go into the Lobby to vote. It was exactly as I have set out—that the new fraction would be one fiftieth. That was what we eventually decided upon that morning.
Let me take the House back again to something that the Lord Privy Seal said in guiding us through those complicated debates on a series of resolutions that night. In his speech covering a variety of resolutions, my right hon. Friend the Lord Privy Seal said:Turning to pensions, the review body recommends, and the Government accept, that the pension accrual rate for Members should in future be set at one fiftieth rather than one sixtieth of pensionable salary. This is a long sought change. Members cannot normally be expected to have had a full working parliamentary life of 40 years. The review body also recommends that the pension contribution for Members should be increased.
My right hon. Friend the Member for Taunton (Mr. du Cann) has touched on how we dealt with that.
On the one hand we were prepared to raise the contribution from 6 per cent. of salary to 9 per cent., and we voted on it. A majority of the House agreed to accept the amendent put forward by my right hon. Friend that that figure should be increased to 9 per cent. We agreed to make that extra contribution. We never thought that we would not get the contribution. We thought that the Government were saying to us through the words of the Lord Privy Seal that night that the Government accepted that the new fraction in future should be one fiftieth rather than one sixtieth.
The House started voting that morning at 2.47 am. Shortly after 4 am the main question, as amended, was put and agreed to. Let me make it quite clear what we decided. The Official Report says:"Question accordingly agreed to.Main Question, as amended, put and agreed to.The House did not divide."Resolved,That this House takes note of the Twentieth Report of the Review Body on Top Salaries (Cmnd. 8881) and agrees with the recommendations contained in that Report with respect to the pensions of Members of this House, being recommendations (v)"—which I have already quoted— 798to (x) set out in paragraph 226 of Volume 1 of that Report, except that, in recommendation (ix), the appropriate pension contribution rate should be 9 per cent. of salary.'"—[Official Report, 19 July 1983; Vol. 46, c. 270–351]
There is a little reference there to the change of contribution—the money that we would have to pay being increased from 6 per cent. to 9 per cent. There is no reference to the fact that the fiftieth was to apply only from that month onwards and not to the previous reckonable number of years.
I do not think that we were misled. We all understood clearly that in future we could calculate the pension on one fiftieth and on no other figure. At no stage in any recommendation, in any part of the Plowden report or in what was said in the debates on pensions did a dispute arise about whether it might be one fiftieth from now on rather than one fiftieth for all the years of one's service.
This is not a court of law. It is the high court of Parliament. If it were a court of law and if I were a lawyer, which I am not, I would say that I rest my case there. I am confident that no jury could find other than for me.
§ Mr. Hugh Brown (Glasgow, Provan)
There is a lot in what has just been said by the hon. Member for Canterbury (Mr. Crouch) with which I would agree. The debate on 19 July 1983 on our terms and conditions, was not one of the best debates in the House. On reflection, it would be wholly unreasonable to think that the Government ever had anything in their minds so generous as to back date one fiftieth to all the years of reckonable service. Nevertheless, the hon. Member is right. Many of us did think that it was one fiftieth for every year. However, that is not the burden of my remarks.
This is one of those unusual subjects when no one needs to declare an interest because we all have an interest. Therefore, we have to appreciate that all Back Benchers are equal. I am a capable, competent Back Bencher but I do not pretend to match what I imagine is the influence of the right hon. Member for Taunton (Mr. du Cann) as the chairman of the 1922 Committee. The hon. Member for Woking (Mr. Onslow) seemed to cast doubt on whether the chairman of an important Back-Bench Committee should be a shop steward—I hope that that is not a vulgar expression in the House. Nevertheless, it means that the rest of us who are arguing some of the points do not have the same optimism about persuading the Government to make further improvements.
I am always encouraged, having been a member of the Select Committee on Members' Salaries three years ago under the Chairmanship of the right hon. and learned Member for Hendon, South (Mr. Thomas), by one sentence of that Committee's report which to me summed it all up. It said:The work of a Member of Parliament is unique.Perhaps some people outside the House believe that we think that we are unique just because we have rather an unusual job. My point is that it is unique in many respects, but it is unique in one fundamental respect in that there are no two constituencies alike and no two Members of Parliament alike. There is no greater contrast between constituencies than between my constituency, in which almost 100 per cent. of houses are council owned, albeit 100 or 200 have been sold, and the more salubrious constituencies, such as Taunton, Woking or Shropshire, North. I do not say that enviously. It is merely a way of 799 emphasising that the workloads in constituencies may be heavy or light. I am grateful for my constituents, because they tend not to write to me about protests on the culling of seals or other esoteric subjects.
