§ Mr. Alan Williams (Swansea, West)
I beg to move amendment No. 2, in page 9, line 3, leave out subsection (2) and insert—'(2) The following shall be substituted for section 7(4A) of the 1972 Act:—4A. Where a person who has attained the age of sixty years and had been a Member of that House for a period of not less than twenty years, or for two or more periods amounting in the aggregate to not less than twenty years and has ceased to be a Member of that House applies to the Trustees for a pension under this section then if the Trustee s are satisfied that he does not intend to stand for re-election to that House, he shall be entitled to receive a pension under this section calculated (subject to sections 11 and 31 of this Act) in accordance with subsection (3) of this section.".'.
§ The Second Deputy Chairman of Ways and Means (Mr. Paul Dean)
With this it will be convenient to take new clause 1—Pensions of Members—.'In section 7(1)(d) of the 1972 Act for the word "sixty-five" there shall be substituted the word "sixty".'.
§ Mr. Williams
We touched briefly on this aspect of the Bill on Second Reading and I want to pursue the basic issue a little further. However, first let me say that we do not intend to press new clause 1. Its purpose is to enable certain matters to be put on the record and for points to be made for the Minister's further consideration.
The effect of new clause 1 would be to drop the age of qualification for pensions to 60 for everyone. Strangely enough, the new clause came about as a result of a representation from a previous lady Member who said that it seemed anomalous that women should qualify for state and other pensions at the age of 60 whereas in the House of Commons they had to wait until the age of 65. An amendment to extend such a change to women Members only would not make a lot of sense in the current context of sex equality. I therefore tabled the amendment to enable the Minister to explain what difficulties might exist in the case of ex-Members and with regard to lowering the age for women Members to conform to the pensionable age outside the House. This would clarify and put on record why Members of Parliament find, when the arithmetic of contributions is being discussed, that they are compared with civil servants, yet with regard to the benefits that accrue on age of retirement there appears to be no relationship. Members of Parliament have a retirement age of 65, whereas civil servants enjoy a retirement age of 60. I should be grateful for the guidance of the Leader of the House on those two issues.
The fundamental amendment is amendment No. 2. Whether it is correctly drafted, I cannot be sure, but the 1175 intention is clear. It is to ensure that at the age of 60 any Member who has paid 20 years' contributions will be eligible for his pension. The Government have been helpful in part about our objectives, which we acknowledged on Second Reading. They have accepted that, if a Member is in the House on his sixtieth birthday, and subsequently leaves with 20 years' service, he will qualify for whatever pension he has then earned, and will be able to draw it immediately.
What I cannot understand, and what I tried to have eludicated on Second Reading, is what is more deserving about having one's sixtieth birthday as a Member of the House rather than as an ex-Member, because in essence that is the suggestion. If both have served the same number of years and reached the minimum service qualification, having paid their 20 years' contributions to the fund, why is the one not in the House regarded as being less deserving or needy than the one who remains in the House? One could argue that the exact opposite might be the case. A Member may enter at the age of 35, 36 or 37 and leave at the age of 55, 56 or 57. I have in mind the case of a former right hon. Member who telephoned me on Monday. He is now 57. Although he is happily employed, he has found it impossible to enter into any further pension arrangements in his present employment. On the other hand, if a man enters at the age of 40, he will already have built up considerable pensionable entitlement in his previous job, and will immediately qualify for the full quota of the parliamentary pension. Thus it could be submitted that in many cases the ex-Member will be worse off and more in need of the pension entitlement than the Member who remains in the House until the age of 60.
Taking this a stage further, let us consider the case of a Member who leaves the House before the age of 61, possibly at the age of 55. I thank the Leader of the House for the Government amendment which brings in the six-month rule because until now a Member had only until the eve of poll to apply for an abated pension. Such a person at the age of 55 within six months must choose an abated pension which at that stage would be 50 per cent. for the rest of his life, or he must recognise that he will be unable to draw his pension until he is 65.
If the Member decides that he does not want the pension at the age of 55, he would do better to take that option than wait until he is 60. He thus gains five years at 50 per cent. of his pension entitlement, and receives 20 per cent. of salary. If he lives to the age of 75, he subsequently loses 15 years of 50 per cent. of his pension, a loss of over £50,000, assuming the rate of salary that it is hoped to achieve on the phasing by the end of this Parliament.
In such a case, a Member leaving at the age of 55 who accepts abatement, and lives to the age of 75, will suffer a massive loss in terms of the return that he gets from the pension scheme. If he does not do that, he must recognise that he will lose the five years between the ages of 60 and 65. Even if he has done 20 years' service, he will lose the equivalent of two years' full salary, some £36,000, as compared with his colleague who has stayed in the House until his sixtieth birthday. Both will have served the same number of years in the House and made the same contributions from salary during their service. The only distinction—and it is a meaningless one—is that one man enjoys his sixtieth birthday as a Member, and the 1176 other has his sixtieth birthday as an ex-Member in miserable contemplation. This is not a tenable definition of qualification.
