HC Deb 18 February 1991 vol 186 cc111-20
Mr. Nigel Spearing (Newham, South)

I beg to move amendment No. 1, in page 4, line 42, leave out from 'to' to `and' in line 43 and insert 'affirmative Resolution of the House of Commons'. The amendment converts the all-important proposed statutory instrument in clause 6 from a negative resolution—that is, from an order which is not usually debated unless it is prayed against—to an affirmative resolution, which is debatable.

I thank the Leader of the House for including clause 6 in the Bill. With your permission, Sir Paul, I hope to speak to the structure of the clause and the nature of the order when dealing with the amendment and to turn briefly to some other aspect of this matter in the clause stand part debate. There have been negotiations or talks between the trustees of the House of Commons pension fund, but I stand in some representative capacity in my party and I wish to try to convey to the Leader of the House the strength of opinion on this matter across all parties. My right hon. Friend the Member for Salford, East (Mr. Orme) may catch your eye on Third Reading, Sir Paul, to deal with that matter.

If I speak with some feeling it is because one of the first constituency cases with which I dealt when I became a Member of Parliament over 20 years ago concerned the family of a former hon. Member. He was well known and well liked. Alas, he died unexpectedly in his late forties or early fifties. In his last illness, he realised that he would live only two or three weeks beyond the 10-year limit. When he realised that, he was thankful that the House of Commons pension fund would look after his wife and two children. Alas, however, a visit to the Fees Office a little later revealed that, although the former Member had completed 10 years and so many weeks' service, he had not taken into account the fact that the time during which the House had been prorogued would be deducted from his service. That hon. Gentleman and his family failed to qualify.

Things have improved since then in the House of Commons pension fund, which looks after such cases, but those hon. Members who retired before 1964 find that, to some extent, that state of affairs still persists. We are all agreed that the benefits and the terms of the fund are not yet geared up to what hon. Members might expect if they had not been Members of this House and—more importantly—to what their families, dependants and widows might have expected if the hon. Member had not been a Member.

Therefore, although the increased benefits that we expect in another order that the Leader of the House is to lay at some stage are not part of this Bill, some aspects of the legislation give cause for concern. My concern is with the nature of the order. Clearly, we are in an unusual position, which is partly the nature of Parliament, but it is also constitutional. As employees of the public, we pay a proportion of our income—whether fixed or variable—into the fund. In a sense, the House itself or the public—it is certainly not the Government—also pay a certain amount as the employer. That mechanism is well known and I need not go into it now, except to say that there is dispute about the amount.

My point about the statutory instrument that is proposed in the clause and which must have the approval of the Treasury before it is laid by the Leader of the House is that the provisions place the Treasury in a special position. I am not sure that I agree with that and we could have tabled an amendment starting, "After consultation with the Treasury", but never mind, those are the provisions. The Treasury, however, is the protector of the public. In the debate on 31 January, the Leader of the House properly reminded us that the taxpayer must be borne in mind, but the taxpayers—whether through VAT or income tax—are our employers. Who, therefore, is representative of our employers? Is it the Treasury? More importantly, is it the First Lord—or even the First Lady—of the Treasury? This matter does not concern only the Chancellor. We all know who the First Lord of the Treasury is.

Or is the representative of the public the body of Members of the House of Commons? I should think that there is at least as strong a case for saying that those who represent the public are the members of the House of Commons in generality as there is for saying that it is the single individual who is the First Lord of the Treasury and Her Majesty's—or His Majesty's; we are thinking ahead—Prime Minister of the day. Therefore, is not it anomalous that not only does the Treasury have to give its consent—that means either the Chancellor or the First Lord or Lady and there has been talk about which it was in the past—but it makes the decisions? As the Bill is drafted, the order, because it uses the royal prerogative, will inevitably come into force unless it is negatived.

Is not it inappropriate for this important matter to be more on the side of the royal prerogative, within the personal control of the First Lord of the Treasury, than in the control of the House? Constitutionally, some people might argue, as I would on another occasion, that it should be entirely in the control of the House, acting as a representative of both the employers and employees, but that might be pressing it a bit hard. I am not saying that it should be framed only in consultation with the Treasury. The Leader of the House has drafted it as an agreement, so that is how we have it. However, if that is not so, there is an equal and proper argument that the House should not lie back and wait for it, but should have to give its approval.

