HC Deb 31 January 1991 vol 184 cc1137-63

Order for Second Reading read.

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

I beg to move, That the Bill be now read a Second time.

I should like to make two points at the outset. First, the vast majority of the proposals that we are considering today, both in the Bill and in the subsequent motion endorsing the draft regulations, follow Top Salaries Review Body recommendations; secondly, they were made some time ago, so, to put it mildly, we have not shown indecent haste in implementing them. There is no question of our doing hon. Members any favours. The proposals are modest and overdue. As some of the main benefits—taking both together—go to widows of Members, who have often had to make many sacrifices as a result of their parliamentary life and whose rewards would not, I think, be described as great, I hope that we can agree to them tonight.

Mr. Michael J. Martin (Glasgow, Springburn)

I am sorry to intervene so early in the right hon. Gentleman's speech. It is noteworthy, however, that the Leader of the House is doing something for Ministers, while he must be aware that a large majority of Members want something to be done about their resettlement grant. Surely he should consider that as a matter of urgency.

Mr. MacGregor

I did not think it right to deal with that at the very beginning of my speech, as I am supposed to be dealing with the Bill. I am very much aware of the concern that is felt about the matter to which the hon. Gentleman has referred, and I intend to say something about it later, but I think that it would be better if I confined my initial remarks to the Bill.

Mr. Ray Powell (Ogmore)

I do not want to labour the point, but, as 351 hon. Members on both sides of the House signed the early-day motion, I would have expected the right hon. Gentleman to pay it due regard in his opening remarks.

May I ask whether it is incumbent on any Member, whether or not he is a Minister—or even Mr. Speaker—to participate in a debate on a Bill as a result of which he will benefit directly? Will the right hon. Gentleman, as a Minister, be entitled to receive any benefit as a result of the Bill, and will he specify who will receive such benefits?

Mr. MacGregor

I intend to cover the question of resettlement grants in my opening remarks, but I think that it is best for me to do so in an orderly fashion. We are taking the Bill and the motion together, and almost every Member will benefit in one way or another: if we excluded those who will do so, the debate would be very odd.

On behalf of the House, let me thank my predecessor, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), for all his work. He did a great deal to bring us to the point that we have reached today. I am very pleased that he is present, and that I am able to say that to him.

As the House will recall, in July 1987 we invited the TSRB to undertake a review of the parliamentary pension scheme, the pensions of the Prime Minister, Speaker and Lord Chancellor and ministerial severance pay. When the TSRB reported in May 1988—let me stress that date—we made it clear in a written answer that we accepted the recommendations. Last January, the House debated that report, together with the Government Actuary's report on the parliamentary contributory pension fund laid before the House in 1989. The Bill implements those TSRB recommendations, together with a number of other items.

We are also making improvements to the parliamentary pension scheme through our regulation—making power under the Parliamentary and Other Pensions Act 1987. The improvements for Ministers and those for other Members need to be seen as a whole, but procedurally we shall be debating the regulations separately from the Bill. In line with the undertaking given by my predecessor as Leader of the House in May 1987, we have set down the regulations in draft so that Members have an opportunity to comment.

I shall, of course, say more about the regulations when we debate them. I will say now only that I believe that the improvements in the Bill and the regulations strike a fair balance between the interests of Ministers and those of other Members. I believe that I have the full support of the trustees in saying that.

Mr. Stanley Orme (Salford, East)

I know that the Bill and the regulations are being taken separately, but surely it would be in the interests of the House for us to be able to debate both at the same time.

Mr. MacGregor

As it is the normal procedure, I intended first to speak to the Bill and deal with the resettlement grant, and then to deal with the details of the regulations when we reach them. I think that this is really a matter for the Chair.

Mr. David Harris (St. Ives)

My right hon. Friend has said that he is prepared to consider Members' views on the draft regulations. Can he give those of us who are former MEPs an assurance that he will examine the provision in the regulations, as they are currently drafted, that service as an MEP will not count towards the early-retirement provisions?

Mr. MacGregor

The MEP point is in the regulations, not the Bill. I will certainly deal with it, and I want to hear the views of hon. Members before I reply to the debate on the regulations. I think that that would be the right time, because the Bill deals with other matters.

Mr. Alexander Eadie (Midlothian)

When it was suggested that both matters should be debated together, the right hon. Gentleman seemed to cast some doubt on the position. He said that it was a matter for the Chair, but, according to my interpretation of the procedure, it should depend on the will of the House; and, judging by the early-day motion referred to by my hon. Friend the Member for Ogmore (Mr. Powell), there is a strong feeling in the House that the two matters should be debated together.

Madam Deputy Speaker (Miss Betty Boothroyd)

Perhaps I can be of assistance. The House determined that the two matters should be taken separately, but a broad-brush approach would be helpful, as it would make a wide debate possible. I am sure that it would help hon. Members on both sides of the House if the Leader of the House were able to make some progress with his speech, as we would then know his intentions.

Mr. MacGregor

Let me make my intentions clear; then perhaps I shall be able to say something about the Bill. I intend to talk about the Bill on Second Reading, but I am aware that the issue of the resettlement grant is of great concern to the House. I suspect that that is the reason for this afternoon's sizeable attendance. I am also aware of the number of signatories to the early-day motion, and I therefore intend to talk about the matter in the current debate. It would probably be wise for me to deal separately with the many detailed points relating to the regulations; otherwise I might speak for rather a long time now, and I consider it important for hon. Members to have a chance to participate.

I intend to go briefly through the various items in the Bill. I shall speak at greater length on the points that are of interest especially to many Opposition Members.

Clause 1 makes changes to the statutory ex officio pensions paid to the Prime Minister, Mr. Speaker and the Lord Chancellor. The Lord Chancellor has been entitled to a life pension since before 1830, while Mr. Speaker's pension until 1972, granted to each retiring Speaker personally by a special Act of Parliament, dates from 1832. The statutory pension for the Prime Minister dates from 1937. The justification for these special arrangements is the recognition of the high responsibilities of the three offices. The pensions are payable not out of the parliamentary contributory pension fund but out of the Consolidated Fund.