While I accept that certain limited concessions are made in Government amendment No. 7, the implications of the amendment do not address themselves to the fundamental problem. The problem will not be eliminated. Amendment No. 2, I submit, is the only way to achieve what I think will be equity between Members contributing to the pension fund. If the amendment is not agreed to, the inequity to which I have referred will result and will lead to further discussion, come the time of the next Dissolution of the House, about the kind of case to which the Leader of the House and other hon. Members referred on Second Reading. The amendment proposes that the sixtieth birthday be coupled with the 20 years' service, although a serving Member would have to wait until his retirement, as he will be drawing his parliamentary salary. This would meet the needs of equity and fairness.
I see no reason why the Government should not be willing to accept amendment No. 2, and I urge the Committee to support it. Amendment No. 7 falls far short of that in terms of its provisions. Indeed, if there were sufficient support, I would ask hon. Members to consider voting on amendment No. 2 because it is an important central issue to which we shall return frequently. If it is resolved today, further acrimonious debate and discussion will be avoided.
§ Mr. Norman St. John-Stevas (Chelmsford)
I warmly welcome the amendment and congratulate the right hon. Member for Swansea, West (Mr. Williams) on his clear, reasoned and researched argument for it.
Members of this House are among the lowest paid of legislators in the European Community, indeed in the wider world, a point that is not always appreciated by the public, and they are not helped in that appreciation by the way in which, when the subject of Members' salaries and pensions is considered, it is treated by the press.
Our salaries are subject to recommendations by what is called the Top Salaries Review Body. So far as we are concerned, it could be called the bottom salaries review body. Even the board's modest recommendations have not been implemented by the House, and the implementation will get nowhere near the point of the board's recommendation for several years, until 1988.
There is an important point affecting Members' pensions on which we should reflect. Because of this postponement of the increase in salary, the pensions which Members who retire at the end of this Parliament will get will be much lower than those recommended by the review body. Further, we must remember that it is not the final salary which a Member receives that determines his pension; it is his salary over the final year of his Membership of Parliament. Thus, the pension is liable to be even lower, as it will not be the final salary. The salary will be averaged out over the whole year.
Not only are Members of Parliament lowly paid. They are also subject to an endemic job insecurity. We cannot complain about that, because it is part of the democratic process. At any moment Members, if there is an election, may be dismissed by the electorate. That is our political system and we must accept it. But we need not accept that unnecessary hardship should be caused to those who are subject to the system. I am thinking not only of the 1177 individuals here but of the families of the Members involved. I am thinking, too, of the anomalous position in which Members may find themselves because of the interpretation of the small print of the various pensions Acts and of the latest Government amendments.
I agree with the right hon. Member for Swansea, West that we shall be back in the same situation of anomalies as we are now if the Bill is not amended. I appreciate that the Leader of the House has taken account of the position of certain Members at the last election. Particularly I am thinking of our former colleague, Mr. Ray Mawby, whose situation has been much publicised and who has suffered considerable hardship from the provisions of the present legislation. That situation could recur at a slightly earlier point unless the Bill is amended.
I was glad, when I was Leader of the House, to be able to do something to improve the situation of hon. Members. We introduced severance pay for the first time. That is necessary to alleviate the financial hardship of Members who suddenly lose their seats. I was also pleased to be able to propose for the first time that those who work so hard for us, our secretaries, should receive pensions and should continue to receive their salary after the death of a Member. Until that time, on the death of a Member, the salary of a secretary was cut off, an extraordinary anomaly.
All the time the situation is being improved and I am the first to admit that there are improvements in the Bill. However, we could go further. Members still in their fifties, with family responsibilities, can be dismissed. While some Members can always find employment—if they have a business of their own or a profession, or if they have certain dynamic resources to keep themselves afloat — there are other Members who do not have that opportunity and who find it extremely difficult in their fifties to obtain alternative employment.
We should consider the lot of those Members and seek to alleviate any hardship that may be caused to them and their families. Hon. Members should, as of right, have the ability to claim their pensions at 60 after 20 years' service. The amendment is well founded on principle, it seems to be adequately drafted and I hope that the Government will accept it.
§ Mr. John McWilliam (Blaydon)
I will not go over the arguments which my right hon. Friend the Member for Swansea, West (Mr. Williams) adduced in moving the amendment. Some additional points can be made in support of it, the first being that not many hon. Members would qualify under it. The number would be small, for two important reasons. The first is that the average length of service of a Member is less than 10 years; few of us have the opportunity to spend more than that time in this place.
Secondly, it is clear that the amendment would not cover a number of cases that have arisen. Yesterday I had lunch with Charles Morris, a respected former right hon. Member of this House. Charles, who is now 57, served here for 19 years and 230 days. He would not qualify under the amendment. While, therefore, we are trying to move towards a system of equity, we recognise that we cannot encompass all cases. The amendment would not cost much.
The Leader of the House made great play on Second Reading about the cost of the scheme and the benefits arising. He said that civil servants had to pay 8 per cent. 1178 for their pensions. He was wrong about that. Civil servants are assessed as having 8 per cent. deducted from their notional salaries for their pensions. They pay an additional sum on reaching the age of 21 for widows' and orphans' benefits.