We should remind ourselves early in this debate that the Top Salaries Review Body recommended a year ago that our salary should be £19,000 a year. We cannot divorce salaries from pensions, because pensions are calculated on the salary rate. We are now a long way from that £19,000 a year. I hope that the press and others who follow our proceedings will note that Members of Parliament do not receive anything like the salary recommended by that outside review body, although the Government accepted some of its recommendations in other respects.
We should always remind ourselves of certain aspects of the problem. We recognise the general unwillingness of all Governments to go anywhere near accepting certain recommendations. This is not a party political point. I confess that the Labour party has not been as good in many respects as the Government, and I believe that everyone accepts that point. The hon. Member for Woking (Mr. Onslow) drew attention to the fact that it is no wonder that we need to keep returning to subjects such as this, because we never seem to make a satisfactory decision in the first place. That stems from our reluctance to do the right thing, or from fear or apprehension about what the public may think.
I am delighted that at least on this occasion the Government have accepted some of the review body's principles, such as that on the accrual rate of one fiftieth of final salary per year of reckonable service, although I believe that we could go further. The principles of a full pension on retirement after 20 years' service and at the age of 60 are big advances, despite the anomaly to which reference has been made, and the Government should be given due credit. I hope that it is not embarrassing to give credit to the Leader of the House. I doubt that authority has been given to accept any amendment that will require more money, but that is the right hon. Gentleman's problem. I believe that we all recognise the limitations under which the right hon. Gentleman is working, however generous he may wish to be.
It is less than 20 years since Members of Parliament received a pension as of right. As a former civil servant, I can never understand why for all these years we have allowed ourselves—both parties are to blame—to accept advice from civil servants who have well-established rights to a pension at 60, as a rule on half pay, as well as a lump sum of a year and a half's salary. I do not say that enviously; I am happy to have had the opportunity to be a Member of Parliament. I can never accept the argument that I should be willing to agree to a pension that is less favourable in its conditions than the pension applying to those who advise the Government. I hope that I have not sounded uncharitable in the way that I have put that point.
Clause 4—this may be one of the touches of humour of the Leader of the House—is one of the main clauses that all hon. Members support. I believe that the principles of a full pension at 60 years and after 20 years' service are an improvement, and we should accept them.
We need to look at the machinery that the House has for examining these problems. As the Leader of the House knows, some right hon. and hon. Members are experts in this matter. Some are trustees or have been chairmen of the 1922 Committee or of the parliamentary Labour party. A host of hon. Members have had to acquire a certain 800 expertise because of their position. We do not need to appoint a welfare rights officer, but, if we go further down this road, we shall expect too much of the staff in the Fees Office in explaining some of the measures that we have passed. Complications will arise, especially with pensions.
Is there any reason why there should not be synchronisation of the dates for allowances and salaries with the taxation year? For the life of me, I cannot understand—I speak as a former civil servant seeking to get everything into a nice tidy package—why we should not ultimately aim to make life easier for everyone by synchronising the tax year with the dates for salaries and allowances.
I must declare an interest in the following matter, although it is probably too late. I cannot understand why we should accept a so-called severance grant, yet cannot accept a lump sum on retirement, which sounds as though it is an offence of affluence. That matter needs examination, because an age bar has been imposed. I do not agree with the Leader of the House that 65 is the accepted age of retirement. Society has moved on, and I see no reason why we should not aim for a pension at 60, even with a lump sum on retirement. I have referred to the comparison with Civil Service conditions, and I believe that it is not unreasonable that hon. Members should move towards a 60 years age pension. I do not say that because it will provide a way of looking after ourselves. I believe that the idea would be acceptable, even though we might have to pay more.
Hon. Members have referred to the vexed question of Members of Parliament discussing their affairs. In the 20 years since I became a Member of Parliament, Governments have grappled with a variety of incomes policies. Some Governments denied that they had an incomes policy, but everyone knows that there is such a policy, however unofficially or informally Governments have implemented it.
No matter what so-called sacrifices the House of Commons makes—this point sticks out a mile—if we were prepared to accept a salary increase of 5 per cent., not a body outside would take a bit of notice of that example. We must have the courage to do what we think is right and fair in all circumstances. I like to think that hon. Members can do so. I support the Bill. As other hon. Members have said, it is an improvement, but further improvements can be made. I hope that the Leader of the House will accept the desire of hon. Members to make those improvements as quickly as possible.