After all, the proportions of contribution, whatever they may be in the future, will be made under a contract of the House with itself—Government, Members and First Lord together. It is not just one sided. I think that the Leader of the House will agree that, as drafted, the Bill leaves everything on the side of the Government and of the prerogative and gives nothing to the House. For that reason, an affirmative order would be consititutionally more acceptable and fairer in terms of contract, if nothing else. I know that this is a late stage in the long saga of this matter. I may be only putting down a marker for some future debate when perhaps none of us is here. However, it is one of substance, it is constitutional, it is to do with contract and, on any objective basis, it would stand up for approval.

Sir Geoffrey Finsberg (Hampstead and Highgate)

As one of the managing directors of the pension fund, I should perhaps say something. This is a matter which we considered, but we came to the conclusion that it was not right to have an affirmative resolution. The matter was discussed four years ago and, at the express wish of the House, the procedure was changed from the affirmative to the negative resolution. On Second Reading, it was felt that the change from primary to secondary legislation might give the House further opportunities to amend and debate the scheme. That was put to the Minister who undertook to consider the matter. He said: I am happy to give an undertaking on behalf of the Government that time will be made available for a debate on an amendable motion before any regulations amending the scheme are made under clause 2. This would allow, for example, the sort of debate that we had in July 1983 on the recommendations of the TSRB which led to the changes to the scheme that were made in the 1984 Act. The arrangements will be similar to the procedure for determining hon. Members' pay and allowances."—[Official Report, 13 May 1987; Vol. 116, c. 371.] It was because that change was made at the request of the House four years ago that, when we most recently considered the matter, the managing trustees agreed, without dissent, that they would leave it as it stood. They felt that it would not be in the interests of Members to change the procedure.

I hope that the hon. Member for Newham, South (Mr. Spearing), after putting down his marker, will agree to withdraw the amendment. I feel that it would not fit in with the considerable amount of work that has been done by the chairman of the trustees, the right hon. Member for Manchester, Wythenshawe (Mr. Morris), who, alas, cannot be with us this evening.

The Lord President of the Council and Leader of the House of Commons (Mr. John MacGregor)

I shall refer to two arguments that were advanced by the hon. Member for Newham, South (Mr. Spearing) before I deal with the substance of the amendment. My first response relates to the case to which he referred of an ex-Member and the tragic circumstances that surrounded him. I agree that in times past the House did not treat its Members well in respect of pensions and other matters. As the hon. Gentleman said, that is why we have the Members' fund—so that widows and others can be looked after. He will have noted that in clause 7 we have changed the wording relating to the Members' fund to enable the trustees—it is their responsibility—fully to exercise their discretion. The wording was worked out by the trustees and myself and I think that it is welcome to the House.

It was because there are problems relating to those who were previously Members of this place that I announced during our debate on 31 January that we were increasing funding from public sources, from the Treasury, by £100,000 up to the maximum to enable trustees to fulfil their responsibilities. I hope that that will help in dealing with those who were previously Members.

Secondly, I take up the excursion of the hon. Member for Newham, South into the siding of the balance of interests and who represents the public. There is a public interest in the form of those who are contributing the public sector element. Those are taxpayers. That is why the Treasury has an interest. Equally, we as Members make major contributions to the fund and we have an interest to ensure that our pensions are reasonable.

I would not agree with the hon. Member for Newham, South entirely and say that, because we represent the public as a whole, we can represent the public on this matter. There is a need to recognise that we have a vested interest. That is why we have the Top Salaries Review Body considering these matters and why, on the balance of contributions, I felt and the trustees agreed that the problem currently causing concern to Members should be referred to the TSRB.