When I was a civil servant and the Post Office became a public corporation, we went to a funded scheme, and the actuarial calculation of what the scheme would cost was 6.383 per cent., not 8 per cent., which shows that the figures which are being bandied about are not of great importance in our consideration of the matter.
We should deal with the effect of what is proposed on the liquidity of the pension fund. The fund is awash with money now. That means that our money is not going out in benefits to former Members who have retired from this House. It is clear that the Bill recommends sensible improvements, and I welcome them, but in equity it is wrong to put the position of someone who was unfortunate enough to lose his seat, but who has paid more into the fund, below the position of someone who has been fortunate enough not to lose his seat. It is important in terms of equity and honesty that we carry the amendment. I cannot understand why the Leader of the House is resisting it. I do not believe that it would lead to the sudden collapse of the liquidity of our pension fund or put other benefits at risk. I hope, even at this late hour, that he will reconsider his decision to resist the amendment and so benefit the few Members who would otherwise find themselves in an anomalous and unfortunate position.
§ 10 am
§ The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen)
I thank the right hon. Member for Swansea, West (Mr. Williams) for the charm which he exercised—a charm that only the Celts possess—in speaking to the new clause in a seemingly casual fashion but one tinged with passion. He has introduced an amendment which would have a transformative effect on the entire scheme but, in a sense, that is what Friday mornings are all about. On Fridays we can take these matters and consider them in a calmer mood than perhaps is possible earlier in the week. The right hon. Gentleman was kind enough to say that he would not press the new clause to a Division. I think it fair to say that the hon. Member for Blaydon (Mr. McWilliam) and my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas), in their endorsement of the speech of the right hon. Member for Swansea, West, had more in mind amendment No. 2 than the new clause.
There is rather more inherent logic in new clause I than in amendment No. 2. The new clause seeks openly and avowedly to convert the scheme so that it is based upon retirement at the age of 60 rather than 65. That is a fairly massive transformation. Retirement at the age of 60 combined with the proposed abatement could go well towards meeting many of the difficulties that have convulsed us over recent years when ex-Members have found themselves in considerable hardship after general elections. I take in good faith the decision not to press the new clause. I recognise the right hon. Gentleman's wish to ventilate the topic, which is one to which we might return in subsequent years and subsequent Parliaments.
Whatever judgment we make, I hope that we shall not think that we are conditioned by what happens elsewhere in the public sector. Each public sector pension scheme pays regard to what are thought to be the specific 1179 circumstances of the form of employment on which it is based. It is a truly Herculean task correctly to identify the vagaries of our employment and how best they may be matched by a pension provision. The great common characteristic is that public sector systems are index linked. I support that principle provided that the index linking is matched by an appropriate level of contribution. It is index linking that sets public sector schemes apart from many others.
I am glad that the right hon. Member for Swansea, West is not seeking to press the new clause to a Division because I think that it would considerably increase the cost of the scheme. It would certainly require a revision of Members' contributions. For a Friday morning performance, that is rather more ambitious than time permits.
I recognise that amendment No. 2 has attractions that have encouraged my right hon. Friend the Member for Chelmsford. My right hon. Friend reminded us of his own striking personal contribution to the pension arrangements of the House and the House is indebted to him. Along with the attractions the amendment carries the incipient danger that we may set up a sub-scheme within the general scheme, which is based upon retirement at 65, for those who wish to retire at 60. The speech of the right hon. Member for Swansea, West contained an interesting sentence, which referred to "those who have served or paid 20 years of contributions." That was manna to the soul of the hon. Member for Blaydon because the Amendment Paper makes it clear that he is advocating reckonable service, which would cover parliamentary service and other contributions.
The House will recognise that entitlement to a pension at 60 becomes a more considerable benefit than anything that has hitherto been considered. In actuarial terms, it is an infinitely better buy, as it were, to take a full pension at 60 than at 65.
It is on that central and philosophic point that I ask the Committee to desist from endorsing the amendment and to consider the other approach to the hardship problems that I shall elaborate upon when we discuss amendment No. 7.
§ Mr. Williams
I am grateful to the right hon. Member for Chelmsford (Mr. St. John-Stevas) for his support. We know that many of our colleagues who left the House at the 1983 general election are grateful to him for the important changes that he introduced from which they have benefited. Those benefits were not available to their predecessors.
The Leader of the House has not responded to the basic argument. A sign of his awareness of the weakness of his case is that he tried to defend himself against the amendment by using a sentence which formed part of my speech and which may have been a verbal inadvertence but which is not covered by the amendment. The right hon. Gentleman tried to impute to the amendment that I would be encompassing the reckonable or bought-in time that my hon. Friend the Member for Blaydon (Mr. McWilliam) will speak to when we discuss amendment No. 7.
The second line of the amendment reads:and had been a Member of that House for a period of not less than 20 years".I am sure that the right hon. Gentleman recognises that the central force of his argument against the amendment has 1180 disappeared at a stroke. He is left standing in a state of blushing embarrassment with nothing to conceal the inadequacies of his case. He has not faced the fact that my hon. Friend the Member for Blaydon presented, that the average length of service in this place is only 10 years.