Arrangements for these pensions were consolidated in the Parliamentary and other Pensions Act 1972 which fixed the Prime Minister's pension at 15/40ths, Mr. Speaker's at 20/40ths and the Lord Chancellor at 17/40ths of salary. These fractions have been maintained since then whenever salaries have been increased.

The TSRB in its 1988 report recommended that instead of the different pension ratios for each of the offices, current and future office holders should be entitled to pensions of one half of their final salary. Clause I therefore amends the 1972 Act so that the office holders all receive a common pension ratio of one half of final salary.

Currently there is a restriction on the pensions increase that may be paid to former office holders. For example, the basic pension of a former Prime Minister is uprated under the Pensions (Increase) Act 1971 until it reaches the level the incumbent Prime Minister would receive if he retired. At that point the pension is capped, and a former Prime Minister is entitled to no further pensions increase unless the Prime Minister's salary rises. This penalises former Prime Ministers who have not received the annual pensions increase uprating received by all other public sector pensioners. The TSRB recommended that this restriction should be lifted and we shall be laying regulations under the Pensions (Increase) Act 1971 to give effect to that recommendation. Taking that into account, and the previous operation of the capping restriction, we felt that we should take the opportunity in this Bill to set the pension level of all former Prime Ministers at the same figure as the present Prime Minister would be entitled to. Accordingly, clause 1(5) provides for this. That will be the basis on which the pension will henceforward be fully index-linked.

Clause 2 amends the Parliamentary and other Pensions Act 1987 so that regulations may be made to permit the Prime Minister and Mr. Speaker to participate in the parliamentary contributory pension fund. The TSRB argued that there was no good reason for the exclusion and that the Prime Minister and Mr. Speaker should be given the option of participating. The TSRB concluded, however, that this participation should not operate retrospectively. The regulations will cover that point.

Clause 3 relates the salary of the Lord Chancellor to that of the Lord Chief Justice. The House may recall that the 1983 TSRB report recommended that the Lord Chancellor should receive a slight salary lead over the Lord Chief Justice in recognition of his role as head of the judiciary. The lead was established at £2,000 and remained at that level until last year. Each increase to the Lord Chancellor's salary currently requires a Lord Chancellor's salary order which is subject to an affirmative resolution of both Houses. To implement the salary lead in legislation will end the need for an annual order. I am sure the House will agree that that is sensible.

Clause 4 deals with the May 1988 TSRB recommendation that the severance payment scheme for Lords Ministers should be extended to other Ministers and paid office holders, with certain provisos. The TSRB recommended that on losing office, for whatever reason, Commons Ministers should receive a severance payment based on three months' net parliamentary income and that Ministers not in either House of Parliament should receive three months' ministerial salary—just as Lords Ministers already do. It also recommended that the two-year qualifying period for Lords Ministers should be dropped, that the Prime Minister and Mr. Speaker should be excluded from these arrangements and that the Lord Chancellor should cease to be eligible because of preferential pension arrangements.

I believe that the justification for this will be well understood. Ministers are often required to relinquish outside appointments when they are appointed. That can often mean a substantial loss of income, in addition to a far busier working schedule.

Mr. Harry Ewing (Falkirk, East)

The right hon. Gentleman says that he believes that the justification for this will be easily understood. May I disabuse him of that notion? No worker in my constituency will easily understand that when a Minister gets the sack his or her salary continues for another three months while the salaries of workers who are sacked stop there and then.

Mr. MacGregor

The TSRB recommended that and made it clear that it saw it as a severance payment scheme. That is what I believe it is.

On leaving office a Minister faces an immediate loss of income. It will normally take time to pick up the threads of a previous career, or in other ways to build up replacement income. The TSRB believed, and the Government agree, that modest severance payments are entirely reasonable to bridge the gap.

Clause 5 introduces a new allowance for Lords Ministers and paid office holders. For a number of years Governments have experienced difficulties in recruiting and retaining Ministers and paid office holders from another place. One of the main reasons why peers have been unwilling to accept office has been the adverse financial pressures which ensue.

On appointment a Lords Minister or paid officer holder not only may suffer a fall in salary as a result of relinquishing outside appointments but he or she is also deprived of the overnight subsistence allowance that they could claim as a Back-Bench peer. At the same time most Ministers find it necessary to set up a London base, if they do not already live here, in order to meet the heavy demands of their jobs.

Under current arrangements, Ministers and paid office holders from both sides of another place receive no assistance towards running a second home in London. This is a long-standing anomaly which we propose to remedy by the introduction of a night subsistence allowance for Lords Ministers and paid office holders. In all cases it will replace the current London supplement. We propose that the allowance will be based on the overnight element of the peers' reimbursement allowance. We propose to increase the allowance in line with the Back-Bench peers' overnight allowance by Order in Council. We believe that the introduction of this new allowance will ease significantly the difficulty we have had in recruiting and retaining Lords Ministers in recent years.

The Bill makes no direct improvement to Members' pensions as such. These are being made by the regulations that we shall consider later this evening. However, clause 6 is of considerable relevance to Members' pension arrangements.

The House will recall that in 1989, following the Government Actuary's report on the parliamentary contributory pension fund, the Exchequer contribution was set at 4.4 per cent. while the Member contribution remained at 9 per cent. In the pensions debate last January, the strength of feeling in the House on the issue of the balance of contributions was made very clear, and my predecessor undertook to consider in what terms the matter should be referred to the TSRB. Following consultation with the trustees, but subject to the views of the House, I have agreed the terms of reference with the trustees. They were set out in my written answer of 24 January.