I shall explain to the hon. Member for Newham, South why I think that things are better as they stand than they would be if his amendment were accepted. My hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg) put the case well. As I explained on Second Reading, although regulations under the 1987 Act are subject to the negative resolution procedure, we are permitted, in line with an undertaking of the Paymaster General in 1987, as my hon. Friend the Member for Hampstead and Highgate said, to set down regulations before the House in draft so that the House can make its views known and have them taken into account. I think that it was agreed in 1987 that in that way the rights of Members would be fully protected. As my hon. Friend the Member for Hampstead and Highgate said, the trustees find that satisfactory. That, of course, is what we have done. There would be little point, therefore, in holding one debate on an amendable motion on regulations and then a second under the affirmative resolution procedure.

I assure the hon. Member for Newham, South and the House generally that we have promised that these matters will be debated. I think that the arrangement proved itself when we tabled our motion on the draft regulations, which improved the scheme and which we debated on 31 January. Although the hon. Gentleman suggested that everything might be on the side of the Government, I believe that practice has proved that that is not so. I hope that it is clear from the discussions with the trustees leading to the Bill and the regulations that there is proper mutual negotiation. That is also clear, I believe, following the decisions that we took on 31 January. On that occasion, I accepted on behalf of the Government an argument that was advanced in relation to MEPs, and that will be included in the final regulations.

I reassure the House that any regulations that are made under the clause will be treated in the same way as we approached the regulations on 31 January. I believe, therefore, that the amendment is unnecessary, and I hope that the hon. Gentleman, having heard what my hon. Friend the Member for Hampstead and Highgate and I have said, will agree that this is a better way to proceed.

For the sake of completeness, I should refer to a technically deficient part of the amendment. The purpose of the amendment is not only to ensure that the affirmative resolution procedure is used, but to eliminate the role of the House of Lords in the approval of the regulations. I am not sure that the hon. Gentleman intended that effect. As I am sure he knows, some members of the other place are in the parliamentary scheme. It would be wrong to exclude them from the parliamentary process. However, that is a lesser point, as it could be put right. The main point is the one that both my hon. Friend and I have made—that, from the point of view of the House, the proposal in the Bill is a more satisfactory way to proceed.

10.30 pm
Mr. Spearing

I should like to respond at once to the Leader of the House's closing point. It was, indeed, realised that the amendment would cut out the other place. I take the right hon. Gentleman's point that some Members of the House of Lords are former Members of this House. But there are many who are not and I do not see why their employment, casual though it may be, should be regarded, for these purposes, as being in any way different from the casual employment elsewhere of other past Members of Parliament. By custom and practice, the other place takes no part in financial matters. In my view, this matter should be covered by that custom. I plead guilty to having been very well aware of that aspect of the amendment.

Past Members who suffer tragedy are covered by the Members' fund, but, in respect of these matters, the atmosphere that we have inherited is not always good. There are one or two points that I want to press home when we discuss the clause stand part motion. To some extent, we are still in a transitional situation. I do not think that we have achieved the ultimately desirable level of benefits.

The Leader of the House said that, as there will be a debate, there is no need for my amendment. I freely acknowledge his undertaking, given on 31 January, that there would be a debate and that it would take place after the TSRB had made its recommendations. However, the right hon. Gentleman will not always be Leader of the House. Nothing that happens on this occasion may be taken as a guarantee for the future. That is why the affirmative resolution procedure would be more appropriate, especially in respect of these matters.

I am very grateful to the hon. Member for Hampstead and Highgate (Sir G. Finsberg) for his remarks. His point is valid to some extent, but it comes into the category of the one made by the Leader of the House. He said that in 1987 it was agreed that there would be a debate and he referred to what has been custom and practice, but, as I have indicated, there is no knowing what will happen in the future. For the moment, the trustees may be quite satisfied. I bow to their judgment, but in principle I am a little wary of what has been said.

Sir Geoffrey Finsberg

The hon. Gentleman is making an interesting point. He and I have been Members of Parliament for about the same length of time. Both of us, when in opposition, have pressed Governments for certain undertakings. Once a Government have given an undertaking—something that is enshrined in Hansard—he, certainly, and I, so far as I know, have always accepted that it will be honoured by all Governments. We were given such an undertaking four years ago. The hon. Gentleman and I, good House of Commons men as we are, ought to be satisfied by that. Very seldom do people question undertakings given on behalf of Governments and recorded in Hansard.