§ Mr. Williams
I bow to the hon. Member for Stroud (Sir A. Kershaw), who is one of the trustees, but the length of service is not substantially more than 10 years. There are not many Members who serve for 20 years. I am somewhat insulated because I am now in my 20th year of service. When I look at myself in the mirror, I realise what a telling and gruelling 20 years it has been. However, most Members do not serve for 20 years or anything like that time. Most of our colleagues who leave this place before the age of 60 do not do so voluntarily. We are allowing Members to leave voluntarily at the age of 60, but those who are victims of circumstances outside their control are excluded from the provisions of the scheme.
§ Mr. McWilliam
Perhaps my right hon. Friend would care to comment on the frequency of the attentions of boundary commissions on constituencies and relate them to the 20 years of service that he is talking about. If he does so, he will find that the two factors do not coincide. We are trying to take account of the vagaries of our democratic system. We all know that trouble is in store when the boundary commissions descend upon us.
§ Mr. Williams
During the 20 years that the Leader of the House and I have served in the House we have endured seven elections — I in somewhat more tenuous circumstances than him, in that I have seen my majority reduced to 401 and, therefore, have felt the cold wind of unemployment blowing on polling day.
Most hon. Members who leave the House before the age of 60 do so either because they have been defeated at an election or because, quite unpredictably, the boundary commission has changed a seat that might once have looked to be absolutely secure. An example of that in south Wales is Monmouthshire and Pontypool. Under the original boundary commission proposals, one of the safest seats in the country, Monmouthshire, would have been dismembered. Someone who had entered the House at a younger age than the present Member for that constituency could, if the changes had gone through, have found that, although he had given up his career to take on what appeared to be a safe seat, he could have been out of the House.
Defeats, ill-health and boundary changes usually force hon. Members out of the House before the age of 60. We all know that there is an addictive characteristic to the House, which is why so many hon. Members, having left the House, scramble to come back, despite what we say about our conditions. The queue for entry is considerable. The right hon. Gentleman has skated over that aspect.
I am not, as the right hon. Gentleman implied, trying to introduce an automatic retirement age of 60; I am trying to extend what he is already doing for hon. Members to those with the same qualifications of age and service who are no longer in the House. As so few of our colleagues serve the full 20 years, even to the age of 65 and over, few will leave the House with 20 years' service before the age of 60. Therefore, no great cost would be involved in my proposal. There is a great inequity for those trapped by the 1181 consequences of what otherwise is a generous recognition by the Government of arguments put forward by hon. Members. There is a discrimination between people of equal contributions, and that is the basic point that the right hon. Gentleman has not answered.
The right hon. Gentleman's scheme would impose three conditions—age 60, 20 years' service and still in the House on the 60th birthday. The first two conditions are logical. There must be a line, whether it is 60–20 or 61–21. Such a line applies to everyone. But it is nonsense to have the absurd requirement that someone who reaches the age of 60 must still be serving in the House. All the right hon. Gentleman is doing is storing up trouble for himself, the future holders of his office and the trustees, when we could eliminate a major problem by accepting my amendment.
§ Amendment negatived.10.15 am
§ Mr. Biffen
The purpose of the amendment is to consider the governing factors that enable an hon. Member to be eligible for the benefits of early retirement. I shall put the point briefly, and I am sure that the House will not accuse me of undue discourtesy for doing so.
It has always been assumed that the early retirement conditions include satisfying the trustees that an hon. Member was seeking to retire only, and that there were no other factors—especially that of parliamentary defeat. That distinction is somewhat unreal. The amendments will provide a greater flexibility and some taper in the arrangements, and would be framed to cover those defeated in the 1983 general election. If they are carried, defeat, no less than the decision to retire, would enable an hon. Member to take advantage of the early retirement provisions.
§ Mr. Williams
I pay tribute to the right hon. Gentleman for dealing with this point, which was almost overlooked by everyone. It was by pure accident that, when the right hon. Gentleman gave me a photocopy of the original 1972 Act, and I was sitting on the Bench trying to phrase an amendment, when looking through words that I would strike out I came across some that I did not even realise existed. There was a provision to disqualify those standing at an election. I saw the look of horror on the faces of hon. Members on both sides of the House who realised how they were juggling with their futures.
In another function, I have just completed service on the Committee and Report stages of a Bill dealing with the future of regional policy. We complained that the legislation made it difficult for hon. Members because it amended by reference. Here is a case where that hazard has led to our perpetuating something about which everyone had forgotten. The Bill amends the 1972 legislation, which was also amended in 1978. Without fully studying the 1972 Act, to which we all became so accustomed that we thought we knew all that it contained, we would have continued to perpetuate an anomaly. I am glad that the right hon. Gentleman immediately accepted the point and recognised that it would be unfair for an hon. 1182 Member to be able to retire voluntarily and obtain the benefits of the 60–20 rule, but that a colleague who had been defeated at the same election would be precluded.
On behalf of the Opposition, I express my gratitude to the right hon. Gentleman and welcome the amendment.
§ Amendment agreed to.