§ 6.9 pm
§ Mr. Roger Freeman (Kettering)
When I listened to the right hon. Member for Bethnal Green and Stepney (Mr. Shore), I found myself in the unusual position of agreeing with his arguments and admiring the clarity with which he advanced them. He spoke of his preference for moving from fiftieths to fortieths but he did not discuss the cost implications of that move. Would he accept that the contribution rate for Members should rise from 9 per cent. to perhaps 15 per cent? I think that 15 per cent. would be implied if we moved to a much more generous scheme that was based on fortieths. When we talk about pension benefits, it is important always to remember the costs that are borne both by Members and by the Government.
I welcome the Bill, but I believe that a slightly greater justification is required for moving to what in my 801 judgment is almost a gold-plated pension scheme. It is an extremely generous scheme. It is indexed for pensions in payment and for deferred pensions for those Members who leave the House and who have not reached the age of 60 years and for those who do not opt to take an actuarialy reduced pension between the ages of 50 and 60. The deferred pension is linked to the retail price index and that is an extremely generous benefit.
The generosity of the scheme is justified by the fact that parliamentary pay is not entirely in line with what has been recommended. We have funked that issue and, almost by sleight of hand, we have introduced a generous pension scheme. Perhaps this has been done on the assumption that the outside world will not understand fully the nature of the benefits. Perhaps we have also been slightly generous in respect of parliamentay allowances. As a new Member, I am disappointed that the House has funked the central issue of parliamentary pay and I hope that it will return to it at a later stage.
I shall seek clarification on four issues and I believe that my right hon. Friend the Leader of the House will be able better to justify the scheme by responding to them. The new proposed scheme is indexed and is linked to the retail price index for pensions in payment and deferred pensions. My right hon. Friend the Secretary of State for Social Services announced yesterday that he would introduce a Bill to index deferred pensions up to a maximum of 5 per cent. per annum. That measure will not be as generous as the pension scheme that Members already enjoy.
It is difficult to calculate the true cost of a fully indexed pension scheme but my right hon. Friend talked about a cost of 22 per cent. per annum with 40 per cent. of the cost being borne by Members and 60 per cent. by the Exchequer. The costing of a pension scheme depends entirely upon the rate of inflation that is assumed. In my opinion, 22 per cent. of a pensionable salary is probably an underestimate of the true cost of the benefit of a fully indexed pension scheme.
My right hon. Friend the Leader of the House referred to the police force when talking about fiftieths for each year of pensionable service. Is the proportion that is paid by police officers for their pension scheme broadly equivalent to the 40 per cent. of total cost that Members are being asked to pay in this scheme?
My hon. Friend the Member for Canterbury (Mr. Crouch) talked about the ability of Members to buy extra pension rights for themselves. It is fair for a new Member to ask a much more senior Member who will pay for the retrospective rights. The concession that new Members are making for more senior Members is considerable. We are being asked to accept 40 per cent. with full tax relief as the cost of buying prior years. That means that new Members and taxpayers generally will pay the other 60 per cent. That is an extraordinarily generous provision which was not envisaged in the Plowden report.
In the second volume of the Plowden report at page 278 the consultants recommended that in addition each Member should be given the opportunity to negotiate an individual additional voluntary contribution contract with an insurance company. The Bill is silent on that issue. It is important that my right hon. Friend takes on board that those who join this place and who have had prior employment outside and prior pensionable service would find it easier to participate in an AVC scheme in which 802 they could contribute up to 15 per cent. of their parliamentary pay, which would be the 9 per cent. already paid compulsorily and an additional 6 per cent. if they wished to pay it. If they have only 15 or 20 years in which to provide themselves with a retirement pension, they may have to make additional voluntary contributions to acquire a satisfactory pension.
The hon. Member for Glasgow, Provan (Mr. Brown) asked whether 65 should be considered a normal retirement age and discussed an age limit of 60 for taking the full pension earned after 20 years of service and the age of 50 for taking an actuarially reduced pension. All those specific ages are much in line with the best of private practice and they are entirely acceptable. Hon. Members will be aware that an individual is not allowed to have a pension that is greater than two-thirds of his final pensionable salary and that that fraction is reduced if he retires before the normal retirement date. That is an Inland Revenue rule and it has nothing to do with the Plowden report. The Inland Revenue rules can and do bite, and that is an issue that I shall raise at a more appropriate time.
