§ Order for Second Reading read.3.35 pm
§ The Economic Secretary to the Treasury (Mr. Richard Ryder)
I beg to move, That the Bill be now read a Second time.
The Bill is the first since 1975 to make changes to the statutory framework for public service superannuation provided by the Pensions (Increase) Act 1971 and the Superannuation Act 1972. The present system of public service superannuation has stood the test of time well and there is no need for major changes. However, there will always be a need from time to time to make minor adaptations and alterations. We have to make such changes now to meet our Community obligations on equal treatment in occupational pensions.
The Bill also provides an opportunity to make other detailed and technical changes of a tidying-up nature. I do not think that there is anything in this largely technical and tidying-up Bill that needs to be controversial along party-political lines, and it is in that spirit that I commend it to the House.
§ Mr. Ian Gow (Eastbourne)
My hon. Friend has referred to our Community obligations. Can he reassure the House that the Bill is the result of a decision by Her Majesty's Government and not by any folk in Brussels?
§ Mr. Ryder
The Bill is the result of a direct decision taken a long time ago by the House. I assure my hon. Friend that there is nothing in it that would in any way prevent him from having the early dinner that he so richly deserves.
Until the 1970s the rules of public service superannuation schemes were generally contained in primary legislation. Public service pensions were increased to compensate for inflation on an ad hoc basis by various Pensions (Increase) Acts passed between 1920 and 1969. In 1971, the Pensions (Increase) Act provided for public service pensions to he regularly increased by statutory instrument. The Act was amended in 1972 and 1974 to lower the minimum qualifying age for pensions increase from 60 to 55 and to provide for all pensions paid to widows of scheme members to be increased. The system was adapted by the Social Security Pensions Act 1975 to allow for the introduction of the state earnings-related pension scheme and contracting out by public service pension schemes.
The Superannuation Act 1972 provided for local government, teachers and National Health Service schemes to be contained in regulations and gave the then Minister for the Civil Service the power to make, maintain and administer Civil Service pension schemes. No major changes to that Act have been made since then, but similar provisions were made for the police pension scheme by the Police Pensions Act 1976.
The Bill is essential to meet the requirements of an EC directive on equal treatment. Occupational pension schemes have traditionally operated on the old-fashioned assumption that women are dependants and that men are bread winners. That assumption is no longer valid and the 710 Bill provides for men and women pensioners to be treated the same regarding the increase in their pensions under the Pensions (Increase) Act.
§ Dame Elaine Kellett-Bowman (Lancaster)
Will those working for the Property Services Agency receive the same benefits as other civil servants?
§ Mr. Ryder
Yes, under this legislation. As my hon. Friend is aware, special measures must be taken at the time of privatisation, but at the moment all public servants are treated in the same way under the terms of this legislation.
As I have said, the Bill provides for men and women pensioners to be treated in the same way with regard to the increase in their pensions under the Pensions (Increase) Act 1971. The Bill also makes other minor changes to the legislative framework for public service pensions. It does not make major amendments to the existing law, and we see no reason to make any changes now, because there is no longer any need to use primary legislation to amend the rules of most public service pension schemes. Regulations made under the relevant statutes can cover most changes that we may wish to make. We also consider the existing statutory arrangements for public service superannuation to be generally satisfactory. Of course, there will always he individual grievances about pension schemes and their administration. That is inevitable. Everyone would always like higher benefits and we should all like to pay less for them. But those are not matters that we can settle by changing the system. Public service pensioners also have the greater opportunities, which this Government have made available to occupational pensioners generally, to make personal pension provision or to pay additional voluntary contributions.
Therefore, the days of large and technically detailed superannuation Acts are, I am pleased to say, long past. However, that does not mean that there will never be a need to legislate. From time to time there will be a need to tidy up the statutory framework and this Bill fulfils that more modest ambition. It will rectify a few anomalies and minor unintended consequences which may have emerged since the early 1970s. It will also make some minor but none the less desirable adjustments to the statutory framework, including some minor consequential amendments occasioned by the wider scope for making additional voluntary contributions introduced following the Social Security Act 1986. It will also extend the powers of the Secretary of State in relation to the determination of employers' contributions in the teachers' and NHS schemes and the payment of injury benefits to teachers.
Hon. Members will have seen the explanatory and financial memorandum and the Bill itself and will, I am sure, appreciate that many of the clauses are complex and technical. I shall give detailed explanations of each clause in Committee, but today I shall concentrate my remarks on the reasons behind the clauses in the Bill and briefly sketch the effect of each clause.
Before I explain the contents of the Bill in more detail, I should make two more general points. First, the Bill does not directly alter the provisions of any pension scheme. The provisions of the schemes concerned are given in the 711 rules made under the Superannuation Act 1972. The second is that, although the amendments to the Pensions (Increase) Act 1971 and the Social Security Pensions Act 1975 will alter the amounts by which some pensions will be increased, the changes do not affect whether a pension is paid. That is a matter governed by the rules of each pension scheme, not by the Pensions (Increase) Act.
Clause 1 is the main clause in the Bill. Public service pensions are increased in line with prices provided certain qualifying conditions are satisfied, and this clause amends those conditions. There are three separate changes. First, the clause provides for the phasing out from 1 January 1993 of a condition under which retired female scheme members with dependent children qualify for pensions increase even if they are below the normal qualifying age of 55. That concession does not apply to male pensioners and the proposed change is needed to comply with EC directive 86/378 which requires member states to introduce equal treatment for men and women into occupational pension schemes. At present, very few women qualify for pensions increase under that condition—we know of only eight in the centrally administered schemes for which data is available. However, if it were applied to men, approximately 7,000 police pensions would have to be increased, and, in addition, if analogous arrangements were introduced in the armed forces pension scheme, it is thought possible that some 50,000 armed forces pensions would have to be increased.