§ Mr. McWilliam
I beg to move amendment No. 4, in page 9, line 6, leave out 'in paragraph (b)' and insert'for paragraph (b) there shall be substituted the following:(b) at the dissolution had attained the age of sixty years and whose aggregate period of reckonable service as a Member was not less than twenty years.".'.
The Second Deputy Chairman
With this it will be convenient to take amendment No. 12, in page 9, leave out lines 7 to 11.
§ Mr. McWilliam
I should like to declare my interest, or lack of it, in that when I came to the House in 1979 I brought with me my accumulated pension entitlement from my period of service as a civil servant and with British Telecom, which amounted to more than 20 years of reckonable service in the House of Commons pension fund. Therefore, at first sight I am one of the people who may be affected by my amendment. However, I will not be, simply because of my age when I came to the House. With the other changes in the scheme, it will be impossible for me fully to realise the contributions that I brought in. By the time that I reach the age of about 53, I shall have completed all the years that I need to complete to get two thirds of my salary as pension, so my contributions during my years of service in the House that I hope to have after that age will benefit me nothing at all, except for the update in the pension in line with the increase in inflation and parliamentary salaries, or whatever we can look forward to. Therefore, I have no interest.
At the moment the Bill is inequitable. When I came to the House, I was given six months to make up my mind about whether to transfer into the parliamentary scheme. At first sight, that is fair enough. That seemed a reasonable thing to do. Had I known then what I know now, I would not have transferred that benefit into the scheme; I would have left it frozen in the BT fund, where it would have given me twenty sixtieths of 'whatever salary technical officers got in the year that I retired—at 60, I might add — and merely built up contributions in the parliamentary pension fund. Even at the age of 60, given the legislation, I could still have twenty-two fiftieths of my salary in the parliamentary pension fund. If I carried on to the age of 65, I would draw a full parliamentary pension, while for five years I would have been drawing a BT pension of about one quarter of the salary for that grade.
If the present situation is to persist, it will not be to the benefit of the fund. There will be a substantial disincentive for people who have a large entitlement to a pension in another fund with which we have a transfer agreement to bring their money into the fund. They will do precisely what I described.
I have no direct interest in this matter because of my age when I came into the House, but it is unfair that people can transfer into the fund, but when they get in they suddenly discover that they did not buy all the benefits of the fund. The only benefits that they buy are the ones relating to terminal pensions and widow's pension. They do not buy the benefit of reckonable service towards early retirement, to which they might think they were entitled.
1183 If my amendment is carried, it will not cost the fund anything. If it is not, in the long term it will cost the fund money because that disincentive will be apparent, and hon. Members will take the appropriate action. I have the highest regard for people in the Fees Office and for their advice. I am fairly certain that they will regard themselves as duty bound to advise an hon. Member to his best benefit. In the circumstances that I have described, that advice can be only that he should not bring in his money, but should freeze it.
For those reasons, the amendment is unexceptionable. It will not cost the fund anything. I hope that the Leader of the House will accept it.
§ Mr. Allen McKay (Barnsley, West and Penistone)
I should like to reinforce the arguments of my hon. Friend the Member for Blaydon (Mr. McWilliam) and those put forward on Second Reading. I was disappointed that at that time the Minister did not mention the ideas that have now given rise to this amendment. We would have liked him to explore further hon. Members' views.
We do not want to try to create an early retirement scheme. Hon. Members to whom I have spoken have no intention of retiring at 60. The intention may come from other sources, but they certainly do not intend to do so. I do not know of any hon. Member who came to the House not wishing to stay here until he was 65—in fact, quite the reverse. Most hon. Members whom I know were well above the age of 65 when they retired. Therefore, no one is trying to create another scheme within the scheme.
It is anomalous that people can bring back service into the scheme, yet cannot get the benefits of that service. Under the scheme, after 20 years' service people can draw a pension at 60 if circumstances warrant it, yet the amount of money that that person brought in from his previous service is not taken into account. For example, had I stayed with my old employer, when I finally left his service I would probably have been financially better off at the age of 60 than I would be under the scheme.
I do not know whether I can declare an interest. The Leader of the House could tell me how long the Government wish to remain in power, so he might tell me whether I have an interest.
It is wrong for no recognition to be made when people bring back service in to the House of Commons pension fund, particularly since, if one becomes ill at 60, one can draw a pension without deductions. That is ridiculous, when we could make a change without cost. The Minister told us, when we mentioned that on Second Reading, that we always said that there would be no cost when we wanted something, but I do not think that the cost would be all that great, if there is a cost at all.
We are asking only that reckonable services be taken into consideration when we talk about the possibility of a pension at 60 in certain circumstances. We do not wish to create an early retirement scheme. Irrespective of the pitfalls, I am sure that any person coming to the House wants to come anyway. Irrespective of the problems, dangers and disadvantages, I still wanted to come. I have no personal feelings in this matter. Recognition should be given to hon. Members' past service, particularly when they bring money into the pension fund, which is awash 1184 with money anyway. If it is awash with money, that is either because too big a contribution is going into it, or insufficient is being taken out for hon. Members.