I shall quote a paragraph from a letter which I received from a company of leading pension consultants. Having read the Bill, the group pensions executive wrote:Could you imagine any company in the private sector at this time increasing the accrual rate from 1/60ths to 1/50ths, allowing past service to be purchased at a 60 per cent discount by the member and allowing added years to be purchased without reference to future inflation? The saving grace is that the country does not reward its MPs at a satisfactory level".
This may be a generous scheme, but I shall vote for it. I shall do so almost in sorrow because we have not solved properly the problem of parliamentary pay.
§ Mr. Michael McGuire (Makerfield)
The hon. Member for Canterbury (Mr. Crouch) was right when he said that when we concluded our debate on this issue on 20 July and left the House in the early hours of the morning we had the feeling that we would make a considerable contribution to our pension scheme—9 per cent. on a reduced salary—and that the scheme would be based on fiftieths. When I alerted one or two Members by explaining that that was not the position, they said, "You are wrong, Michael. We have passed it." I do not want to accuse the Leader of the House of sharp practice because I want his sympathy and attention, which I know I shall get. He was not guilty of sharp practice, but we were guilty of negligence. We made an assumption and we did not want to focus attention on fiftieths. We kept quiet, but the general feeling was, "Lads we have done it but we shall pay a bob or two extra." If there was any negligence, we were at fault for not probing the proposals.
The hon. Member for Canterbury has told us that he is not a lawyer—nor am I—but having read the report of the debate that took place on 20 July he would not think, if he were a lawyer, that it would take much to persuade a jury that the fiftieths proposal had been accepted and that it was to take effect retrospectively. Lawyers would have a field day in determining this issue and it is possible that at the end of the day their determination would not be as conclusive as the right hon. Gentleman and I would wish. That is water under the bridge.
The hon. Member for Woking (Mr. Onslow) mentioned shop stewards, and seemed not to like the idea of the chairman of the parliamentary Labour party and the chairman of the 1922 Committee acting, as we say, 803 through the usual channels and being shop stewards. We have made considerable improvements because we have the usual channels and shop stewards. I remember well the day when the late Charlie Pannell, who later became Lord Pannell, and whom we all remember as an effective shop steward, said how daft we were as Members of Parliament. The hon. Member for Kettering (Mr. Freeman) may be interested to know that, when I came into the House, one lost about a month's salary at election time, and, if one lost one's seat, one went out on one's ear. Charlie Pannell was able to persuade the House that there should be a three-month redundancy scheme when a Member lost his seat, and the House has built on that.
My hon. Friend the Member for Glasgow, Provan (Mr. Brown) observed that we take advice from civil servants—the Government seem to take the advice that suits them, to which I will come later—who have much better conditions of service, and that we should do away with that. As my hon. Friend said, we take advice from people who are well fixed.
I was disappointed—and this was touched on by the hon. Member for Canterbury—that there seems to be some picking and choosing. The case for not making the fiftieths retrospective rested on the fact that Plowden did not recommend it. I accept that. But Plowden recommended a salary of £19,000. It seems unfair to pick and choose in this way.
I deal next with the main point that I wish to raise. The Leader of the House will know that I wrote to him about an ex-parliamentary colleague of his who, like most Members, had done his service, as he saw it, to his party in the House and elsewhere. My right hon. Friend the Member for Halton (Mr. Oakes), in what I thought was a marvellous speech, outlined and highlighted this case and what could happen in future. This ex-parliamentary colleague of Conservative Members, after 29 years' service in the House, because of the inflexibility of the age at which one leaves the House at dissolution or on prorogation, did not qualify to receive his accrued pension as he was eight months' short. He had a choice of waiting until he was 65 and picking it up then, or surrendering in perpetuity 26.5 per cent.
As most hon. Members know, as well as being a Member of Parliament, I am a member of the Council of Europe where one has a chance to meet one's colleagues in other Parliaments. When one relates the story of an ex-Member of Parliament who has done 29 years' service but cannot qualify for a pension, they simply do not believe it.
I have written to the Leader of the House about this matter. I believe that we are in danger of perpetuating that inflexibility. The same system will exist with the substitution of 25 years' service linked to the age of 62, at which time a Member leaves the House.