The Government do not consider that it would be appropriate to make a major extension of that kind to the conditions for pensions increase, which would result in the pensions paid to those who retire at comparatively young ages and can enjoy second careers being increased. Equal treatment for both sexes can therefore be secured only by repealing the relevant provision of the Pensions (Increase) Act 1971. The Bill does that, but ensures that the accrued rights relating to service rendered before 1 January 1993 of the very few current and future female pensioners who benefit from this provision are fully protected.
Second, the clause provides for all pensions paid to survivors of scheme members to he increased in line with prices. At present, widows' and children's pensions are increased, but pensions paid to widowers and other adult dependants are increased only if the survivor is over 55 or physically or mentally incapacitated or, if a woman, has a dependent child. Most public service schemes have now aligned their rules on widowers' pensions with their rules on widows' pensions, and it is appropriate, therefore, that widowers' pensions should now be increased under the same conditions that apply to widows' pensions. It is possible also in some public service schemes for pensions to be paid to adult dependants who are not widows or widowers of scheme members if certain conditions are satisfied, or if the scheme member surrenders part of his or her pension. There are very few pensions in these categories and most are already increased because of the pensioner's age or state of health. We think that it is appropriate therefore to simplify the conditions for pensions increase and to introduce equal treatment by providing for all those pensions to be increased.
I emphasise that, in practice, these provisions affect very few women and men receiving, or expecting to receive, public service pensions. No one will lose any 712 accrued rights. There is little extension of existing provisions. In that sense, it represents a practical, cost-effective and reasonable response to the problem of equal treatment and the requirements of the EC directive to which I referred.
Third, two minor extensions have been made to the conditions under which injury benefits paid by pension schemes are increased. In practice, public service pension schemes increase almost all injury benefits, even though the beneficiary may not be regarded as having finally retired on ill-health grounds or as being completely incapacitated. This clause makes sure that such payments of pensions increase in those cases are covered by the Pensions (Increase) Act.
Clauses 2, 3 and 10 make changes to the Acts to rectify some problems that have emerged since the early 1970s. For example, clause 2 amends the Pensions (Increase) Act 1971 to bring the law on two small, technical aspects of pensions increase into line with the practice followed by public service pension schemes since 1965. Clause 3 amends the Pensions (Increase) Act to end a provision that gives rise to extremely small payments to pensioners but with a disproportionate administrative burden for the Department concerned.
Clause 10 amends part of the Superannuation Act 1972 to clarify the protection given to re-employed scheme members if changes that are potentially detrimental to them are made to regulations for local government, teachers and NHS schemes.
Clause 4 enables the Secretary of State to make regulations for teachers' and NHS schemes under which the costs of pensions increase may be recovered from employers through the contributions they already pay towards the cost of basic benefits. If and when the necessary regulations are made, the Government Actuary will advise on the appropriate contribution rates for employers. Employees' contributions will not be affected.
Clause 5 amends a provision in the Social Security Pensions Act 1975 under which some widows have part of their pension indexed by both the public service pensions scheme and by SERPS.
Clauses 7, 8 and 9 make some minor technical amendments connected with the wider scope for making additional voluntary contributions introduced following the Social Security Act 1986. Clause 7 makes sure that money purchase benefits arising from additional voluntary contributions paid by scheme members are not indexed by public service pension schemes. Clause 8 relieves certain schemes of a responsibility to pay annuities purchased by scheme members where the scheme member himself has the chosen the company that will provide the annuity. Clause 9 brings money purchase pension schemes for civil servants within the scope of the existing arrangements for agreeing amendments to Civil Service pension schemes that may adversely affect the accrued rights of scheme members or pensioners.
Clause 11 allows the Secretary of State to make regulations under which injury benefits can be paid to teachers by their employers. At present, these benefits can be paid only by the Secretary of State. It is more appropriate for those benefits to be paid by the employer than the pension scheme. This clause makes that possible, and allows existing arrangements made by some local education authorities to continue until any regulations are made.
713 The House will see from this brief description of the Bill that it is almost wholly concerned with making minor, largely technical, adjustments to the existing legislative framework governing public service pension schemes. There are no substantial changes to that framework which has stood the test of time well. This short, modest but useful Bill will ensure that the relevant Acts can continue to provide sound framework for public service pension schemes in future years. I commend it to the House.
§ Mr. Paul Flynn (Newport, West)
The Bill appears to be modest and non-controversial, hut on close examination it is seen to contain clear signposts of the Government's rather wayward policy on pensions. Unfortunately, all the signposts point backwards. Bills such as this are rare, but they give the House a chance to examine the drift of Government policy.
Unfortunately the hon. Member for Eastbourne (Mr. Gow) is no longer in his place. The rather convoluted answer to the hon. Gentleman's question about whether we were acting as a result of a European directive should have been that we are acting as a result of action from Europe. That is because the European Community which was once denounced as a rich man's club is now laying down minimum standards of fairness and justice and, sad to say, Britain is having difficulty keeping up with those. The Bill is very much part of that process.
Public service pensions, and especially Civil Service pensions, have blazed a trail for all other pensioners. With our customary magnanimity I welcome the beneficial parts of the Bill and thank Ministers for the unusual generosity that they displayed and the way that they co-operated during work on the Bill. There were special difficulties because work on it spanned the Christmas recess.