§ Mr. Biffen
Again, I thank the hon. Members for Blaydon (Mr. McWilliam) and for Barnsley, West and Penistone (Mr. McKay) for the reflective way in which they spoke to the amendment. The hon. Member for Blaydon said that the amendment was unexceptionable. I am sorry that he is reduced to accepting a state of consensus in our national politics so that he has to table such amendments. I would have been happier if it were a challenging amendment, designed to flush out how the Government were thinking on this great topic. There is no doubt that the circumstances of the fund are being altered by the availability of the facilities for buying added years and transferred services.
§ Mr. McWilliam
I felt that the amendment was unexceptionable in a financial sense. In a political and philosophical sense, the right hon. Gentleman is entitled to regard it as he chooses.
§ Mr. Biffen
The hon. Gentleman is now trying to ride both horses at once, in the best alliance fashion.
The reason why this matter will detain the Committee, not merely today but on future occasions, is that there will be a growing number of Members with a commitment to the fund which goes to the purchase of added years and transferred service. I have both added years and transferred service, and I have served for over 20 years in the House, so statistically I am in a minority and almost everything that I say today will, I suspect, be against my own financial interest. However, I shall plough on in the cause of righteousness and the Treasury brief.
The relationship of the detailed application of the fund to other public sector schemes does not bear much analysis, because of the extraordinary circumstances of parliamentary life. What we are discussing may be the disposition of only a modest fraction of the fund. We are talking about the hardship cases which arise when hon. Members with long service and mature years find themselves out of the House for one reason or another. I agree with the hon. Member for Barnsley, West and Penistone that most hon. Members spend their time working out how to stay here, not how to leave, but the problem exists, nevertheless. It is a hardship problem related to the age and service of hon. Members and what they have thereby forgone in ability to earn in the outside world or to have an effective parallel career.
If we say that in this particular case reckonable service will be available—in other words that it will be not just the 20 years served in the House but the number of years that the Member has clocked up outside and transferred, or the amount of money that he has used to purchase added years, which will count for the 20 years' service for early retirement — we shall undermine the arguments which sustained our earlier discussions of these matters, which were related to the hardship that resulted when a Member with long service in the House was defeated at a particularly unpropitious time from the point of view of drawing the full pension.
§ Mr. Allen McKay
Hon. Members who come to the House late have also given up careers. Had they stayed in those careers, they would probably have been financially 1185 better off. Does the right hon. Gentleman not also agree that there is a danger of looking at the pension fund as one might look at severance pay? Further on in the Bill, severance pay takes into account the number of years actually served by an hon. Member in the House. If the Minister is not to consider reckonable service, an hon. Member who retires at the age of 60 will be unable to draw his pension until the age of 65 and yet will have only 50 per cent. of the amount of severance pay. That will cause a great deal of hardship.
§ Mr. Biffen
Severance pay is related to years served in the House, not reckonable service. Severance pay is also the factor of a taper. That is precisely the approach of the Government. What we are dealing with—I do not speak in any pejorative sense—is a privilege. We are offering something to hon. Members who are defeated and who leave the House, or who choose not to stand again at a certain age and after a certain period of service, because we believe that, broadly speaking, there is an area of hardship. We are therefore offering a palliative, basing our calculations upon length of service in the House and age, and not transferred pension contributions from the world outside. That stands all square with the severance proposals in philosophical terms.
I have no doubt that the topic will be raised again and again in debate, as the number of hon. Members who have purchased added years or transferred service grows, but at this stage the line should be held. I invite the Committee to hold the line.
§ Mr. Williams
I have not closely followed through the consequences of the changes. When an hon. Member who reaches the age of 60 and who has served 20 years and has not bought anything in leaves the House, will he qualify for the full 20 years at Dissolution? I may not have understood the position. If a Member has served 20 years and has bought in five years, does he on his early retirement get twenty fiftieths or twenty-five fiftieths?
§ Mr. Williams
That is what I thought. Here is the problem. A Member who is aged 60, and has served 20 years plus five years bought in, gets half pay from the age of 60. A Member who has served 15 years and bought in the same five years gets nothing. That is why, as the right hon. Gentleman has intimated, we shall return to this point. There is a genuine quandary. I do not pretend to know the answer. As the right hon. Gentleman says, there will be the difficulty that more and more Members are bringing in substantial pension entitlements. One would have doubts if someone entered the House at the age of 50 with 19 years' pensionable service, left at an early election and qualified under this scheme. That could happen, though I realise that it is improbable.
We shall not settle this issue today. Again, there seems to be an anomaly. Once an hon. Member has reached the qualifying period he gets the years that he has bought in if he leaves early, whereas if he is a year or so short, the situation is different. My hon. Friend the Member for Blaydon (Mr. McWilliam) might have bought in 21 years' service. He would have served 18 years in the House and bought in 21. He would have contributed for years for no benefit whatsoever — because he had exceeded the permitted maxima—and would not get a single penny.
The right hon. Gentleman may tell me that that has already been taken care of. If the question has not been 1186 considered in detail, perhaps the review body could be asked to consider it before it is considered again on the Floor of the House. Some attempt to reach a logical and defensible position is desirable, although I recognise the hazards of pursuing that route.