I ask the Leader to look at this seriously and sympathetically. It will not cost any more money. If a Member aged 60 with 20 years' service leaves the House, he is entitled to his fully accrued pension. If he is aged 58 with 25 years' service, he will not be paid a greater amount. We do not ask that he be given a pension when he is aged 58, or that he takes retirement earlier than any other Member of Parliament. We say merely that it is wrong to penalise him, and to put him in the position of the ex-parliamentary colleague of Conservative Members whose case has been outlined. If the Bill goes through, a 804 Member in this position will have to wait longer so that the position will be made worse rather than being improved.
My right hon. Friend the Member for Halton said that this is not a matter in which it would be appropriate to table amendments. I urge the Leader of the House to look at this again. We ask not that a Member who leaves at 55 years of age be given the pension then, but merely that he be given the same benefits that a Member who leaves the House aged 60 is lucky enough to enjoy. He will have to wait until he is 60, which could be four, five or more years. It is a choice between a Member living in reasonable comfort and drawing a pension when he is 60 years of age, or a Member living in penury in some cases until he is 65. I do not believe that it is the wish of the House to make that kind of cackhanded change which will only make matters worse.
I hope that the Leader of the House or the Financial Secretary will be able to respond to my modest request.
§ Sir Anthony Kershaw (Stroud)
As a trustee of the pension fund, I wish to say a few words. They will indeed be a few words, because my hon. Friend the Member for Grantham (Mr. Hogg) has made it clear that, if the House does not complete Second Reading by seven o'clock, we will have no pensions.
In some walks of life, retirement is a matter of nice calculation, but in our profession it is not. Even if a Member decides to go at the end of a Parliament, he does not know when that will be, and he is very much at the mercy of events outside the House. I agree with the hon. Member for Colne Valley (Mr. Wainwright), who said that as the salary goes up there is a certain pressure on Members of Parliament not to lose their seats. They cannot afford to do so because most of them are unemployable after they have been in the House for a certain time. Therefore, we must do more or less as we are told. This position can be mitigated considerably by a decent pension. If we have confidence, in that respect it will be to the good of all hon. Members.
The right hon. Member for Halton (Mr. Oakes) drew attention to the rigidity of the age of 60, and 20 years' service. I believe that one's age is not as important as one's service to the House. It must be borne in mind that the average length of service in the House is only 14 years, and most hon. Members never attain 20 years' service. Cases such as the one to which reference has been made—and all hon. Members know to whom that refers—are heart-rending and are a disgrace to the House.
I have two questions to ask the Minister. Clause 5 to some extent appears to override the conventions of the Revenue about the amounts that one may have on pension. Does that also underwrite the rule that, after one has reached the retirement age, one may not purchase any extra years? I declare an interest here in that I am more than 65 years of age, and I have been forbidden to buy any extra years. Is it the intention that that will continue after the orders under clause 5 and section 11 of the Parliamentary Pensions Act 1978 have been made?
On the question of hardship awards, parliamentary trustees have a right under section 4 of the Members' Fund Act 1948 to make special hardship awards. As I understand it, we are allowed to meet hardship awards of only £3,700 per year. That figure was fixed in 1948. I do not know what the equivalent value of £3,700 is today, but 805 it must be a considerable sum. I believe that the amount should be increased so that we may grant commensurate awards to our colleagues who fall on hard times.
§ 6.29 Pm
§ Mr. Allen McKay (Barnsley, West and Penistone)
There is an anomaly in the Bill. As has been said, we ask that this proposal be accepted, because it will not cost any money. I hate talking about our own pensions and salaries. The position is eased because we will be paying 9 per cent. Because of that, we should also draw what is due. I seek to insert the word "reckonable" before the word "service".
A person entering the House at the age of 40 may spend 20 years here and make 20 years' contributions to the pension scheme. He could draw his full pension without any deductions. In addition, he could draw maximum severance pay. However, a person entering the House at 51, who spends nine years here may bring with him 20 to 30 years pension from his previous scheme. That person leaving the House at 60 will receive only half severance pay and must wait until he is 65 before he can draw his full pension. It is wrong that a person should bring in his contributions and not receive the same benefit as others.
The scheme would not cost anything because those involved would have already paid their contributions before entering the House. Rather than feeling obliged to table an amendment, I hope that the Leader of the House will recognise the wisdom of such a scheme and will insert the word "reckonable" before the word "service."
