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§ Mr. Paul Flynn (Newport, West)I beg to move amendment No. 1, in page 1, line 17, leave out from 'men)' to the end of line 18 and insert
'the words "is a woman who" are hereby repealed.'.
§ The First Deputy Chairman of Ways and Means (Sir Paul Dean)With this we shall discuss amendment No. 2, in page 1, line 28, leave out subsection (4).
§ Mr. FlynnThe main reason for clause 1 is that the public service pension schemes presently discriminate between the sexes in a way that, from January 1993, will no longer be permissible under the European directive on equal treatment in occupational schemes. The discrimina?tion is found in a rule that provides for pension increases to women under 55 with dependent children. Men in the same position do not qualify for pension increases unless they have retired because of ill health or, having retired on other grounds, are disabled by physical or mental infirmity.
The discrimination operates only up to the age of 55. A man whose pension starts before that age will not get increases, except on health grounds, unless he is 55. When he reaches that age, his pension is increased to the level that it would have reached if the discrimination did not exist. The loss of pension to a policeman who, for example, retires—as many do—in his 40s can be considerable. At the age of 54, he could be drawing a pension worth half or less its original value.
On Second Reading, the Minister said that if the discrimination was removed, by bringing men up to the level of entitlement that women now enjoy, about 7,000 police pensions would have to be increased and that if analogous arrangements were made for the armed forces, another 50,000 would be affected. That would be expensive, but public service pensions are not public charity: they are paid for in exactly the same way as all other occupational pensions, either by direct contributions by employees and employers or by an adjustment of salary in the case of a non-contributory scheme, such as the Civil Service scheme. Neither the employers nor the Government have a moral right to make unilateral decisions of that sort without consulting the members of the scheme and discussing the alternatives and how any additional costs might be met. No such consultations appear to have taken place.
The Minister argued that equalising in favour of men would mean increasing the pensions paid to those who retire at comparatively young ages and who can then enjoy second careers. That is an extremely worrying argument for those who are affected, such as the police, who have good historical reasons for retiring at an early age. If it is acceptable to pay a retired policemen a pension that falls 346 in value every year because he can make up for the loss by taking another job, the implication must be that he does not need the pension at all.
How long will it be before the Government decide, in the interests of efficient targeting, that no public servant should receive a pension below the age of 55? That is the logical conclusion of the Government's decision to which clause 1 inexorably leads us. Our amendment would tackle the problem of discrimination from the other end—equalising in favour of men, rather than removing the rights enjoyed by a small number of women. The Opposition do not propose to divide the Committee at this stage, but we hope to hear a statement about the Government's views on the issue, since no such statement was forthcoming on Second Reading.
The National Union of Teachers and the Assistant Masters and Mistresses Association—practically the only bodies that seem to be aware of the Bill—say that they oppose the Government's proposals. The NUT believes that there should be legislation with the opposite effect —that equality of provision should be achieved by levelling up rather than levelling down, as proposed.
The Assistant Masters and Mistresses Association is opposed to the clause as drafted and regrets the removal of an entitlement to pensions increased to female pensioners under 55 with dependants. That organisation writes:
The removal of this benefit is wholly unnecessary as regards the Teachers' Superannuation Scheme as the scheme's fund is well able to bear the financial cost of treating men on equal terms.While comparisons can be made with the police—a profession from which traditionally people retire at an early age—few male teachers would be caught in the net. We are told that the cost to the teachers superannuation scheme would be small.It is worrying not to have heard a statement about the Government's thinking on the equalisation of pensions, especially as equalisation is just over the horizon, or will happen within a few years. Seven of our 12 EEC partners have already equalised their basic pensions, most of them at the age of 65, with France equalising at 60.
Perhaps more significant is what has happened recently in occupational pension schemes in Britain. With a view to equalising pensions in that sector, many have taken action and, from May to August 1988 of those occupational funds that equalised their pensions between the sexes, only 21 per cent. had equalised at age 60, while 55 per cent., by far the majority, had equalised at 65.
May we be told what plans the Government have? As I said, the amendment attempts to solve the problem of discrimination by ensuring that we level up rather than down. Although, as I said, we shall not divide the Committee on the issue, it is clear that much consultation with members of the schemes affected is necessary. We hope that that will take place.
§ The Economic Secretary to the Treasury (Mr. Richard Ryder)I thank the Opposition, and in particular the hon. Member for Newport, West (Mr. Flynn), for enabling us to take the Committee stage on the Floor of the House.
As the hon. Gentleman said, we discussed the important issue of levelling up and down on Second Reading, when he signposted the fact that he would be taking a further interest in the subject. He has deployed the same arguments at this stage, and the answer that I shall give the Committee is along the lines that I adduced on Second Reading.