Mr. Spearing

This is indeed a fascinating exchange. I take the hon. Gentleman's point. He will know to what I am referring when I say that a very important undertaking concerning the examination of certain legislation was given. That was undermined in a written answer given on the last day before the summer recess. I understand what the trustees have done. I understand that discussions have taken place. I believe that I have made a constitutional point in this context. The arguments have been made. Having heard what the hon. Member for Hampstead and Highgate, for the management trustees, and the Leader of the House had to say, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mr. Spearing

I shall deal with not the structure of the clause and what it seeks to achieve, but the content. Again, we owe our thanks to the Leader of the House for the hard work that he has done. Having dealt with the complications of the common agricultural policy, waded through education in the United Kingdom and attempted to grapple with the procedures of the House of Commons, the simple matter of pensions should have been just a few moments of easy work. But alas, it is not thus. I imagine that the Leader of the House must have burned the midnight oil dealing with this extremely complex issue. Therefore, if what I have to say to him seems a little unfair, I hope that he will take it in good part.

The Leader of the House has said—he certainly did so in the debate on 31 January—that we want a scheme that is fair to everyone, but I am not sure that the scheme will be fair on widows. He has said that we have a scheme which will pay five eighths, not two thirds, of the pension allowable to the Member who dies. I hope that the next time that we have a benefit updating round we can have a look at that. It is not even five eighths of the pension of a Member who reaches the age of general retirement. It is five eighths of something less. That is an illustration of the point that I made. We still have some way to go in respect of that scheme.

I wish to deal with what is fair. I shall take the Lord President and hon. Members through a series of propositions with which they will not disagree. If any hon. Members disagree at any stage, they should please intervene. I have checked in various places and I believe that I have a watertight argument. It backs up the work of the chairman of my party, my right hon. Friend the Member for Salford, East (Mr. Orme), who is on the Front Bench.

We all want the scheme to be fair. There is an anomaly in the way in which we are working up the scheme. It must be fair in that it is not a disincentive to a person becoming a Member. More importantly, there should not be a disincentive in respect of a person's family, dependants or potential widow. We all know that at present in comparison to other schemes our scheme does not fulfil that criterion.

The scheme must also be fair to our employers, the taxpayers, as the Leader of the House has reminded us. But it must be fair to the Member. The proportion of money that he has to pay from his salary should compare to what he, or other people in the public service, would pay if they were in a comparable occupation. I suggest that all those matters must be kept in some sort of equilibrium, together with what the benefit will buy or what the benefit level will be. We must watch that, too.

One of our problems in this realm is that three elements have to be borne in mind and they are sometimes confused. One is the proportion of money in any one year or over a period which can be contributed in money terms by the Exchequer and by the Members. The Government Actuary says that half of the money must be raised in order to keep the fund in equilibrium. The second is the proportion of the Member's salary. The third is the ratio between the contribution of the Member and that of the Treasury.

I suggest that those three elements, although related, are distinct. They are separate sets of variables, which can be moved together in more or less infinite combinations. Therefore, we have to decide on a system that raises enough money to reach the standard contribution, yet maintains equilibrium and fairness throughout the system.

At present, as I understand it, the main bone of contention in the evidence that my right hon. Friend the Member for Salford, East is to present to the TSRB is that in public schemes employees pay broadly 5 or 6 per cent. of their salaries, and the employer pays roughly double that amount. That proportion is more or less fixed, which is why we have perhaps alighted on the advantage of a fixed proportion.

However, the Leader of the House said in the debate on 31 January that there were disadvantages in a fixed proportion. If there is a change in demand in keeping up funds by the actuarial certificate—which is bound by some Acts of Parliament—while the hon. Member's contribution may be fixed, and we know how much the percentage will be for a long time ahead, the Treasury contribution could zoom up. The right hon. Gentleman pointed out in that debate that two or three years ago the Treasury contribution increased to about 18 per cent. The fact that it is now down to 4.4 per cent. is due to a notional surplus on the fund. But it is notional when compared to the benefits, because we know that the benefits are not what they ought to be.