§ Mr. Geoffrey Lofthouse (Pontefract and Castleford)
I wish to declare an interest, even though we were told earlier that it was not necessary to do so as we are all interested parties.
I associate myself with the remarks of my right hon. Friend the Member for Halton (Mr. Oakes) in the cases that he outlined. I hope that they will be sympathetically considered. I do not know whether the trustees have discussed the point made by my hon. Friend the Member for Barnsley, West and Penistone (Mr. McKay), but if they are prepared to accept transferred contributions from other superannuation schemes, surely they should allow the years of service during which an individual has contributed to count as service for the benefits of our pension scheme. If a person had not transferred those assets they would have been frozen and he might have been entitled to retire at 60. It is not fair that someone should bring in perhaps 14, 15 or 20 years contributions from another scheme and the trustees accept them, but then say that he will not be allowed the full benefits of our scheme. Under clause 4, someone could find himself with less than 20 years service in the House, but with many more years of contributions from a previous scheme.
I hope that it will not be necessary to table an amendment and that the Leader of the House will seriously consider the point. It would not be necessary to have any further income for the scheme, and I understand that only a few people would be involved. Surely the House, the right hon. Gentleman and the trustees believe that it would be fair that the transferred contributions should entitle a person to the benefits of the parliamentary scheme.
§ Mr. Alan Williams (Swansea, West)
I thank the Leader of the House for making available a small number of copies of the 1972 Act because without them it would be difficult to table amendments by Friday. I am grateful for the right hon. Gentleman's positive attitude during recent months in our discussions on the difficult problems implicit in the Bill. I welcome the modifications that have been made.
I think that perhaps there has been an oversight, in that we have not taken the opportunity to ensure that our widows receive the same treatment as the widows of judges, whose capital sum and pension are based not on the actual salary but on the recommended salary. They, like us, do not receive the recommended salaries, but at least their widows are not penalised.
We especially welcome the decision on fiftieths. Obviously, we would have preferred fortieths. We are buying back and paying for that additional facility, which meets the objections raised by the hon. Member for Kettering (Mr. Freeman), although I appreciate that it was a legitimate objection. We are paying back in the same proportion as we pay for our pensions generally. That is defensible and unchallengeable. It is made more unchallengeable by the fact that we are also paying 9 per cent. rather than 8 per cent., which was the figure recommended by Plowden. Although I do not think that we should pay 9 per cent., it means that, even before our additional contributions for the fiftieths, we are putting 12.5 per cent. a year more income into the fund than Plowden regarded as necessary. We are paying in several ways for the additional benefit, so we do not feel that we are in any way begging for the additional pension.
On Friday we shall seek clarification of one or two points and will table a couple of amendments. I shall try to leave the Minister as much time as possible to deal with the points raised in today's debate. If he can clarify some of the points, that will ease the position on Friday.
My colleagues want to be clear whether the 60–20 provision includes years that have been brought in, or whether it means only years actually served in the House. Does an hon. Member have to serve 20 years, or will someone who has brought in five years and served 15 qualify? We have drafted a provisional amendment to cover that point, but if we have misunderstood the position, clarification would avoid an unnecessary debate on Friday.
It is wrong to perpetuate the system whereby the facility—the 60–20 replacing the 62–25—is available only to hon. Members who have not been defeated at the election at which they qualify. An hon. Member who, on dissolution, decides not to stand again and has fulfilled the required 60–20 provision will qualify, but under the 1972 legislation an hon. Member with the 60–20 qualification, who stands and is defeated, for some inexplicable reason will not have the same pension as his colleague who left Parliament at the same time. That is indefensible and I shall seek to amend that in Committee.
Another problem has been highlighted by hon. Members on both sides of the House. If the Leader of the House is not careful, he will perpetuate what we all know as the Mawby anomaly by insisting that the 60–20 provision applies at the dissolution of Parliament. That really does not stand up to examination. It will create 807 injustices rather that solve them. It will mean that an hon. Member aged 59½, who does not return to the House, has two alternatives.
If he draws no penson until he is 65, compared with a colleague a day or two over 60, he will lose five years, which at the minumum will be equivalent to two years' full salary. For someone who has served 30 years it will mean a loss of three years' full salary. The alternative is that he has to accept an abated pension, although he is only a matter of months adrift in terms of his birthday. He will have the necessary age, and will have served the necessary 20 years, but his misfortune is that he will have gone out of the House a couple of months too early. He will then have to accept an abatement, which will mean that instead of his full entitlement of, say, 20-years—if that was his service—he will receive less than 69 per cent. of that figure, not just until he is 65, but for the rest of his life. That is a massive and unjustifiable loss.