The House may find it helpful if I explain the background. Briefly, the Member contribution to the PCPF is set on the basis necessary to fund benefits over the long term, leaving aside surpluses and deficits. The Government Actuary's department, on the basis of the cost of those known benefits, values the scheme every three years. Since the Member contribution is fixed, the Government Actuary's department is able to stipulate the Exchequer contribution as a residual. The Government Actuary's department then takes account of any surplus or deficit in the fund and adjusts the Exchequer contribution accordingly to produce the rate actually paid. The effect is that the Exchequer funds deficits but, where there is a surplus, enjoys a contributions holiday. In other words, the Exchequer contribution is not a fixed item but varies, depending on the state of the fund. There is either a holiday or a reduction.

The trustees and others, however, take the view that the character of the scheme to which the Exchequer makes contributions in this way—taking the benefit of surpluses and making good any deficits—should be changed. They argue that it is wrong that the Exchequer contribution may on occasion be below the Member contribution. Their preference is for a system which has a fixed relationship between the Exchequer and Member contribution—say, in the ratio of 5:3 or 60:40.

One of the merits of the system is that Members enjoy known benefits for known contributions. If we are to make the changes that the trustees want, we need to be clear that Members' contributions would fluctuate possibly sharply and certainly unpredictably. Put simply, Members would lose the present stability and predictability of their contributions—in other words, the fixed price they enjoy for guaranteed benefits.

Now is not the time to discuss the substance of all this but it is clearly important to make clear the Government's position, which is that we believe that the system works fairly. However, I accept that there can be different points of view. I am aware of that and have been looking into it in considerable detail. So we have agreed to refer the matter to the TSRB.

Sir Peter Hordern (Horsham)

Our contribution of 9 per cent. is the highest of any privately-funded pension scheme in the country and it should never have reached that position. When my right hon. Friend refers the matter to the TSRB, will he make it clear that it is not simply a matter of wanting to alter our contribution so that there can be flexible arrangements in the future, but that 9 per cent. is too high and should never have been the position? That is what the TSRB should be investigating.

Mr. MacGregor

I suspect that I do not have the same detailed knowledge of pension schemes elsewhere as my hon. Friend the Member for Horsham (Sir P. Hordern). I am aware of his great knowledge of them. I cannot confirm precisely whether a 9 per cent. contribution is higher than that for any other scheme in the country. If I were to say so, and then discovered that that was not the case, no doubt people would write about it. However, I agree with my hon. Friend that in my knowledge it is a high contribution in comparison with other schemes.

Clearly, in referring this matter to the TSRB, it will be open to anyone, including the trustees, of which my hon. Friend the Member for Horsham is a distinguished member, to make representations about the balance of contributions, the system and the points made by my hon. Friend.

Mr. Orme

May I underline the point made by the hon. Member for Horsham (Sir P. Hordern)? We have looked into the 9 per cent. contribution and compared it with the private and public sector. It is almost impossible to find anything comparable with our scheme. It is completely wrong. Members feel that it is a gross injustice and I hope that when the Leader of the House refers the issue to the TSRB, as he has rightly said that he will, he recommends that it looks seriously at the matter.

Mr. MacGregor

I have already explained in a written answer the way in which we are proposing to refer this to the TSRB. The right hon. Member for Salford, East (Mr. Orme) knows that the terms of reference have already been agreed with the trustees. In fact, I made some changes to the terms of reference to incorporate recommendations of the trustees. I intend this to be a serious reference, as I do another matter that I shall come to. The TSRB will look at the views expressed in the debate and it will be open to the trustees and others to make their representations known.

Sir Norman Fowler (Sutton Coldfield)

In referring the matter to the TSRB, what view will the Government express? Will they be suggesting, as my right hon. Friend appeared to a moment ago, that this is a fair system? If they do that, I do not think that they will carry the House with them.

Mr. MacGregor

Since the Government have put this scheme before the House, clearly we shall make clear why we did so and why we believe that the current scheme has certain merits. By referring the matter, the TSRB will be able to make up its mind about whether it wants to propose any changes. I want to make it clear to my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) that I am doing so in order that the strong feelings in the House can be conveyed to the TSRB. I can go no further than that today.

Mr. Frank Haynes (Ashfield)

I have been listening carefully to what the Lord President has had to say. He mentioned that the Government were a little fearful of the amount of finance involved in the fund. Some such things have been said in the past and the right hon. Gentleman almost said it today. The Government are more or less deciding their contribution to the pension fund and they feel that it should be smaller than it is now. Hon. Members are correct in their belief that 9 per cent. is far too high. Incidentally, during the passage of the Employment Bill I can remember the ex-Secretary of State for Employment, the right hon. Member for Sutton Coldfield (Sir N. Fowler) who is sitting below the Gangway, talking about pension funds outside the House and what workers should be doing to get into such funds. They were much better than the House of Commons fund.

I have not yet heard the Lord President refer to the people who have to carry out the job in the pensions office across the road after we have debated and decided on the regulations and so on. They do a first-class job in very difficult circumstances.

Mr. MacGregor

I agree with the hon. Gentleman's final point and I intended to mention that later. However, I am happy to do so now.

I do not recall saying what the hon. Gentleman attributed to me at the beginning of his intervention about the finances of the fund. The TSRB recommended the current position. The Government accepted that and clearly believe that the scheme has been fair up to now. I am aware of the depth of feeling in the House because I have consulted widely before reaching this point and those feelings are clear from the reactions in the Chamber today. Therefore, I think that we are taking the right step by referring this to the TSRB so that it can be looked at again. It will enable all those who are putting points to me now to put the same points in detail to the TSRB.