§ Mr. Biffen
I shall willingly and full-heartedly respond to that request. At the moment, however, there is an anomaly, or a potential anomaly, whichever way one views the situation. The Bill attempts to reach a common sense holding position. At some future time we may well wish to reconsider entirely the provisions under which the 62 years of age and 25 years of service are the basis on which we make the calculations in attempting to deal with hardship cases.
We have now broadened the position to a point where increasingly, there is an enclave—I will not call it an enclave of privilege — of those who retire on full pension at 60 and have clear benefits, as against those who stay and take the abated pension based on retirement: at 60, who are the generality of those in the scheme. There is a danger that, within the major scheme, because of a good-natured attempt to deal with a limited number of hardship cases, a sub-scheme will grow up that will make a nonsense of the major scheme in actuarial terms. That will be a challenge to both sides of the House. However, I shall draw the right hon. Gentleman's remarks to the trustees. I know that they will be anxious to consider those points.
§ Amendment agreed to.
Amendment made: No. 6, in page 9, line 11, at end insert
(b) for paragraph (c) there shall be substituted the following paragraph—
(c) is not or was not a candidate for election to that House at the general election consequent upon the dissolution or was such a candidate but was not elected to that House,";
(c) for the words "day of the poll in the general election consequent upon the dissolution" there shall be substituted the words "period of six months beginning with the day of the dissolution".'.—[Mr. Biffen]
§ Mr. Biffen
I beg to move amendment No. 7, in page 9, line 11, at end insert—'(2A) The Lord President of the Council may by order made by statutory instrument make provision in relation to the dissolution of Parliament on 13th May 1983 and any subsequent dissolution—
- (a) for extending entitlement to a pension under subsequent (4A) of section 7 of the 1972 Act to persons in relation to whom the conditions specified in paragraph (b) of that subsection are not satisfied or are satisfied only in part;
- (b) for any entitlement to a pension conferred by an order made by virtue of paragraph (a) above to be subject to such abatement as may be specified in, or determined under, the order.(2B) An order under subsection (2A) above may—Amendment No. 7 is my major contribution to the Committee stage. It addresses the problem of how we deal with the hardship that the House has perceived is experienced by some Members of a certain age who have long service in the House and then cease to be Members. 1187 I think that the House agrees that the distinction between whether the Member has been defeated, has retired or has suffered from the vagaries of the boundary commission is meaningless.
and a statutory instrument containing an order made under that subsection shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.
- (a) make different provision for different cases; and
- (b) be framed by reference to the opinion of the Trustees or to their approval or require any matter to be established to their satisfaction;
Perhaps I should begin by describing how, hitherto, we have approached the problem. The problem was considered when the legislation provided no system of entitlement to an abated pension as is now proposed. We now have an entitlement to an actuarially abated pension from the age of 50. That gives a smooth graph of entitlement up to retirement age for those Members who leave the House before they are 65. That consideration used not to be available and the House decided that a 62-year-old Member with 25 years service should be entitled to a full pension if he fulfilled those two criteria on retirement. It was hoped that that provision would deal with the hardship problem, which was narrowly drawn, but the immediate consequence was a well-known case, to which I do not want to give further publicity, of an hon. Member who fell just short of the age requirement.
As a result, and in response to pressures generated within the House and on advice tendered by the trustees, it was proposed that the age qualification be lowered from 62 to 60 and that the years of service be reduced from 25 to 20. It was argued, however, that, although that was a touch more liberal than the original 62–25 qualification, it gave rise to difficulties in that the relief was absolute and that if anyone fell just outside the new provision they would be entitled to an abated pension, which used not to be the case, but there was still a substantial gap, rather than a chasm, between what could be obtained under the full pension provisions and taking an abated pension.
We could have relaxed the provisions a little further, but that was not the general drift of representation. That drift, which has been argued eloquently today by the right hon. Member for Swansea, West (Mr. Williams) and my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) was that the pension should be available at 60, even if the Member left the House some time before reaching that age. Amendment No. 7 does not follow that route. It tries to taper the two factors that have given entitlement to the early pension—the age factor, which now stands at 60, and the years of service factor, which now stands at 20. The amendment provides an order-making power so that an order could be made for that taper.
I hope that the Committee will give the Government the authority to proceed on those lines because, first, we would want to discuss with the trustees the details of how the taper should operate. Naturally, we would want to consult as widely as possible. I am sure that the Committee will confirm that consultations prior to the publication of the Bill were extremely wide. However, a statutory instrument would be available, subject to the negative procedure, so the House would have the ultimate chance to decide on what was proposed.
I do not want to run from the debate without giving, in broad terms, the type of taper that I believe would be appropriate. I have in mind a taper on age running from 57 to 60 and a taper on years of service running from 17 to 20. Perhaps because the famous case that has initiated much of the consideration came about because the 1188 Member's age was just a touch short, we have overlooked the extent to which exactly the same problem might have arisen if the number of years of service had fallen a touch short.