We have a few days in which to consider the representations made from both sides of the House. I do not expect the Treasury Minister to welcome all the amendments and to promise wholehearted support for them by Friday. Although we have moved the requirement back a couple of years, the anomaly is still there, and, if anything, the new provision will create even greater differences between one hon. Member and another. Therefore, I urge the Leader of the House and his hon. Friend to look at this before Friday.
I recognise that I am no great parliamentary draftsman and that whatever amendments I table may be suspect. I hope that by Friday, if the Government are willing to co-operate with us, they will also be willing to co-operate on the availability of the parliamentary draftsmen to ensure that whatever amendments are moved reach the statute book in the correct form.
§ The Minister of State, Treasury (Mr. Barney Hayhoe)
This has been a constructive and useful debate. The two main themes that have flowed through it are the welcome for the Bill from both sides of the House and well-deserved tributes to my right hon. Friend the Leader of the House, who has taken an infinite amount of trouble to discuss this in all parts of the House and to seek the greatest possible consensus. Speaking as a Treasury Minister, I can say that his arguments were persuasive for the Treasury and this is reflected in the provisions of the Bill, which, as has been acknowledged, meet many of the points that have arisen during informal discussions. I shall try to reply to some of the points that have been made, and I or my right hon. Friend will answer in writing questions that remain unanswered at the end of my speech.
The right hon. Member for Bethnal Green and Stepney (Mr. Shore) asked particularly about the phraseology of clause 4 and the words, "in certain circumstances." This refers to the 60–20 provision applying only if the Member of Parliament concerned applies for his unabated pension to take advantage of the 60–20 provision before the close of the poll on election day, which means that he must make a fine judgment if he is not sure how he will fare. He is not allowed to wait to see whether he is elected and he must satisfy the trustees of the fund that he will not be standing again.
The right hon. Member for Swansea, West (Mr. Williams) wondered whether the precondition of making application before the result of the election was known is 808 reasonable and fair. It is the provision that now applies arid no change is being made by the Bill, except the change to 60–20 from 62–25. These preconditions are the same as they have been. However, I shall reflect on that point, and that will apply to all the points made in the debate.
The most important point that has been raised, first by the right hon. Member for Halton (Mr. Oakes), who was supported by powerful speeches from both sides of the House, is about the rigidity of the 60–20 provision. It was acknowledged that the example that was highlighted at the last general election has been dealt with by the Bill. As we all know, the individual with 29 years' service who missed out by some eight months is covered by the Bill. That should be clearly established.
§ Mr. Hayhoe
I understand that, and I listened carefully to the hon. Gentleman's speech and to others. I am fully apprised of the arguments. I repeat what my right hon. Friend said. The whole of the parliamentary pensions provision is based on a normal retiring age of 65. My right hon. Friend underlined that and made it clear, as it is important that we should not forget that when talking about these special provisions that should apply for those approaching retirement age when a dissolution is called. A reduction from age of 62 to 60 and from 25 to 20 years of service will be welcomed in the House. The suggestion that we should reduce the age below 60 in certain circumstances——
§ Mr. Hayhoe
As I understand it, the suggestion is that there should be flexibility about that so that someone with many years of service who has not yet reached the age of 60 at dissolution should not suffer in the same way as if we had not been making these provisions.
I think that I understand the point and we shall be examining what has been said in detail. In choosing the age of 60 we have to bear in mind that the normal retiring age is 65 and the probability is that a Parliament will last five years. The three figures of the normal retirement age of 65, a minimum age of 60, for which we are legislating, and the maximum life of a Parliament of five years make at least a logical framework.
I understand the points that have been made, and I make it clear that my right hon. Friend the Leader of the House has been listening carefully to the arguments. He is prepared to meet the trustees of the fund to discuss this matter urgently before Friday to see whether it will be possible to introduce some flexibility. The point made by the hon. Member for Colne Valley (Mr. Wainwright) and the comparison with tax laws and whether it is marginal relief or transitional provisions is one of the points that should be taken into account.