Mr. Ray Powell

It has already been said that we did not have much of a hand in deciding that we would contribute 9 per cent. I have my salary slip, which all hon. Members will have received yesterday or today. My basic superannuation contribution is £217.28, and that is for my wife to know if no one else. With all due respect, during the five-week-per-month period I would be paying £43 or £44 a week and during the 10 four-week-per-month period I would be paying £52 a week. I have consulted organisations outside to see what benefits I would receive if I contributed to a private scheme. I was told that on all the benefits currently available to me as a Member of Parliament and those contained in the Bill I would receive nearly one quarter again. The TSRB should consider that anomaly. The contribution to the majority of occupational pension schemes is 4.4 per cent. by employees and 8. per cent. by employers.

Madam Deputy Speaker

Order. I understand the hon. Gentleman's deep concern, but this is an intervention, not a speech. Is the hon. Gentleman coming to his final point?

Mr. Powell

This is my final point. The Leader of the House mentioned 40 per cent. and 60 per cent., but he did not say who is paying 40 per cent. and who is paying 60 per cent. It is essential for us to know that.

Mr. MacGregor

In a debate such as this, the Leader of the House is in a slightly unusual position, because he is putting forward the position not only of the Government but of those who fund some part of our pension contributions—the taxpayer. We must have a mind to that and be fair about it.

Like the hon. Member for Ogmore (Mr. Powell), I received a pay slip yesterday. I, too, pay a Members' contribution of 9 per cent. I am aware of the points that the hon. Gentleman made, but we must be careful how we approach these matters, which is why it is right to ask the TSRB objectively to consider the argument that is being advanced and how outside schemes operate.

I mentioned ratios to make a distinction between the current system and one with fixed ratios, which is the preference of the trustees. Hon. Members can put their views to the TSRB, which will then make a decision.

Mr. John Garrett (Norwich, South)

The Minister has given an eccentric description of his job, which is why I suspect that he will not be a very good Leader of the House. His job is to represent Members of Parliament. It is the job of the Chancellor of the Exchequer to represent the taxpayer. In this instance, the right hon. Gentleman is not a member of the Executive but is representing the House.

Mr. MacGregor

That is what I am doing by putting this issue to the TSRB, with a recommendation and terms of reference that have been agreed with the trustees.

The Government will make clear what they see as some of the merits of the present system. It is perfectly clear that everyone will be entitled to put his own case. I know that the trustees will do so and hon. Members, too, will be free to put their views. It will then be for the TSRB to make recommendations. If it were to recommend a change in the present arrangements, it would then be for the Government to decide whether to put them before the House.

If, for example, the TSRB were to recommend, and the Government were to accept, a change to a fixed relationship between the Exchequer and the Member's contribution, that would require the Leader of the House to fix the Exchequer as well as the Member's contribution. I do not have that power and it would require new primary legislation.

I have recognised the force of the arguments—the trustrees will agree with me on this—that the parliamentary pension scheme would be unique in requiring primary legislation to make such a detailed change, and that pressures on the parliamentary timetable may delay such possibilities. Under clause 6, therefore, we shall amend the Parliamentary and other Pensions Act 1987 to enable us to make changes by regulation if we are persuaded that the system should change. The House will note that the clause is permissive, but I hope that it will agree that this will be a more satisfactory arrangement.

Sir Geoffrey Howe (Surrey, East)

May I congratulate my right hon. Friend on having achieved that clause, for which I know the trustrees were pressing? He has been able to take advantage of his more recent association with Treasury officials than mine to coerce a healthy conclusion from that redoubtable organisation. He has been assisted by the fact that hon. Members have been pressing their case on him, as they are pressing him in early-day motion 299 on resettlement allowance.

There is a group that is not well represented in the House—about whom I have felt an uneasy conscience since the time when I held my right hon. Friend's office—on behalf of whom my former Parliamentary Private Secretary intervened a moment ago: those who have combined service as Members of the European Parliament and Members of this House. Some have served here but are now serving in Europe, and vice versa. The salaries of MEPs were fixed precisely parallel to hon. Members' salaries to ensure parity. In one respect, that does not seem to apply—the benefit that they earn at the end of their service. I hope that my right hon. Friend will take that point seriously. I tried to take it seriously because I felt that it was being under-represented; there are few such creatures sitting on the Benches in the House. Apart from that, I congratulate him on his success. One last heave in respect of those poor fledglings in Strasbourg would be most helpful.

Mr. MacGregor

I am most grateful to my right hon. and learned Friend. I hope that that shows that 1 take seriously my responsibilities as Leader of the House and have endeavoured to achieve the right solutions.

It would probably be best to discuss MEPs in the context of the regulations. It is rather a complex matter, as my right hon. and learned Friend will know, and I have been involved in tortuous examination of it in recent days. It might be best for me to listen to hon. Members and respond in detail later.

Mr. Allen McKay (Barnsley, West and Penistone)

Will the regulation be debatable?

Mr. MacGregor

I think that the hon. Gentleman means the regulation on MEPs. Today we will be debating the draft regulations. The Government will consider the points that are made and introduce regulations later.

The House should know that the GAD is working on the next valuation report, which is expected in the next couple of months. That will yield a new Exchequer contribution. Under the 1987 Act, any change in that contribution can come into effect only at the beginning of the financial year following publication. Thus, if the report were published in, say, late April, the new Exchequer contribution would not take effect until April 1992. My written answer suggested that the TSRB is being asked to report on this subject by this April. Following consultations on the practicalities of that with the chairman of the TSRB, I am persuaded that we shall have to give more time for the review to be undertaken properly. I propose that it should report as soon as possible—some time in May.

Hon. Members' reactions have shown that it will be necessary for the TSRB to consider much evidence and many representations, and no doubt it will wish to take oral evidence. Its chairman was probably right to say that it is better not to rush the reference and for it to consider all the evidence and to relax the timetable that I proposed in my written answer.

The important point for the House is that, even if the TSRB were to recommend change, and we accepted that, we would be in a position to take the necessary action well before April 1992. That is the important point. Ally change to the Exchequer contribution in the forthcoming report of the GAD could therefore be included in any regulations made under clause 6. I hope that that reassures the House that there is now no question of a lack of power, nor any difficulty of timing.