Therefore, the Treasury gets what the Leader of the House is pleased to call a "holiday"—it is probably a banking term in the City, I do not know. I understand that for the foreseeable future that 4.4 per cent. is unlikely to be increased if we keep to the present actuarial calculations. I suppose that it could increase years ahead.

One of the problems that the Government Actuary and the House have is that membership can turn over pretty rapidly from one term to another—even more than redundancy. The age of Members of Parliament and the liabilities that they impose upon the fund can vary considerably. The actuarial calculations must be quite remarkable.

The other factor that is often overlooked is the skill in managing the fund. If it is managed skilfully, Members of Parliament still pay the same amount, but the Treasury contribution goes down. Although it is nice to have a skilfully managed fund, it benefits the Exchequer rather than the hon. Member, his dependants or the fund. There is an inherent imbalance in the situation.

In the previous debate on the subject the Leader of the House said that the scheme is quite good because if Members of Parliament have to pay a fixed amount they are cushioned by Treasury liability going up or down. I agree with him in principle, but the trouble is that that fixed amount is 9 per cent. At the end of that debate the Leader of the House said that that amount could only be changed by statute. What are we about? The future regulation, which we have just debated in greater detail, could change that amount year on year. It can be changed within the resolution, although it is a negative resolution. So there is room for almost infinite flexibility, within the legislation before us.

I suggest to the Leader of the House, and through this debate to the TSRB—to back up the evidence of my right hon. Friend the Member for Salford, East and that no doubt given by the trustees—that perhaps the ideal scheme is one in which the Member of Parliament's contribution is fixed to perhaps around 5 or 6 per cent. in line with outside schemes and the Treasury makes up any deficit, perhaps within a fixed limit, but one which is not less than the amount paid by the hon. Member, and which is on occasion a great deal more. That would mean that the tax payer—Joe Public—would be ensuring that public servants and their dependants were properly looked after. At the same time, the order would go through year on year to keep the equilibrium.

What is wrong with the present system is the 9 per cent., but it could surely be varied by clause 6. Therefore, I see no real difficulty for the future, provided the TSRB considers and reports on the points that I have been discussing. The structure might be equitable as long as the Member's contribution was equitable, but it is not. I do not think that the public could be regarded as a good employer if the contribution remained fixed at 9 per cent.

I hope that in recasting the mechanism through this clause, which we all welcome, the Leader of the House and others will note the arguments that I have made. I hope that they have been logical, correct and fair. The Leader of the House can put me right on any matter that I have not got correct, and we can go on from there. This is a contribution to the work of my right hon. Friend the Member for Salford, East, the work of the trustees and the midnight oil burned by the Leader of the House.

10.45 pm
Mr. MacGregor

The hon. Member for Newham, South (Mr. Spearing) covered two points. The first was on the five eighths widow's pension which has been agreed. The point to stress to the Committee is that it came about because of a negotiation with the trustees on using the surplus in the fund. The five eighths used up the balance of the surplus. That is why it was not possible to go further.

There is, of course, a potential problem if there are not surpluses in the future. If we have a five eighths or a two thirds widow's pension, contributions may have to be raised in future to meet that if there is not a surplus in the fund. That is for the future. The point at present is that it was agreed that this was a sensible way to use the surplus. I accept that it is important to increase the widow's pension to get it closer to the levels of the best elsewhere. The point was agreed by the trustees with me and my predecessor in discussions.

The second point raised by the hon. Gentleman relates to the balance of contributions, which was quite a feature in the debate on 31 January. He is right to recall that in that debate I outlined some of the reasons why the existing method was reached and, indeed, recommended by the TSRB. I put those points to ensure that the House recognised that the arguments in favour of the change for which hon. Members were pressing were not all one way and that there were arguments in favour of the existing system. I stressed some of those in the debate in order to get the balance of the argument right.

As the hon. Gentleman knows, the balance of contributions is perhaps the biggest matter that I felt it right, and agreed with the trustees, to put to the TSRB to consider again. He will know that I announced that the Government accepted that the balance of contributions problem should be referred to the TSRB, as well as the resettlement grant about which hon. Members also felt strongly—I understand why. I indicated that I would put both positively to the TSRB. I wrote to the chairman of the TSRB on 4 February and the final text of the reference to the TSRB was published in Hansard on 5 February. I am glad to have the opportunity to restate that for hon. Members who did not see the written answer.