Clause 1 has both negative and positive aspects. The positive proposition is the extension of increases to widowers' pensions. At first sight that looks generous but that is not a trait that we instantly associate with the Government. The matter that is being tackled has been the subject of some controversy in the House. Early-day motion 600 put down on 15 March 1989 was signed by 121 hon. Members including six Conservative Members and asked for just such a reform.
The Assistant Masters and Mistresses Association contacted me today expressing some concern. Although that trade union has a membership of more than 130,000 and has waged a vigorous campaign on the issue, the only information that it had about the change was received today. It was only because of the wonders of the fax machine that I have had documents from the association on this matter. The association says that its formal consultative group, the teachers' superannuation working party, which is maintained by the Government, has not considered the Bill's proposals. The association tells me that as far as it can tell none of the trade unions represented on the working party has been consulted about the Bill or notified about its contents. Perhaps we shall hear more about that later in the debate.
Since April 1988 all contracted-out schemes have been obliged to provide a guaranteed minimum pension for widowers as well as widows. The Civil Service scheme previously provided widows' pensions as an optional extra for women civil servants, and for that an extra 1.5 per cent. contribution was paid. From April 1988 the 1.5 per cent. 714 contribution was made compulsory for men and women. They have been paying for the advantage that has been offered today for some considerable time. The Government have no alternative but to give to widowers the same pension increases that widows receive.
The negative aspect of the Bill has alarming repercussions. It is the abolition of pension increases for retired women under the age of 55 with dependent children. In the Civil Service superannuation scheme the minimum pension age is now 50. The only circumstances in which a woman would retire under the age of 55, other than on medical grounds—where pension increases are payable regardless of age—are redundancy, approved early retirement or retirement on an actuarially reduced pension. Some mothers under the age of 50 with dependent children may draw pensions from other public sector schemes with a lower pensionable age, such as the police scheme, but they are likely to be few in number. The Minister confirmed part of that today.
The numbers involved are low, but if that is so, why bother to deprive people of the pension increases that they now enjoy? The Government's excuse is that the increases discriminate against men. That is one of the signposts in the Bill. More major decisions will have to be made in future to comply with the progressive European directive —and future directives—which says that we cannot discriminate between men and women. An enormous discrepancy which the Government must tackle before long is the age at which men and women can draw a state pension. At present there is discrimination because for women it is 60 and for men it is 65.
It seems that the Government's reaction to the call for an end to discrimination is, not to spread the advantages, but to take advantages away from one sex so that both sexes are discriminated against. In their view, that is a reasonable way to achieve discrimination. However, the Government are discriminating down rather than spreading the advantages.
To extend pension increases to fathers under the age of 55 would achieve equal treatment and would be a reasonable step to take. We suggest that the Government should do that instead of taking the increases away from mothers. The cost would be relatively small because at 55 fathers already qualify for a pension at the higher rate. That would be reached by annual increases.
In principle there is no case for paying unindexed pensions to men or women of any age without children. There is room for argument about the age at which a pension should be payable and under what conditions. However, once it has been decided that someone is entitled to a pension, it makes no sense to allow that pension to be eroded by inflation. Either the person needs the pension or he does not. If he does, he needs to have its real value preserved.
The Bill is part of a long and, in most aspects, honourable history of providing decent pensions for civil servants. The present Civil Service scheme dates back to the Superannuation Act 1859. Richard Titmuss wrote 25 years ago:The civil servants were the first large organised group of workers to obtain security in their old age. The foundation of the system firmly settled by the Act of 1859, remains today: the governing principles applied more generously with the passage of time, still rule authoritatively. In 1963, the system was still a model and a goal for the vast majority of British workers.715 In 1990 that still remains true. Much progress has been made in pension provision for other occupational groups. The public service as a whole has attained pension rights comparable to the Civil Service. Increasingly, occupational pension schemes in the private sector have been modelled on Civil Service advantages, with pensions based on individual earnings in the final year or the years before retirement. Where they have lagged behind is in inflation-proofing pensions and in shielding rights for people who change jobs. Sadly millions of people are still exposed and vulnerable without the strength of an occupational scheme behind them. They include the 3.5 million people who have been induced by a heavy cocktail of bribery and misleading propaganda to take out the so-called personal pension schemes. They may well rue that decision if they stay in the schemes for longer than five years.
The greatest leap forward to the goal described by Titmuss in 1964 for securing pensions for the majority of workers comparable to those in the Civil Service was taken in 1975 when the then Labour Government's Social Security Pensions Act introduced the state earnings-related pension scheme. The scheme was based on a plan which was first published in 1957, and Titmuss was one of the authors. Its inspiration was firmly rooted in the Civil Service scheme, which had been created a century earlier and had been tried and proved.
The comparison with Europe still prevailed. Most of our European partners now have schemes that are based on the principle that pensions should be related to previous earnings. That is one of the main reasons why our pensions lag so pathetically behind those in the rest of Europe. British pensioners still rely on a flat-rate pension for the bulk of their state pension.
The Social Security Pensions Act 1975 was a pensions revolution. It transformed the retirement prospects of the great majority of the working population. It was a considerable achievement to confer on half the working population—it was previously not covered—new pension rights comparable to final salary occupational schemes. As important but not so widely recognised was the secondary achievement of the 1975 legislation, and that was to confront the cumulative destruction caused by inflation of pension values. Again, the model was the public sector.
The Pensions (Increase) Act 1971 had the effect that public sector pensions were automatically inflation proofed. The 1975 Act protected state earnings-related pensions from the ravages of inflation and the State undertook the inflation-proofing of the guaranteed minimum pension by contracted-out occupational schemes. Thus the pensions of millions in the private sector were brought nearer to the higher standards set by the public sector. The Bill is important for the changes in the pension rights that are directly affected by it, and the reverberations will spread wider to all provisions for retirement. That is why the Opposition are convinced that it is entirely appropriate that a spokesperson on social security should participate in the debate.