I know that some hon. Members are keen that the TSRB should examine experience in other countries. As the House will have seen from my answer on 24 January, that is specifically mentioned in the letter that I shall send to the TSRB's chairman. It is only fair to warn the House, however, that because of the tight timescale I doubt that it will be possible for the TSRB to cover this aspect fully before May. That is one of the consequences that we must accept of trying to get the matter resolved as soon as possible.

Sir Peter Hordern

My right hon. Friend said that the Government Actuary would report in April and that he would report on the state of the fund as at April or May last year. He will report solely on the relative contributions between Members of Parliament and the Exchequer. What happens when the TSRB considers not only the balance of contributions, but improved benefits, with which the House is concerned, such as the suggestion for up to two thirds for widows? What happens when the TSRB then considers those matters, and reports favourably and recommends that such improvements should be made? Will there be time for the Government Actuary to see what the improvements will cost so that, using the procedure under clause 6, the House may carry forward the recommendation that should be made by the TSRB on the improvements that may be suggested by the House?

Mr. MacGregor

This is a complex matter, so I shall try to go through it with some care. I am anxious that the House should know the position and I do not want to mislead it. The reference to the TSRB is fundamentally on the point about the balance of contributions and whether the system should change. If the TSRB makes such a recommendation and the House accepts it, that will be a big change in the system. As a result of the timing of the next GAD report, there should be no problem about making the change, if that is what is eventually decided, in good time for April 1992 so that the automaticity of anything that the GAD report might say normally under our present arrangements would not apply. In other words, if we do not make a change in the system, there is the automatic effect of the GAD report in April 1992 under our present arrangements. I am satisfied that if we want to make a change under these proposals—and with the suggested timing—to the TSRB, there will be time to take that into account and that automaticity, if that is how it worked out, would not follow.

My hon. Friend the Member for Horsham knows well from his discussions, especially with my right hon. and learned Friend the Member for Surrey, East on the changes to these benefits and to the benefits that we shall discuss later, that discussions also took place between the Leader of the House and the trustees. The benefit changes were agreed, and we are now putting them to the House and seeking its agreement. That process could, no doubt, continue, but it would be concurrent with and not part of the change to the overall scheme.

I must warn, as I mentioned earlier, that every change in benefits that relates entirely to a surplus—if there is one—in the last valuation carries through. If there is a change in the valuation subsequently and the surplus disappears, those benefits will still be there, but will have to be paid for. That is where, in a fixed contribution scheme, the contributions might have to rise. I hope that I have given my hon. Friend the Member for Horsham a clear answer.

Perhaps it would be appropriate for me to say something now on the resettlement grant which is the subject of early-day motion 299. The House will be aware that this grant is paid directly from the House of Commons vote and has, therefore, nothing to do with the parliamentary pension fund nor, indeed, with the Bill. Hon. Members will also recall that the TSRB examined the question of the cut-off at age 65 in its last report, the recommendations of which we are now implementing, and that it recommended no changes in the resettlement grant. But the Government must obviously take very seriously an expression of such widespread concern from hon. Members of all parties. I can, therefore, tell the House that we agree that the TSRB should be invited to look again urgently at this matter.

I shall be drawing to the TSRB's attention the strength of feeling in the House that the arguments bear re-examination, especially in view of the unique circumstances which determine the precise timing of the end of a Parliament and therefore, for some hon. Members, the end of a parliamentary career. The trustees were anxious that the TSRB should consider the matter seriously, with an open mind and in a way that ensures that the arguments can be put before it clearly and to the satisfaction of all concerned. I give the House the clear assurance that I will put the request to the TSRB on that basis.

Mr. Joseph Ashton (Bassetlaw)

It is pretty obvious from the number of people here today who are aged well over 50 that they are concerned about the retirement age. Is not it a further disgraceful anomaly that an hon. Member aged 48 or 49 who has done 15 years' service in the House still gets only six months' severance pay when it is virtually impossible for him to go back to his job? This will not affect me or many of my colleagues, but it will affect Conservative Members, who could lose their seats even through a boundary change.

The Leader of the House proposes that Ministers should receive three months' redundancy pay after having had possibly only two years in a ministerial job. They will not be unemployed because they will go back to a Back-Bencher's salary. In the past, many hon. Members have done 15 years and have lost their seat at the age of 48 or 49, yet they have received only six months' redundancy pay. Surely severance pay should be tied to length of service and, of course, those who serve over the age of 65 must also be considered. Length of service should be tied to severance pay as well as there being a birthday cut-off at the age of 50.

Mr. MacGregor

There is a length of service tie-in. As the hon. Gentleman will know, it applies equally to hon. Members of all parties. I have been referring to early-day motion 299 about which the House is expressing concern. That is why I suggest that the right thing for the House to do is to refer the matter to the TSRB, expressing clearly the strength of concern and asking the TSRB to consider the matter again.

I also recognise that there is concern that the TSRB should report as quickly as possible so that appropriate action may be taken in a timely way. I have, therefore, agreed with the TSRB that I will ask it to report separately on the resettlement grant by the middle of April. I have every reason to believe and expect that the TSRB can meet that demanding time scale. I am sure that the whole House will wish to join me in expressing our thanks to the TSRB for its readiness to deal with these complex and important matters—and especially with early-day motion 299—so speedily.

Mr. Merlyn Rees (Morley and Leeds, South)

I declare an interest in that I should be affected by any change here and in that I am now over 70.

When the Leader of the House talks to the TSRB, will he point out that it is no use comparing this pension scheme with a normal one? I mentioned my age. Many of my friends have now been retired for five years. Whether they were in banking, in teaching or anywhere else, they retired at a set age. They realise that a number of hon. Members are over 65 and that it is a different scene.

