EXCHEQUER CONTRIBUTIONS TO FUND (Hansard, 13 May 1987)

§ Mr. Alfred Morris

I beg to move amendment No. 8, in page 3, line 44, leave out subsection (4) and insert— '(4) If it appears from the report of the Government Actuary under this section that there is a deficiency or surplus in the operation of the scheme, then, subject to the following provisions of this section, the rates of contribution under this section may be increased, or, as the case may be, reduced in accordance with those provisions or all or any of the rates of benefit may be reduced or, as the case may be, increased in accordance with those provisions. 373 (4A) An alteration of the rate of contributions may be made by Resolution of the House of Commons.'. As the House knows, I speak as chairman of the managing trustees of the parliamentary contributory pension fund. My amendment reflects the concern that I expressed when the Bill had its Second Reading about the amendment in 1972 to the 1965 Act, under which benefits and/or Members' contributions could be varied in the light of any surplus or deficiency revealed by an actuarial review of the fund.

The 1972 Act, by contrast, left the Exchequer contribution to the fund to be determined by the Government Actuary at the level necessary to balance assets and liabilities. This means that the fund can never go into surplus, no matter how well the investments perform. At the same time, it means that our prospects of improving the pension scheme, based on successful investment management, are effectively vetoed since the Exchequer contribution to the fund falls in proportion as that management succeeds. That penalises good management and puts the trustees, in the view of some who have commented on the working of the 1972 Act, in the unenviable position of being incapable of acting in the best interests of the members no matter how successful they are in increasing the fund's assets. This, we must all recognise, is the other side of the coin to which my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) referred when he spoke of the fund being in such robust health.

Following a meeting that I attended in the office of the Leader of the House yesterday, he was prepared to amend the Bill so that there would always be a debate on the Government Actuary's report when it was laid before the House. That would have enabled the trustees and other hon. Members to suggest changes in the fund in the light of its assets and liabilities. I now understand that, unfortunately, parliamentary counsel has advised that an amendment on these lines would not be practicable under the existing Standing Orders. Instead of amending the Bill in the way in which the Leader of the House was prepared to do yesterday, I am informed that the Minister will give an undertaking tonight to provide time for a debate on every report from the Government Actuary. I appreciate the Minister's difficulty, just as I know that he understands both my reasons for tabling the amendment and that it is strongly based. I regard the Minister's undertaking as constructive and helpful and will not, therefore, press the amendment.

§ Mr. Brooke

The amendment moved by the right hon. Member for Manchester, Wythenshawe (Mr. Morris) seeks to provide a mechanism for benefits and Members' contributions to be adjusted in the light of the performance of the fund. It suggests a new procedure for amendments to he made to the scheme by resolution of the House. That would cause conflict with the object of the Bill, which is to enable the scheme to be set out, as far as possible, in consolidated form in regulations.

Nevertheless, I recognise the concern expressed by hon. Members, both tonight and on Second Reading, that the performance of the fund should be reflected in their contributions or benefits. I recognise that they would welcome the opportunity to consider the scheme from time to time, in the light of the state of the fund. On behalf of the Government, I am happy to undertake— as the right 374 hon. Member for Wythenshawe foreshadowed—that a debate will be held on each future report from the Government Actuary.

In considering whether to go further we should remember that in the past Members have benefited from the arrangement— common to all public service schemes and many private sector schemes — whereby their contributions are fixed as a percentage of salary while the Exchequer meets the balance of the cost, which will therefore vary with the performance of the fund's investments. We should be cautious about proposing alternative systems linking Members' contributions to the state of the fund. That might offer benefits in the short term, but it would, in the longer term, shift the risk of fluctuating contributions from the Exchequer to Members. Such an arrangement may also hinder improvements to the scheme at times when the fund was not performing well.

I am grateful to the right hon. Member for Wythenshawe for stating that he will not press his amendment in the light of the undertaking that I have given on behalf of the Government. I know that hon. Members greatly appreciate the knowledge, expertise and services of the trustees, of whom the right hon. Member for Wythenshawe is so distinguished a chairman. I hope that that is a suitably happy note on which to conclude the Committee stage.