§ Mr. Williams
Will the Minister appreciate that the three points do not run together? Two of them do—the 60–20 and the retirement age of 65—but the dissolution point is an irrelevancy. If the lion. Gentleman thinks that it is not, will he explain what it is that automatically makes the needs of a Member who has served 20 years but who is two months over 60 at the time of the dissolution more self-evident than those of a Member who happens to be two months under that age?
§ Mr. Hayhoe
As has been acknowledged in the debate, any line that has been drawn will produce anomalies on either side.
§ Mr. Hayhoe
We may disagree about that, but in such pension provisions it is almost certain that, wherever a line is drawn — it was 62 and 25, which produced the anomalies that we are seeking to remedy — new anomalies can be thrown up. I have said that my right hon. Friend is prepared to discuss this with the trustees of the fund. I am sure that the House, understanding the way in which these matters work, will feel that that is a reasonable response to the points made in the debate.
My hon. Friend the Member for Woking (Mr. Onslow) referred to the question of nomination under clause 9. I am advised that the change of the word "person" to "individual" excludes the nomination of the nominator from being other than an individual. Under the Interpretation Act 1973 "a person" includes a corporate and a main unincorporate body. We shall consider that point because we appreciate the possibility of a nomination being made not to an individual but perhaps to a charity.
My hon. Friend the Member for Canterbury (Mr. Crouch) adduced a detailed argument about what the House had or had not done in the early hours of the morning. He will recognise that the clauses towards the end of the report, from paragraph 226(v) onwards, from which he quoted are prefaced by the comment that they are a summary of the main recommendations. The words "in future" occur in the main recommendations, but not in the summary.
A more significant point about retrospection is in paragraph 66. The matter was considered carefully by Lord Plowden and his colleagues. Paragraph 66 of their report makes it clear that they do not believe that retrospection is justified. I am glad that the House gave a general welcome to the provisions which make it possible for those with previous service in the House which would otherwise be counted at the accrual rate of one sixtieth to change that to an accrual rate of one fiftieth by paying 40 per cent. of the cost, which is the proportion of the cost of the pension scheme implied by a 9 per cent. contribution. That seems to be a fair arrangement, and I am glad that it was welcomed and accepted as fair, by the right hon. Member for Bethnal Green and Stepney.
Comments were made about the possibility of an accrual rate of one fortieth. In a well-considered, fair and authoritative speech, my hon. Friend the Member for Kettering (Mr. Freeman) said that if the accrual rate was changed there would be consequential changes in the contribution rate. That must be considered.
§ Mr. Hayhoe
I am happy to try to find an authoritative figure if it would be useful. However I believe that that moment has passed. We are now considering the provision, which has been generally accepted and which is in accordance with the resolution of the House, for the accrual rate to be one fiftieth.
My hon. Friend the Member for Stroud (Sir A. Kershaw) asked whether the over-65s would be able to buy added years. The answer is that they cannot in the normal 810 course of events, but that under the Bill they can make that transition for the years of past service from sixtieths accrual to fiftieths accrual by purchase.
Clause 5 does not override the Inland Revenue rules. It is important that in our own pension scheme we should seek to stay in harmony and in line with the Inland Revenue rules that apply to all other pension schemes for other people. Hon. Members will agree that it would be wrong for us to seek a privileged position for our pension scheme, which would not be available to other people.
The purpose of these changes is to get a balanced contribution, which takes into account the extra cost of indexation. My hon. Friend the Member for Stroud asked whether we were satisfied that the costing was realistic. I assure him that it is according to the best information available. He asked whether the proportion of 40 per cent. was in line with the police scheme. It is broadly in line with the police scheme, but I hope that he would not hold me to one or two percentage points. I can find the precise figure for him if he wishes it. He also drew attention to the fact that as a result of the provisions new hon. Members would gain nothing like as much as older hon. Members with past service.
My hon. Friend the Member for Stroud also asked about hardship cases. The trustees of the fund have been worried about such cases. In some circumstances they have been worried about the limit of £3,750. The provisions in the Bill will multiply that figure by a factor of 10. The trustees will have the authority—they must act properly, as I am sure that they will—to increase the sum up to £37,500.
Many other points were raised during the debate. It would be best for my right hon. Friend the Leader of the House and me to consider those points carefully. We shall discuss urgently with the trustees of the fund the most significant point that has emerged from the debate, which is the operation of the 60–20 provision. Having given the House those assurances, and having undertaken to reply in detail to other points, I hope that the House will give the Bill a Second Reading.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Douglas Hogg.]
§ Committee tomorrow.