Some of us may come here at a later age. Parliaments run over a four-year period. People outside sometimes get the wrong end of the stick and compare our jobs with jobs outside. That is why the magic figure of 65 has been used. Will the Leader of the House point out to the TSRB that it should look at the different nature of work here?

Mr. MacGregor

I am sure that the right hon. Gentleman's point will be raised by a number of those who make representations to the TSRB. My role as Leader of the House and on behalf of the Government is to say that we shall put these points to the TSRB, and ask it to look at them seriously and in the way that I described a few moments ago. However, my personal view—as I said a moment ago—is that we are in unique circumstances and have a unique job. I agree with the right hon. Member for Morley and Leeds, South (Mr. Rees) that our position is different.

When Members of Parliament enter a new Parliament, they take a decision for themselves, but they cannot be certain when their employment will terminate. The TSRB should be asked to consider that point, which I recognise.

I should like finally to turn to clause 7, which makes some changes to the Members' fund. This is a statutory fund, administered by trustees, which is able to offer grants to former Members of Parliament or their dependants who experience financial difficulties. It is usual to make changes to the fund from time to time.

The House of Commons Members' Fund Act 1948 has in particular a hardship provision which permits the trustees, for the purpose of alleviating special hardship to make such payments as they think fit". This section has not been reviewed for a long time and it seemed right to us and the trustees that we should bring the wording more up to date and, in doing so, cast the trustees' discretion more widely. Under the Bill there will now be no doubt about the trustees' discretion to act where, having regard to the circumstances of the persons to … whom the payments are to be made", they judge it right. The decisions on what payments to make and to whom will, of course, be for the trustees alone.

The financial implications of the Bill are small, and are contained in the explanatory and financial memorandum. I should also tell the House, however, that, under Statutory Instrument 1981/748, there is provision for the Treasury to pay to the separate Members' fund up to £215,000 per annum. Currently, £115,000 per annum is made available to that fund. It seemed right to us that, at a time when we were changing the trustees' discretion, we should make the extra £100,000 per annum available, and we propose to do so.

All these matters have been considered extensively by the TSRB, and by the Government in discussion with the trustees and others. The measures in the Bill and in the draft regulations which we shall be considering later today together form a package with which the trustees are content. In view of the lengthy consultations, and because the beneficiaries of these modest and overdue changes include the widows of a number of colleagues who are sadly no longer with us, I hope that the House will agree to support the Bill, and that we can thereafter make rapid progress with its remaining stages. I commend the Bill to the House.

6 pm

Mr. Stan Orme (Salford, East)

The Bill deals with ex-Ministers and office-holders and, to that extent, its provisions are limited. The proposals are modest, but hon. Members on both sides of the House will agree that it would have been wrong to proceed with the Bill without discussing other matters affecting Members of Parliament, and those matters should therefore be dealt with this evening.

I hope to speak only once, and it may therefore be helpful for the Leader of the House to hear the Opposition's views on the regulations with which he will deal later this evening.

I thank the Leader of the House for the manner in which he has introduced the Bill, and I want to put on record the fact that there has been a great deal of consultation and discussion involving the trustees—not least my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who has played a prominent part. I represented the parliamentary Labour party in those discussions, and I know that other hon. Members have represented their respective parties. We have been trying to resolve outstanding problems regarding hon. Members' contributions and benefits under the pension scheme.

The proposals are extremely modest—certainly when considered against the background of conditions in other Parliaments in Europe, the Commonwealth and the United States. It is worth putting it on record that the House of Commons turned its mind to proper provision for Members of Parliament and their dependants under a contributory scheme only in 1964. We have since had to build on that scheme. Improvements have been made, arid further improvements are contained in the Bill and the regulations. Nevertheless, in certain areas, progress has been painful and slow—not least in respect of widows arid dependants. The House has seen the tragic consequences of that in recent years.

We welcome the improvements that have been made—and certainly some of the improvements outlined in the regulations attached to the Bill. The fact that the Leader of the House has seen fit to introduce the regulations alongside the Bill shows that he recognises the importance that hon. Members attach to the proposals. Many hon. Members have already told the right hon. Gentleman that their concern is to see justice done. We want nothing other than justice. We want what we are entitled to; we do not want anything more, and we certainly do not want anything less. That point must be made very clearly.

The Leader of the House has told us that clause 6 provides the power for the holder of his post to make regulations altering the amount of the Exchequer's contribution to the fund. It is extremely important that that provision should be included in the Bill because, if the Top Salaries Review Body makes proposals for changing the contribution ratio, the right hon. Gentleman must have the basis on which to make those changes. The right hon. Gentleman's anticipation of that eventuality is a mark of his good will towards the House.

We must make it clear to the TSRB that it is totally unsatisfactory to have the Treasury contribution reduced to 4.4 per cent. while Members of Parliament are now to pay 9 per cent. I gave evidence to the body when it last discussed the matter and I made that case strongly.

At that time, of course, we did not realise that the Government Actuary would recommend 4.4 per cent. The Government Actuary has the power to re-examine the Treasury contribution. When he saw that the fund had reached a high level, he reduced that contribution to 4.4 per cent. The problem is that he has no power to examine hon. Member's contributions, and that is absolute nonsense. When I was Minister of State for Social Security, I examined pension funds and I know that the trustees of the pension fund of a large firm such as ICI would never have tolerated such a state of affairs.

I do not think that the Top Salaries Review Body fully understood the arguments that were put on the last occasion. The body takes evidence, and it is incumbent on hon. Members to stress the point raised by my right hon. Friend the Member for Morley and Leeds, South (Mr. Rees)—that the employment of hon. Members is unique. I welcome the recommendations made by the Leader of the House, who has gone as far as he can in telling the TSRB to take a fresh look at the matter and come forward with proposals.