Clause 7 excludes money-purchase benefits earned by additional voluntary contributions from the provisions of the Pensions (Increase) Act 1971. A money-purchase pension is the annuity that can be brought from the amount of money that is available at pension age from the 716 approved contributions plus investment income. In theory, on reaching pension age a person can choose to buy an index-linked annuity, but it is unlikely that many people will do so. That is because an unindexed annuity will have a much higher initial value.
Encouraging people to pay into money-purchase schemes, which is favoured strongly by the Government, is likely to result in payments of pensions that are fixed in cash terms with no protection from inflation. That is true of personal pension schemes too, except where there is a requirement to provide annuities rising by 3 per cent. a year. Even that applies only to annuities purchased that meet the minimum contribution that is required for contracting out. It would not be sensible to object to clause 7, but it illustrates a significant problem that will inevitably arise again and again from the proliferation of money-purchase schemes under which the Government are now acting. A complexity has been introduced into pension schemes that will require a great deal more legislation in future.
There has been a remarkable change in the indexation of pensions in the past decade. In the early days of the Thatcher Government it was known that the Prime Minister thought of the Civil Service as a grossly over privileged group, and that the privilege that the right hon. Lady begrudged more than any other was the right of Civil Servants to index-linked, inflation-proofed pensions. The repeal of the Pensions (Increase) Act 1971 was high on her hit list. Then the emphasis changed suddenly from abolishing indexation to asking civil servants to pay for it.
Exactly 10 years ago today, on 8 January, The Guardian published an article by Ian Aitken under the headline,Search for way to end pension-inflation linking may be dropped".The lady was for turning. The story confirmed that the Prime Minister wanted to end index linking and social benefits in general, especially for public services. Ian Aitken wrote:Ministers now seem to be agreed that an arbitrary cut off in inflation proofed pensions would have wide effects throughout the public services and in some cases would involve a breach of contract.Right hon. and hon. Members may recall that in February 1981, Sir Bernard Scott's committee dealt a bitter blow to the Prime Minister's plans when he found that the pensions deductions made from civil servants' wages were nearly twice those made from the earnings of employees in the private sector, so civil servants were enjoying no bargain whatsoever. More importantly, Sir Bernard not only made the point that index-linked pensions were not an indefensible privilege to the public sector—far from it—but that they should be extended to the population as a whole. The committee reported:It is highly desirable as a social objective that the standard of living of those in retirement should be protected. This is clearly recognised in countries like France and West Germany, where the benefits enjoyed by pensioners are superior to those of this country and the benefits of index linking extend alike to both public and private sectors. In the United Kingdom, the full cost of protecting pensioners has yet to be recognised and fully shouldered during working life. We believe that there may be helpful lessons to be drawn from our work for the private sector pensions and their financing, as well as for the public sector.Nothing has changed. The report makes two crucial points on European practice and on index linking that are intimately germane to the Bill. How are we doing nine years later?
717 It is notoriously difficult fairly to compare pensions in different countries, but the European Commission recently made a brave attempt at doing so. It took as a standard the amount paid to a new pensioner who had worked for an average wage in manufacturing industry. Two different methods of comparison were used. I have urged the Government to adopt them both, but so far they have declined. The first method is to convert the cash amount into ecus by using a standard rate of exchange known as the purchasing power standard, which takes full account of the cost of living in each country. The pension is thus related to the value of purchases that can be made locally.
Not surprisingly, and as was the case nine years ago, the United Kingdom came out badly by comparison. The British pension of £53 is almost half the £104 paid in Luxembourg and barely half the £101 paid in the Netherlands. Britain is only beaten into bottom place by Ireland, with £43. I must be fair and give details also of the Commission's second comparison, which takes the pension as an average of manufacturing industry earnings in each country, after taking account of tax. That system is known as net replacement ratio, and it uses the figure of 100 to represent average manufacturing earnings.
The best countries pay pensions of nearly 90 per cent. of average earnings, while the United Kingdom and Ireland pay less than half of pre-retirement earnings, with a pension of 46 per cent. It seems extraordinary that the neglect of the basic pension in particular should continue.
The index linking of state pensions introduced in the Social Security Pensions Act 1975 was once challenged, but that provision managed to survive. It would not have done so had the proposals in the June 1985 Green Paper, "The Reform of Social Security—Programme for Action" been implemented. It was the Government's clear intention to abolish SERPS, and with it the inflation-proofing mechanism, but their nerve again failed them. The scheme was savagely cut by the Social Security Act 1985, but the inflation-proofing provision remained intact. Contracted-out schemes must now provide inflation proofing of the guaranteed minimum pension up to 3 per cent., instead of the state scheme doing that for them. The state scheme still makes provision above that level.
The Government's newly found enthusiasm for index linking—provided that someone else bears the cost—is about to bear fruit in the next social security Bill, which will require limited indexation of occupational schemes above the guaranteed minimum pension level—but apparently, only when a scheme is about to be wound up.
The first Civil Service pension was granted in 1684 to Martin Horsham, a land waiter in the Port of London, who, in the memorable words of the Treasury Warrant at the time, was paid it because he was:so much indisposed by a great melancholy that he is at present unfit for business".There is little in the Bill or the Government's pension policy that would have lifted Martin Horsham's melancholy and, sadly, there is much that would have deepened it.
This is a mean-spirited, patch and prop Bill. In the past, Britain has led the world to liberate retired people from the anxiety of deep poverty. Europe is now leading Britain, coaxing and coercing the Government out of their obsolete fixations. The Bill continues a Government pension policy that is wasteful, confused and mean.