347 Clause 1(2)(b) and subsection (4) provide for the phasing out of the payment of pensions increase paid to women below the age of 55 if they have dependent children, a point stressed by the hon. Member for Newport, West. The existing law—that is, section 3(2)(c) of the Pensions (Increase) Act 1971—discriminates against men and must be changed to comply with the United Kingdom's obligations under European Community equal treatment law, which is EC directive 86/3/78.
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As I explained on Second Reading, the existing provisions benefit very few women; to our knowledge, only eight women fall into this category. But extending it to men would be costly. Equal treatment can, therefore, be secured only by removing that provision. The clause does that by phasing out the provision in a way which fully protects the accrued rights of female scheme members and pensioners.
Acceptance of the amendment would mean that pensions increase would be payable from 1 January 1993 on pensions paid to men below the age of 55, provided they had dependent children, even on the parts of those pensions earned by service before that date. That, as the hon. Member for Newport, West pointed out, would be very costly indeed, and retrospective improvement to the superannuation provisions would benefit almost exclusively the younger retired members of the police, fire service and armed forces schemes at an age at which many of them can and do enjoy second careers.
I advise the Committee to reject the amendment because, as I said on Second Reading, the total cost of it would be substantial. It would be about £80 million a year at today's pension levels, rising to over £100 million a year at today's pension levels after about 20 years.
Those who have retired on ill health grounds or who are physically or mentally disabled already receive pensions increase when below the age of 55, and when other pensioners in the schemes reach 55—that is, still five years younger than the normal retirement age for most public service schemes and 10 years below the state pension age—their pensions are increased and the increase built up since they retired is paid up to then.
The Committee will agree that we could not give priority to targeting extra support on a group of public service pensioners who already enjoy some of the best pension provisions of any groups of public sector employees.
The hon. Member for Newport, West raised the issue of the equalisation of pension ages. The Government recognise the arguments for equalisation of pension age, but a great many complex issues must be considered, including demographic factors and the long-term economic and financial implications of any change for individuals, employers and the state.
The hon. Gentleman spoke of what was happening in Europe and was right to suggest that some European countries have a common pension age. The common pension age in Denmark is 67, and in Germany, Ireland, Luxembourg, the Netherlands and Spain it is 65. 1 do not imagine that women nearing pensionable age would be delighted were the British Government to raise the pension age to 65.
348 Five countries have different pension ages. They are Belgium, where men retire at 65 and women at 60; Greece, where men retire at 65 and women at 60; Italy, men at 60 and women at 55—the only country with a 55 pension age for women; Portugal, men at 65 and women at 62; and the United Kingdom, men at 65 and women at 60.
I hope that, having heard my reasons why we cannot accept the amendment, plus the additional background information on the equalisation of pension ages, the hon. Member for Newport, West will feel able to withdraw the amendment.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)I support the thrust of the case that has already been made by the hon. Member for Newport, West (Mr. Flynn). However, I am puzzled by the size of the sum of money involved. I agree that if I was in the Minister's shoes I would not wish to spend £180 million in such a way, because there are other claims on the money that also come under the social security heading.
If I understand the situation correctly, we are talking about extending pensions, after 1 January 1993, to men under 55 with dependants, and the amendment aims to give them a larger increase than that provided for in the Bill.
Presumably we are talking about the cost over a period and not expenditure of £180 million in the year commencing 1 January 1993. Either there are more people within the category that would get the increase if the amendment were passed than I imagined, or the sums of money to be paid to them are larger than I imagined.
What I am trying to say, in a cack-handed fashion, is that either the increases are large or a huge number of people will benefit from them.
I know that this is a technical question and the Minister may not have the information immediately available to answer, but I think that the Committee would like to know why such substantial sums of money would be involved if the amendment were passed. Will a few men under the age of 55 get a substantial increase in the short term, or will thousands of new pensioners benefit from the amendment? That is an important question. Why do the Government estimate that the costs will be greater if this amendment is made?
§ Mr. RyderI shall do my best to answer the understandable and legitimate question of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood).
I shall again paint some of the backcloth. As I said earlier, only eight women in the schemes for which data are available—the Civil Service, the National Health Service in Great Britain and teachers in England and Wales—currently benefit from the provisions. The cost of the pensions increase to be paid to them is approximately £3,000. Home Office estimates for the police scheme in England and Wales show that no more than 50 or 60 retired policewomen could benefit from the provision, and the actual number is thought to be somewhat less. There are no retired female firefighters or armed forces personnel who would benefit from the provision. Paying a pension increase to men under 55 with dependent children would be very costly, as some 7,000 retired policemen and firefighters would benefit—mainly policemen, as proportionately more firemen retire early on grounds of ill health and they already qualify for an increase on those grounds.