I welcome, too, the new proposals regarding an ho n. Member who reaches maximum pension after 30 years' service and is still under the age of 65. At present, if he or she completes 30 years' service before the age of 55, he or she continues to pay full contributions between the ages of 55 and 65 and is, in effect, paying in for no gain. That is nonsense. The removal of that anomaly is welcome, and does no more than bring Members of Parliament into line with employees in the public and private sectors. We in this place do not take the lead in these matters; indeed, in many respects, we are lagging far behind.

That matter is linked with the question of early retirement. At present, if hon. Members take early retirement, their pension is payable when they reach the age of 65 or when they have done 20 years' service. If the Member of Parliament is over the age of 60 at a general election, he or she can receive an immediate unabated pension. Under the proposed new arrangements, if an hon. Member retires before the age of 60, as long as the required number of years has been reached, he or she will be able to claim a pension without having to wait to attain the age of 65. That is another small, but important and long overdue, adjustment.

Turning to widows', widowers' and children's pensions, there has been a long and protracted argument over this issue, as the Leader of the House knows only too well. There is strong feeling that the pension rights of widows and widowers should be two thirds of the allowable pension instead of one half. There have been instances—these have been put before the House on a number of occasions—of hon. Members who have died on a small pension, because they have only been here for a limited time, when the widow and family have received a pittance and have had to rely on charitable contributions from one or other side of the House. That must be rectified.

Therefore, although the move to five eighths is a step in the right direction, I agree with the hon. Member for Horsham (Sir P. Hordern) that that should not be the final answer. We should aim to get the TSRB to agree at some future date that it should be two thirds of the allowable pension. That is a justifiable amount, and we should press for it very strongly indeed.

The increase in the death gratuity is overdue and very welcome. The increase is to two years of gross salary paid to the spouse of the deceased, the widow or the widower, and is back-dated to 1988. This is very welcome, but, again, it is only in line with standard practice.

There have been untimely deaths on both sides of the House. I do not need to stress to my right hon. and hon. Friends that we have had some very bitter blows in recent months and years. We have seen families riven by grief because of the untimely deaths of younger Members of the House.

Mr. Michael J. Martin

I think it is worth while putting it on the record that widows have to put up not only with their grief but also sometimes with the intrusion of the press and the rest of the media trying to find out who the successor to the seat will be. They often also have to see their late husband's photographs on television just when they are trying to get over a terrible grief.

Mr. Orme

That is one of the extra burdens that one has to bear if one is a Member of the House.

We very much welcome the fact that this recommendation is to be implemented.

I want to deal very briefly with the question of the regulations for future Members of the European Parliament, who will be able to transfer their pension rights from the European Parliament scheme to the House of Commons scheme, where they will be counted as added years. That is very much welcomed. However, those hon. Members who serve in the House and who have previously served in the European Parliament feel very aggrieved that the proposed new scheme does not apply to them. Will the Minister take a further look at this issue?

A similar situation should also appertain when an hon. Member becomes a Member of the European Parliament. It should be reciprocal. The MEPs are not asking for anything different. They pay to the pension scheme within the European Parliament, and they are on the same salary as we are. All they are asking is that, when they transfer that money, it should be counted as added years. This is a small but, I think, justifiable point.

Speeches tonight have shown how strongly we feel on the resettlement grant. Hon. Members feel that there is a great deal of injustice here. The resettlement grant is for Members who have left the House of Commons, to allow them to make modest adjustments in their home and living conditions. With a cut-off age of 65, it has become a lottery whether one's birthday falls just before a general election or just after it. There are a number of examples of hon. Members who have missed this by a very short period, even days, and also of hon. Members who have gained. As we have no fixed dates for general elections but are dependent on when the Government, irrespective of what party forms the Government, call an election, the unfairness is aggravated.

Sir Anthony Grant (Cambridgeshire, South-West)

I agree whole-heartedly with the right hon. Gentleman. On the question of hon. Members who gain, is he aware of the case of one of our colleagues, no longer in the House, who was consulted by Prime Ministers as to the date of an election? He was in a difficult position, because whatever advice he gave would benefit or disadvantage him. That shows the absurdity of the present system.

Mr. Orme

That is true, and the lottery must be removed. There is a justifiable case. As the House knows, and as the Leader of the House has acknowledged, 351 hon. Members have signed a motion to this effect. They feel extremely strongly about it. It is worth putting it on record that only a small number of hon. Members are involved, but the injustice is seen as great.

I therefore welcome the fact that the Leader of the House has referred this to the TSRB in as strong language as it is possible for him to use at this stage. I hope that he will impress on the TSRB the fact that hon. Members see this as a matter of natural justice and that it is important that we have a reply as soon as possible, so that any proposals can be implemented before the next general election.

I believe, therefore, that the proposals before us this evening—limited, modest, but important—are a step in the right direction. It is not the end of the problem; we have not resolved all the outstanding issues; but certainly we are making progress. I ask my right hon. and hon. Friends to support the Bill and the regulations this evening.

6.16 pm
Sir Norman Fowler (Sutton Coldfield)

Pensions are an acquired taste. I remember that when the state earnings-related pension scheme was introduced in 1975 there were only about a dozen hon. Members present in the House. I mention that to make two points. First, pensions policy generally has been a long-standing interest of mine—and it is not just my own pension that I am interested in. Secondly, I speak as one of a select band of ex-Thatcher-Cabinet Members who are not retiring at the next election.

A flicker of suspicion crosses my mind when a Government put on a Bill such as this late on a Thursday, with private business at 7 o'clock, and in the middle of a war. My fears are semi-allayed by what my right hon. Friend the Leader of the House has said. I support entirely what he says about settlement grants, but I am bound to say that I am less than overwhelmed by the arguments for severance payments for Ministers.