§ 4.9 pm
§ Mr. Ivor Stanbrook (Orpington)
I have to declare a financial interest in the Bill as I am a beneficiary of the arrangements that it makes for public service pensions by virtue of service in the colonial administration of Nigeria.
I welcome the Bill. We should all support the details of the Bill, and I was distressed to hear my hon. Friend the Member for Eastbourne (Mr. Gow), whose judgment is usually quite sound, appear to cast some doubt on the merits of the Bill because some of its proposals have apparently been prompted by events within the European Community. If that is so, it is a jolly good thing.
Women's equality is not a subject on which I normally speak at great length, or with enthusiasm, because women may be equal but they are also different. However, there can be no doubt that the small amendments proposed in the Bill are good ones for women and I am surprised that they have not been made before. They are mostly self-evident and logical, because the pound paid by a woman civil servant is as good as the pound paid by a man during their service, and there seems to be no reason for discrimination between the sexes and in that respect the proposals in the Bill are to be commended.
Apart from amending injustices and anomalies and improving pensions for public officers, there is a need for the Bill and for all pension arrangements to be index linked due to inflation—the evil and the scourge of modern times. Inflation distorts economies and causes great misery and cruelty, and it should remain the enemy of all Governments. If we can beat inflation, we shall not need to introduce measures constantly to reappraise the value of pensions to people who have earned what they are paid at the end of their service in a pension because of the contributions that they have made or that have been notionally made for them during their service. The Government should bear in mind that the financial burden of the Bill can be eased by the extent to which they are successful with their anti-inflation policy.
A number of other more detailed matters come to mind when we discuss public service pensions. Many British citizens, resident in Britain, are pensioners of a public service that is, in fact if not in law, under the Government of the United Kingdom. For example, the pension rights of people who served in the colonial service under the Government of the Federation of Rhodesia and Nyasaland were secured on the basis that employers' contributions would be made by the Governments concerned—successor Governments, where transfers have taken place. The value of such pensions was therefore tied to agreements between Governments, which has meant in practice that many former British civil servants serving in our overseas territories must live on a pittance. The value of their pensions has not benefited from inclusion in the general arrangements covered by the Bill, because technically their employer was not the United Kingdom Government but the result of arrangements between the United Kingdom and other countries—or for other similar reasons.
To their credit, the Government have recently eased the problem concerning the Federation of Rhodesia and Nyasaland by making an ex gratia payment into the fund, which has enabled pensions to be increased. That, however, is merely a stopgap measure, welcome though it 719 was at the time, and I hope that it will eventually be replaced by a provision consistent with the spirit of the Bill.
Civil servants in Hong Kong are among those with similar problems. The colonial or overseas Government —not the United Kingdom Government—are bound to a pension obligation unless an arrangement has been made between the two Governments for the money to be transferred to the United Kingdom Treasury. The United Kingdom and Nigerian Governments reached such an arrangement for my pension, but, as the Hong Kong Administration are within the British colonial empire, pension arrangements are still governed by Hong Kong regulations.
The main difficulty is that the value of Hong Kong pensions is established by the prevailing exchange rate, and the Hong Kong dollar is inclined to fluctuate. At present it is notoriously subject to the influence of world events, and to other matters that have nothing to do with the interests of the people involved. Such influences do nothing to assure those people that they will receive an appropriate retirement income, whether or not they have already retired. We want them to stay in Hong Kong, but there is still the problem of their pensions.
Expatriate staff of the Hong Kong Administration who are on pensionable establishment will in due course retire, and their pensions will be determined by the value of the Hong Kong dollar. Surely the United Kingdom Government have a moral obligation to ensure that those people do not suffer because of the instability of future foreign exchange conditions, but are guaranteed the full value of their pensions—uprated by arrangements in the legislation referred to in the Bill—so that they need not fear the suffering experienced by other colonial service pensioners in, for instance, the Federation of Rhodesia and Nyasaland.
Part of our imperial responsibility is still the obligation to protect those who have served the Crown, often in an inclement climate and unhealthy circumstances. The conditions of people who maintained and controlled the government of the empire and our remaining colonies should not be prejudiced by the fact that their service was notionally directed towards a Government separate from the United Kingdom. I appreciate that this precise point is not strictly covered by the Bill, but I am sure that the Minister is well aware of it and that he will ensure that those who are responsible for taking this overview of our obligations to all British public servants abroad will take their cases into account so that this injustice is remedied.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
I endorse everything said by the hon. Member for Orpington (Mr. Stanbrook). The Government ought to examine carefully the provisions that have been made for former colonial servants of Her Majesty's Government. The hon. Gentleman may be right that the long and short titles of the Bill will make it difficult for the Standing Committee to consider amendments covering that point, but I hope that the Government will deal with the plight of former Crown servants. The hon. Gentleman has made a valuable contribution to the debate.
720 I am worried about the way in which pensions legislation in general is enacted by the House. The explanatory and financial memorandum refers to the Bill rectifyingcertain anomalies and unintended consequencesin previous legislation. The parliamentary draftsmen are doing no service to public servants who are in receipt of public service pensions by drafting legislation that is technically flawed and which, to lay persons, is completely unintelligible.
I hope that the Government will consolidate some of the pensions legislation. I recognise that a different series of Acts governs public service pensions. They are quite distinct from the Acts that apply to most pensions, but there is an overlap between the Treasury's responsibility for public service pensions and the Department of Social Security's responsibility for other pensions.
Has any consideration been given to the systematic and cohesive consolidation of all the statutes relating to pensions in all their different aspects? It would then be easier to understand the ramifications of the legislation, some of which has been in place since public service pensions were first given in the year 1684, as the hon. Member for Newport, West (Mr. Flynn) has told us.