I have in mind that such broad tapers would involve the scheme costing an extra 0.25 per cent. on the 23 per cent. which is now its assessed cost. I believe that we could devise a set of figures by which the taper would be less than the full pension—that is self-evident—but it would be significantly better in age terms than taking an actuarially reduced pension. I believe that that would cover many of the hardship problems that arise from Members leaving the House voluntarily at a mature age. It would also avoid some of the difficulties that would be prayed in aid if Members left the House relatively early. It is not difficult to give 20 years service if one enters the House at the age of 30. Such a Member could leave relatively early, have another career and then pick up a pension at 60 with no hardship circumstances and with a considerable actuarial advantage over having to pick up the pension at 65. We can all quote the difficulties of each other's schemes. I hope that this scheme will provide a reasonable solution without seriously challenging the concept that it is based on retirement at 65. I commend it to the Committee.
§ Mr. Williams
I thank the right hon. Gentleman for the improvement. I hope that he will not think me churlish for saying that I give it a limited welcome. It is almost impossible to produce a scheme that will have everyone's complete approval. It is desirable in so far as it lessens the harshness of the taper. We are grateful for that. We have also to be grateful in so far as it recognises the need for a taper on the contributions side. We must welcome the fact that the Minister and his officials have taken on board a point that we did not press in our discussions with the Leader of the House.
However, the amendment does not meet the point about the person who has the qualification and leaves the House somewhat earlier. For example, it will not help Charles Morrison, whose case has been referred to, and who has said that he is willing for his case to be mentioned. Although he is 57 now, he was 56 at the time of the last general election, and although he had done 19 years and 330 days' service, because of the age of 56, even if there were anything for him on the years of service provision, the abatement would be so penal at the age of 56—it would be virtually 50 per cent.—that it would be almost impossible for a former Member to exercise that right.
§ Mr. Biffen
Clearly there will always be those who fall just outside whatever line one draws. However, when consideration is given to the tapering, which I have done on the three-year proposition, it will be seen that it has substantial merit. It would be possible to do it on four years, although the taper would be less generous because there would still be the same financial constraints governing the overall contribution. It is a matter on which I am happy to take counsel.
§ Mr. Williams
At the end of the day, I suspect that it would be far easier for present and future Leaders of the House if we reverted to the solution that I suggested earlier, which is that at the age of 60, where one has met the 20 years requirement, one could, whether in or out of the House, be entitled to the pension. There would not be the need for the taper.
1189 However, I accept that this amendment is a move in the right direction. We recognise that only a limited number of people—those of 58 or 59 years of age—will derive much benefit from the age taper. Even so, for those it is a meaningful benefit, and for that we give thanks to the right hon. Gentleman. We shall not oppose this amendment. I repeat that I regret that the Government have not been able to accept what we regard as the more important amendment dealing with the 60–20 ratio, regardless of whether one is in the House or outside.
§ Mr. St. John-Stevas
Once again, I find myself in entire agreement with the right hon. Member for Swansea, West (Mr. Williams). I too think, as is obvious from what I have said, that it would be preferable to have the absolute right to pension at 60. However, the amendment is an improvement, and I think it right and proper that I should express our appreciation to my right hon. Friend the Leader of the House for having responded in this way to what is a real problem. I also thank him for his gracious reference to myself. It must have looked like a solicited tribute, but I mentioned the point to show that it was a continuing problem and that successive Leaders of the House have continually to improve the system. It is semper reformanda, and that applies to the reforming of the procedures of the House, which is a continual process that has to go on from year to year and from Leader of the House to Leader of the House.
I have one question for my right hon. Friend the Leader of the House which he may be able to deal with in correspondence. What effect will there be on the ministerial pension scheme? Will the taper system apply to entitlements under that scheme as well as to the parliamentary pension scheme?
I conclude on a positive note. It is typical of the approach of the present Leader of the House that once more he has gone out of his way to make a reasonable response to the objections of hon. Members, and that is greatly appreciated in all parts of the House.
§ Mr. Biffen
I thank my right hon. Friend. The ministerial aspect of the pension scheme will march in line with that for Members of Parliament.
§ Amendment agreed to.
Amendments made: No. 8, in page 9, line 12, after '(3)', insert
'Without prejudice to the power conferred by subsection (2A above, the amendments made by paragraphs (a) and (b) of'.
§ No. 9, in page 9, line 15, leave out 'that subsection' and insert 'those paragraphs'.
§ No. 10, in page 9, leave out lines 19 to 22.
No. 11, in page 9, line 27, leave out 'and' and insert—
'(iA) after the word "stand" there shall be inserted the words "(and since that general election has not stood)"; and'.—[Mr. Biffen.]
§ Clause 4, as amended, ordered to stand part of the Bill.
§ Clauses 5 to 17 ordered to stand part of the Bill.
§ Schedule agreed to.
§ Bill reported, with amendments; as amended, considered.
§ Mr. Deputy Speaker
Order. I am sorry, but I have in put the Question forthwith, so it is not possible for me to call the hon. Gentleman.
§ Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 58 (Third Reading), and agreed to.
§ Bill accordingly read the Third time, and passed.10.59 am
§ Sitting suspended.
§ It being Eleven o'clock, MR. SPEAKER interrupted the proceedings, pursuant to Standing Order No. 5 (Friday sittings).