349 The annual cost of such a provision would be about £6 million in 1989 to 1990, at 1989 to 1990 pension levels, rising to £14 million, at 1989 to 1990 pension levels, after 25 years.
The cost of a pensions increase for some male pensioners under 55 could be met by an additional contribution of approximately one half of 1 per cent. of the payroll. The costs of increases on pensions payments in the future, in respect of the past service of current and retired employees, could not be met in that way for the police scheme, which is the main scheme to be affected, because the costs would have a capital value of approximately £120 million at 1989 pension levels.
When I first saw the figures, I was as surprised as the hon. Gentleman, but they have been worked on in detail by the Treasury and by other interested parties and, to the best of my knowledge, the figures are accurate.
The amendment moved by the hon. Member for Newport, West (Mr. Flynn) does not propose to phase in the provisions. If it did, the cost in 1993 would be small.
I hope that I have answered the hon. Member for Roxburgh and Berwickshire. If I have missed any technical matters, I shall try to answer them later.
Armed forces personnel can draw a pension from the age of 38 and the police, I think, from the age of 48.
§ Mr. KirkwoodI am grateful to the hon. Gentleman—and I am not trouble-making, honestly. Perhaps it is because I am not a specialist in this subject, but I do not understand the £120 million capitalisation figure that the Minister mentioned. I think that it means that the Treasury, however indirectly, would have to put that sum into the schemes to meet the increments over a period of some years. If that is the case, I shall go away a relatively contented man. As a lay person, it seems to me that it is possible to phase in the cost of meeting the increase if males under 55 are to benefit from the scheme.
I remain surprised that the scheme will cost so much money. Is the simple answer that £120 million will have to come out of the Treasury's pocket to be paid into pension funds? I am still somewhat puzzled about the cost of the scheme, bearing in mind the small number of people likely to benefit from it.
§ Mr RyderAs the hon. Gentleman has conceded, we are dealing with sizeable amounts of public money. Some of that money could be better spent by looking after people who are less fortunate than many of the people who subscribe to, or gain from, the schemes that we are debating.
To elaborate on the hon. Gentleman's last point, the schemes are not funded. Therefore, we are talking about the amount that we would have to put in if the payment were applied to pensions derived from service before the change was made.
§ Mr. FlynnI share the unhappiness of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) with the Minister's replies.
I should like to draw hon. Members' attention to the unusual nature of the work of the police and the armed services, and the fact that it is universally accepted that people in those services need to retire early.
I mentioned the teachers. Two teachers' unions have said that they would be happy to see the costs provided for in the amendment funded out of their superannuation fund. They believe that the cost would be tiny, protozoan 350 or minute, and they would be prepared to pay that for the principle that is at stake. It is an important principle: equal treatment of the sexes represents a great international reform. We should compare that reform with others in the world. At the time of the emancipation of slaves, we did not create equality by making all working people slaves; we did not spread the misery. The Government, however, seem in this instance to wish to spread not the advantages enjoyed by either sex—sometimes men, sometimes women—but the disadvantages.
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On Second Reading, the Minister used the words "the ultimate cost". Ultimate" refers to a long period, and I share the cynicism that has been expressed about the arrival of the year in question. It is with some regret that we note the resistance from this regressive, backward-looking Government to the ideal being pushed by the far-sighted, progressive Europeans. Much of the contribu?tion involved should be a matter for negotiation, as the funds are provided not by a public charity but by working people, in the same way as with other occupational pensions. Surely this is a matter for those people to decide rather than a matter for Government edict.
§ Mr. RyderMay I repeat what I said in my opening remarks and on Second Reading? If we were to accept the amendment on the levelling-up or levelling-down principle, considerable public expenditure would be involved. Therefore, we cannot accept it.
The hon. Gentleman alluded to the equalisation of pension ages. As I said in my earlier speech, equalisation of pensions in Europe is not always equalisation downwards. The majority of countries that apply such equalisations equalise up to the age of 65, while Denmark equalises up to 67. Such an arrangement in this country would make women less happy than they are with the present arrangements, which specify an age of 60.
I am advised that one problem of the amendment is that, perversely—I am sure that this was not the intention—it could discriminate against women. The children involved must be dependent children and, other things being equal, male pensioners are more likely to be regarded as heads of household than female pensioners, especially if the husbands of the female pensioners are still working.
§ Mr. FlynnIn these days of equality and the spread of "house husbands", I do not think that that would pose a serious danger. In view of what the Minister has said, however, I beg to ask leave to withdraw the amendment.
§ Amendment, by leave withdrawn.
§ Clause 1 ordered to stand part of the Bill.