The hon. Gentleman also made a valuable point when he suggested that the House should examine carefully how the Government are seeking to cope with requests from the European Community, or anyone else, for a pensions system that would eliminate discrimination between males and females. Such a move would be welcomed. It is long overdue.
The Government pick and choose between benefits. Some they are prepared to level up, while others they level down. They are breaking the spirit of European Community directives that place an obligation on member states to end discrimination. By and large, the Government are levelling down all the time. I speak as a humble Scots solicitor. I am not an expert in pensions legislation. It can be argued that what I have described breaches the spirit of the directive and could be challengeable through the European legal system. The Government must make it clear what principles they will adopt when they approach the problems that they will experience with ending discrimination between males and females.
My overall impression, on skimming through the Bill, is that the Treasury has done a quick trawl to see where it can save the odd bob or two. The Minister shakes his head. I am more sceptical than he obviously is. Some of these provisions will save money. With his usual eloquence and competence, the Minister skipped over the fact that it was mooted that the police, fire and armed services should receive additional benefits. The idea was given careful consideration, but the decision went against them. Nevertheless, the sum involved must also be weighed in the balance.
The pensions industry has studied the Bill. I give it a cautious welcome. On balance, it improves things. However, the Government can be accused of looking for quick ways to save the odd buck, and the House should examine that carefully before giving it a Second Reading.
As I have already said, there is confusion about pensions legislation. Clause 2 contains quite a substantial element of retrospection. There may be reasons or cases that justify retrospection in some circumstances, but the 721 Minister did not mention them. Any retrospective legislation, especially if it affects pensions, should not be accepted casually.
I shall put my Scots solicitor's hat back on and draw attention to clause 2(5). It amends the Pensions (Increase) Act 1965, but that Act was repealed by the Pensions (Increase) Act 1971. That is a very good trick if it can be done, but I think that it is an example of technical incompetence. I am sure that it will interest the hon. Member for Orpington, who is a distinguished observer of these matters. No doubt the Treasury has more solicitors than I could muster on this Bench. Indeed, I can muster the support of only my party leader—but that is quite considerable support, although perhaps not on pensions legislation. He is neither a Scot nor a solicitor. I am worried about slipping through legislation that purports to amendment an Act which was repealed yonks ago. We should have a word about that from the Minister.
Clauses 3, 5 and 7 are a bit petty, but clauses 5 and 7 make sensible changes. Although I have accused the Treasury of trying to save money, I must observe that the changes in clauses 5 and 7 are justified because the double benefits that were previously available were overgenerous.
It is all very well for the Minister to say that the Bill is tidying up various pieces of legislation and that it is all minor and technical. Given enough time—preferably not during the Christmas recess which included Hogmanay which is a much more important festival north of the border—and given the opportunity in Standing Committee I could certainly provide a whole list of minor or consequential amendments that will certainly cost the Treasury money. I shall suggest one now.
I am the joint secretary and treasurer of the all-party committee on pensioners, and the most obvious case that has come to my attention concerns the changes to the Civil Service pension in 1978. Civil Service widows' pensions were not made payable to widows of post-retirement marriages until the pensions legislation of 1978. That gives rise to an anomaly because widows of post-retirement marriages after 1978 are now treated much more generously than those who were widowed before then. I cannot believe that the Treasury objects to that on financial grounds because it must cost a relatively tiny sum compared with some of the other savings being made in other parts of the Bill. That is a clear example of another anomaly which could have been tidied up in the Bill. It would have had a substantial effect and removed an important anomaly which has been causing quite legitimate and justified concern among those who observe the comings and goings of the Civil Service pension funds and schemes.
I said earlier that the hon. Member for Orpington had made a valuable contribution concerning colonial pensions. Again through the all-party committee on pensioners I have received representations from a host of different organisations. On the last day of last year I received one from the consultative committee of the Kenya local authorities superannuation fund again complaining about matters such as those raised by the hon. Member for Orpington. Technically, they may not be capable of rectification under the short title of the Bill, but given a bit of good will from the Government and a slightly longer short title, the Bill could have addressed some of those problems. They would have required some subvention from central Government funds into certain outstanding funds which are leaving former colonial servants in dire 722 financial circumstances. It is a missed opportunity. Small items such as that make it impossible for the Minister to say that the Bill is simply a minor and technical matter.
The Bill embraces some important issues, and the Minister will have to convince the House of some of the financial aspects and consequences of the provisions of the Bill before I shall be entirely comfortable with it. However, I shall certainly recommend to my colleagues that on balance the Bill deserves a Second Reading.
§ Mr. Ian McCartney (Makerfield)
I wish to take part in this short debate mainly to voice my concern that sometimes the House passes legislation such as this late in the evening or, as on this occasion, soon after the holidays without hon. Members understanding the full significance of the Government's intention in future years to use the legislation as a principle. I wish to discuss the principle of discrimination. I seek assurances about the Government's intentions, whether in future it will be used for levelling down rather than levelling up and whether they attach importance to the Bill in respect of pension matters before the European Commission.
My hon. Friend the Member for Newport, West (Mr. Flynn) said that by clause 1(2)(b) the Government seek to amend a provision that currently discriminates against men who retire before the age of 55 on grounds other than ill health but who cannot take advantage of the specific arrangements by which women with dependants can retire before the age of 55 on grounds other than ill health. The Government aim to end discrimination against male contributors to the fund, but in so doing women's rights will be removed.