Perhaps I may use the opportunity briefly to update the Committee on the position in relation to the TSRB. As I told the House on 31 January, I expect the TSRB to report on the resettlement grant during April and on the balance of contributions as soon as possible thereafter—some time in May. The TSRB has asked that written evidence from the Government, the trustees, political parties and, indeed, anyone who wishes to make written submissions should be with it as soon as possible. It is a tight deadline. We are all working hard to that deadline because it is in our interests. I understand that the TSRB is to meet shortly before the end of the month. It will no doubt be inviting oral evidence in March.

We have set the TSRB a tight time scale for dealing with these important matters. I think the whole Committee will join me in expressing appreciation for the businesslike and brisk start that it is making. It is equally incumbent on us to express any views to the TSRB as quickly as possible.

The short answer to the hon. Member for Newham, South is that he is perfectly free to make the points that he has been making about the balance of contributions to the TSRB, so that it can examine them in relation to all the other points that have been put to it. I hope that the House will now approve clause 6.

Question put and agreed to.

Clause 6 ordered to stand part of the Bill.

Clauses 7 to 9 ordered to stand part of the Bill.

Bill reported, without amendment.

Order for Third Reading read.

Motion made, and Question proposed, That the Bill be now read the Third time.—[Mr. MacGregor.]

10.51 pm
Mr. Stanley Orme (Salford, East)

May I briefly underline the points made by the Leader of the House and my hon. Friend the Member for Newham, South (Mr. Spearing) about the submissions to the TSRB regarding two vital points—the 9 per cent. contribution and the resettlement grant?

I have already written to the chairman of the TSRB putting forward the views of the parliamentary Labour party and hope to give oral evidence in the not-too-distant future. I welcome the timetable set by the Leader of the House and I am glad that the TSRB has started work already; I think that it will agree to that timetable.

The Bill has had a chequered career. It has taken much longer to go through the House than has major legislation: I have seen three Leaders of the House while it has been progressing through its stages. I hope, for the purposes of the Bill and the findings of the TSRB, that the present Leader of the House will remain with us at least until the next election, although I will not speak about what may happen after that.

I agree with my hon. Friend the Member for Newham, South that the five eighths contribution to widows is not sufficient. The trustees want it to be three quarters, and we shall continue the pressure. The doubling of the death grant is welcome, however, as are other small improvements.

Clearly this is not the end of the story, and we look forward to the report from the TSRB.

10.53 pm
Mr. MacGregor

I congratulate the right hon. Member for Salford, East (Mr. Orme) on the speed with which he has delivered his evidence to the TSRB: it is, I think, an indication of the importance that he attaches to the matter.

During our debate on the draft regulations on 31 January I said that I hoped to be able to accommodate the many representations made—both before and during that debate—in favour of years of service as an MEP counting as service in the House for the purposes of the early-retirement scheme. I now confirm that the Government accept that the change should apply to all service as an MEP, with no cut-off date. It will benefit all former MEPs now serving as Members of the House of Commons. The Government also intend to bring forward similar changes to the pension scheme for MEPs, to ensure that the two schemes remain in step with each other. That is, I think, a demonstration of how well the procedure has worked.

Drafts of the regulations were made available before the debate on 31 January. I hope to lay all the regulations, in final form—including those that provide for the increased death-in-service grant and the improved widow's pension—very soon. That is what impelled us to get on with it—that, in particular, there are increased death-in-service grants and improved widows' pensions which we are anxious to see in place.

Sir Geoffrey Finsberg

Can my right hon. Friend confirm that they will be retrospective?

Mr. MacGregor

They will be backdated to May 1988, as they were in the regulations.

The Bill has been gestating for a long time. I am grateful to the trustees and all the others who have been involved in bringing it to this point. That includes the hon. Member for Newham, South (Mr. Spearing) and, in particular, the chairman of the trustees. I hope that the Bill will now be given a Third Reading. It has had a speedy passage, which is what all hon. Members wanted.

Question put and agreed to.

Bill accordingly read the Third time, and passed.

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