In reply to my hon. Friend the Member for Newport, West, the Minister attempted to use the numbers game in respect of the number of women who currently benefit, and said that the figure is derisory. He gave a more important answer in relation to the number of men who could qualify if the Government ended discrimination more positively by allowing equal pension entitlement for men and women.
The Minister may argue that in calculating for the fire and police services and other employees tens of thousands of men may benefit, but that raises an issue of principle in relation to pension entitlement. Far too often when the Government have been faced with an issue of discrimination from the European Community they have chosen to remove the rights of one group to end discrimination against another.
I signed early-day motion 88, which argued for the ending of discrimination against men who reach retirement age at 65, whereas women benefit at 60. Those who have been involved in ending that discrimination foresee under this legislation the possibility of the Government establishing the principle of levelling down by removing the rights of women rather than legislating for a universal pension age for men and women. That is a controversial matter within the European Community, and at some stage the House will return to it. The debate is continuing not only here but outside, and the Government are receiving advice from pension actuaries and others about amendments that the European Community may force on them at a later stage. Although 723 the amendments might affect few women, they could have significant repercussions on the debate on pension entitlement in future years.
As I understand it, those in the pensions business who currently advise the Government say that a reduction in the male pension age to 60 would be expensive and would lead to a significant reduction in the net contribution. Therefore, rather than reduce the pension age for men, over stages the Government will increase it for women to 65. The basic pension and the state earnings-related pension scheme will be available to women aged between 60 and 65, and those retiring at 60 will receive the equivalent of two thirds of the full state pension. Women will lose their current pension entitlement at 60. Labour Members believe that to legislate for the worst elements of a scheme but to remove its best elements is no way to end discrimination between men and women.
The principle embodied in clause 1(2)(b) will put pressure on the Government to introduce a phased arrangement under which women's entitlement to full pension at 60 will be obliterated. Women who are currently aged about 50 will retain their entitlement to full pension at 60, but those aged between 40 and 50 will see their entitlement to a full pension changed to between 61 and 64. Women under 40 years of age will have to wait until they are 65 before getting a full state pension. That means of ending so-called discrimination is unacceptable.
Legislation covering care in the community is going through the House. More than 90 per cent. of those who care in the community are women who, voluntarily or involuntarily, give up their employment at an early age to look after an aged or severely disabled relative. It is ironic —indeed, I can find no precedent—that the House is considering legislation that will make it easier for people to care for others but a clause in this Bill will prevent women from retiring before they are 55 to look after a dependent relative and they will lose the benefits that they are currently enjoying.
The House would not expect this or any other Government to allow such discrimination. Over the coming decades, a growing number of women will be asked to take on the job of caring in the community. They will apply to their employers to retire before they reach 55, not on medical grounds involving themselves but on medical grounds relating to a dependent husband, mother or father or child. Changes in medical techniques mean that children are living beyond their teenage years with severe physical and mental disabilities.
The Minister may believe that this is a small, insignificant group of women. Legislation must take account not only of what is happening now but of what will happen in 10, 20 or 30 years. One of the damning features of clause 1 is that it fails to recognise changing trends and the needs of people who will be required to care for their elderly and dependent relatives.
I have spoken in the House on behalf of fire authorities, as their honorary parliamentary adviser. Because of the nature of fire fighters' work, a significant number would benefit from an early retirement age, but restrictions imposed under current legislation mean that they cannot. They would have liked an amendment to allow them the same rights as women who retire below the age of 55. Not 724 only are these fire fighters not included in the Bill but—we never expected this—women who are now covered by legislation will be excluded.
Although there will not be a Division on the Bill, the House must return to the long-term fundamental issues of equal opportunities and pensions. The Opposition and a significant number of Conservative Members will not accept legislation that operates on the spurious ground that removing the rights of one group of pensioners whether male or female, is equalised by the ending of discrimination against another group. That is no way to proceed with legislation. I shall not seek to divide the House—I see that you are smiling, Mr. Deputy Speaker, and thinking, "Thank God for that"—but I am not satisfied with the legislation.
§ Mr. Ryder
By leave of the House, Mr. Deputy Speaker, I should like to speak again. I am grateful to hon. Members for the attention and interest that they have shown in this largely detailed and technical Bill, but I should like to stress again that it is a modest Bill and has modest scope. It amends the statutory framework in which the regulations for public service pension schemes are made. Apart from some adjustments at the margin to the law prescribing the index linking of public service pensions, the Bill does not directly alter the rules of any pension scheme. Changes to these rules will continue to be made in the usual ways, which are prescribed in the Superannuation Act 1972.
There can be no fear that the Bill will seriously affect the pensions of those who have retired after many years of public service. I assure the House that there is no cause for such concern. The proposed changes to the qualifying conditions for pension increases—clause 1—will be introduced in a way that fully protects the accrued rights of serving public servants and those already retired. The double indexation of part of the pensions paid to surviving spouses will be phased out gradually and only the widows and widowers of scheme members not yet retired will lose this anomalous and unintended benefit. That is covered by clause 5. The ending of the extremely small payments of pensions increase on additional lump sums will be introduced for future retirements only, and this is covered by clause 3.
I assure the hon. Member for Newport, West (Mr. Flynn) that we are not alone in work of this kind. Other European countries are affected by the 1986 directive. I know that that will be of interest to my hon. Friend the Member for Eastbourne (Mr. Gow). The hon. Member for Newport, West asked whether there had been consultation with various interest groups. I believe that all interest groups support the measures in the Bill, but if any have suggestions to improve it, let us have a look at them.
I understand that the Department of Education and Science is holding discussions with teachers' representatives all the time and that a joint working party on pensions is operating now. The hon. Members for Newport, West and for Makerfield (Mr. McCartney) asked why we did not "level-up" pension increases for retired male scheme members so that those under 55 with dependent children could receive pensions increase. As the hon. Gentlemen know, this would be a costly improvement to superannuation benefits for which either employers or employees would have to pay. During my 725 opening speech I set out details of how many people would be affected one way or the other. If we went down the road advocated by the hon. Members for Newport, West and for Makerfield, an estimated 7,000 retired policemen and fire fighters would be affected and it has been said that, on a conservative estimate, about 50,000 retired service personnel would benefit if payments were also made in armed forces schemes. The ultimate cost would be more than £100 million a year—for the police about £14 million and for the armed forces about £100 million.
§ Mr. McCartney
Surely, in considering whether to amend the legislation, the principle should be whether the current position of women is right. We should ask whether this is a proper aspect to include in pension provisions. The Opposition say yes, in principle. We should therefore consider how it can be applied to all members of the scheme. The Minister has implied that if amendments caused a huge influx in the number of people included in the scheme, the Government might have difficulty in finding the resources needed. The Government should turn to the second, more feasible option and introduce a sheme of phasing in arrangements rather than phasing out the current arrangements for women.
§ Mr. Ryder
I explained earlier why we have drafted the Bill along these lines. The hon. Gentleman will know that, for the reasons that I gave then, we believe that this is the right course. As I said, we understand that very few people will be affected. We know of only eight teachers who will be affected by the provision, although there may be more.
I referred to the initial cost of taking the course that the hon. Gentleman advocates, which is to level up. I gave that cost as over £1 million a year, and I shall be happy to supply him with the details of that figure if he wishes.
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) knows that any proposal to phase in pensions increase for male pensioners under 55 with dependent children would be equally vulnerable to a challenge that it did not meet the requirements of EC directive 86/378, to which I referred in my opening remarks.
The hon. Member for Newport, West answered his own question about clause 7. An additional voluntary contribution can buy an index-linked annuity if the individual so chooses. The Government support the personal pension developments but also wish to continue good occupational pension schemes, as the hon. Gentleman knows.
My hon. Friend the Member for Orpington (Mr. Stanbrook) has for several years campaigned assiduously for the concession of an additional pension for war service of former colonial expatriate civil servants. I have followed his campaign with interest for longer than the six months for which I have held my present position.
The benefits and qualifying conditions of the colonial scheme have been modelled on those of the United Kingdom public service schemes—in particular, the provisions applying to home civil servants. There can be no special relaxation of the rules for colonial Civil Service pensioners.
My hon. Friend the Member for Orpington also drew the attention of the House to arrangements in Hong Kong. Ministers have said, as he may know, that we do not rule out the possibility of public officers' agreements in due course, although it is not clear whether, in the unique circumstances of Hong Kong, there may be other ways of 726 achieving these ends. It may help if I explain that as other former colonies went into independence, the question of sterling safeguards was settled much closer to the time of constitutional change. This question is one of the matters that the Government are keeping under careful review in consultation with the Hong Kong Government. On present evidence, we are not persuaded that the current arrangements work to the disadvantage of Hong Kong pensioners.
Ministers have stated that the Government fully recognise the particular concern of HMOCS officers in Hong Kong and will continue to keep their interests in mind in the years leading up to 1997. Particular considerations apply in respect of Hong Kong—for example, guarantees under the joint declaration that expatriates may continue to serve after 1997. No firm decisions have yet been made on special measures, such as compensation, that might be appropriate in Hong Kong's unique circumstances.
The hon. Member for Roxburgh and Berwickshire asked about consolidation. I agree that simplicity and comprehensibility are important in any pension schemes and underlying legislation. There are already some important consolidation measures on the statute book—for example, the Superannuation Act 1972 of which he may have even closer knowledge than I. We need to be careful that attempts to produce statutes of near-universal coverage do not make the position more complicated. I am not convinced that the time of the House would be well spent on further pensions consolidation at present. As I have said, the Bill represents a relatively simple and straightforward correction of a few minor anomalies in existing legislation.
With his customary acuteness, the hon. Member for Roxburgh and Berwickshire highlighted clause 2. He is quite right that the clause is retrospective. It aligns the law with the practice of schemes. It brings the law into line with what it was thought and intended to be. I stress, emphasise and underline that no pensioner will lose out as a result of clause 2.
The hon. Member for Roxburgh and Berwickshire wondered whether the position of police and fire personnel had been looked into. The answer is yes, and no anomalies in the way in which legislation affected them were identified.
If I have not covered any detailed points, I shall be happy to write to hon. Members or to talk to them before the Bill progresses further.
§ Mr. McCartney
Some Government Departments are considering setting up agencies to deal with their work. Will any changes have to be made in the legislation in respect of civil servants who, from this year, may be working for agencies, which although attached to the Civil Service are technically outside it?
§ Mr. Ryder
Not as far as I know. All public servants are treated the same under the Bill, whoever they work for and whatever the circumstances in which they work. I shall certainly let the hon. Gentleman know if I am wrong in that judgment.
As I explained in opening, the Bill is evolutionary rather than revolutionary. It is intended not to replace a system that has worked well for nearly 20 years but to adapt and improve it to meet the needs of the 1990s in a way that is fair to pensioners and current employees. Against that 727 background, I commend the Bill to the House. I thank those hon. Members who have taken part in the debate— especially my hon. Friend the Member for Orpington, who has given the Bill his support, the hon. Member for Roxburgh and Berwickshire, who spoke on behalf of the Liberal party, and the hon. Member for Makerfield. If any points need to be clarified, I shall be happy to clarify them during the next few days.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Lightbown.]
§ Committee tomorrow.