I suppose that publicly the most controversial part of this Bill is clause 1, which gives half-pay pensions to anyone who reaches, for however short a period, the position of Prime Minister, Speaker or Lord Chancellor. I would not oppose that. It follows precedent, as my right hon. Friend has said. These offices have been treated differently previously, and this proposal manages to rationalise the position. It is generous, but, as far as those offices are concerned, justifiable.

My concern is the contrast with the positions of other Ministers and the position of hon. Members generally. To take the Ministers first, the Lord Chancellor's is an important post but not, perhaps, the most dominating post in the Cabinet. Others have more influence: Chancellor of the Exchequer, Foreign Secretary, deputy Prime Minister, Home Secretary—posts of that kind. They are covered by the supplementary ministerial pensions scheme. Estimates are difficult, but it would take a Cabinet Minister of that kind, or indeed any other Cabinet Minister, about 20 years of service in the Cabinet to reach a half-pay pension. It is hardly necessary for me to say that not many hon. Members, in our experience, serve 20 years in the Cabinet.

What about a Member of Parliament? Under our provisions, it would take him 25 years to reach a half-pay pension, and that is on the new basis of accruals of one fiftieth rather than the old basis of one sixtieth. Of course, that came into being only in 1983. Most hon. Members will be covered by most of the one-sixtieth provision, and only partly covered by the one-eightieth provision.

Whatever else, I do not believe that Ministers and Members of Parliament generally can be attacked for having unbelievably generous pension arrangements, but what really sticks in the throat is the basis upon which those pensions are financed—the reason for clause 6. The Member scheme is a funded scheme. That means contributions from Members and from the Treasury. It used to be the case that the Treasury contributed 18 per cent. and Members contributed 9 per cent. However, over the past few years, like every other funded scheme in the country, there has been a good surplus. That has resulted in Members' contributions remaining at 9 per cent. but the Treasury's contribution going down from 18 per cent. to 4.4 per cent.

I remember something about Government being a model employer. The Government have taken a pension holiday which is extremely difficult to justify. I do not believe that it can be justified, nor do I believe that that is the sort of thing that the Government should be about in terms of pensions policy. Their case is that the 4.4 per cent. is what the Government Actuary says is necessary to finance and fund the scheme. That may be true as an actuarial calculation, but it does not mean for one moment that we should believe that everything within the scheme now is desirable or cannot be improved. For example, the position of widows could be improved, to the benefit of everyone concerned. I hope that my right hon. Friend will take on board what I detect to be the feeling on that subject, particularly in respect of widows. Changes in the financing of the scheme are urgently required. The position until now has been rather shabby and not something in which the Government should be involved.

Obviously, I welcome clause 6. I would welcome it even more if my right hon. Friend would go a little further in what he sets out as the Government's policy and the evidence that he will give to the TSRB. I am delighted to know about his powers to do that, but I should be interested to know even more about the matter. However, clause 6 allows the Leader of the House, with the consent of the Treasury, to make provision for determining the Exchequer contribution. It calls for consultations with the trustees. Again, that is obviously an important thing to do. Also, it calls for consultations with persons appearing to the Leader of the House of Commons to represent persons likely to be affected by the regulations on which he has consulted, other than the trustees themselves. Again, that is an important point.

Not everyone will want to be in the House of Commons scheme. There are now new pension options. For example, there are personal pensions, which in many ways were designed for people who might change jobs. Someone who enters the House with a majority of 300—I do not care on what side of the House—is not necessarily going to look forward to 30 years' uninterrupted service on the Benches of the House of Commons. It is important that the position of personal pensions is understood.

What does a generous Exchequer do? Of course, it pays the national insurance contribution that is required by law, but, apart from that, as the employer it makes no extra contribution whatsoever. The Treasury's touching support for the Government's policy of extending choice in pensions is to do the absolute minimum that the law allows. In other words, it does absolutely nothing. The Treasury needs to be made aware of that point and to understand that the law has changed, even if some of the views upon it may not have done so.

The trustees are concerned first and foremost about the fund, and that is right. My right hon. Friend the Leader of the House must take into account other interests as well. He really must impress upon the Treasury and upon his colleagues the fact that there are now new options, that the law has changed, and that hon. Members may want to exercise those options, just as much as people outside would wish to do so.

The Bill is rather incomplete. It deals with some problems but ignores others. It should be recognised that Members of Parliament have a right to good and sensible pension arrangements made for them, and, above all, that we do not allow the Treasury to rule the scheme. That would be disastrous. A few years ago, I carried out a national review of pension arrangements. I hope that my right hon. Friend will conduct his own review of pensions for Ministers and Members of Parliament. There is a great deal left to improve in our system.

6.25 pm
Mr. Alfred Morris (Manchester, Wythenshawe)

After that withering criticism of the Treasury, I rise to speak as chairman of the managing trustees of the parliamentary contributory pension fund. In that capacity, the House will expect me to give the views of the trustees on the Government's proposals as set out in the Bill. As trustees, selected by right hon. and hon. Members as a whole to manage the fund, my colleagues and I, from both sides of the House, try our best to improve its provisions in the interests both of hon. Members, past and present, and their dependants. We have taken a leading role in securing many improvements in the scheme over the years, including a faster accrual rate, the age—service conditions for early retirement at a general election, and the provision for ill-health retirement pensions.

As I made clear in our last debate on parliamentary pensions on 17 January 1990, however, there remained a very strong case for further improvements. This debate, more than a year later, breaks all known records for frequency of postponement and, regrettably, although the Bill provides for some improvements long advocated by the trustees, it does not meet all our aims—in particular, our very strongly held view that the scheme will remain most seriously flawed until the injustice of a Member's contribution of 9 per cent., compared with one from the Treasury of only 4.4 per cent., is redressed.

Anyone who thinks that the House of Commons puts the interests of hon. Members first should look at that comparison and the failure, over a protracted period, to bring it more into line with the average of contributions paid by employees and employers in occupational pension schemes generally. According to the latest survey I have of occupational pension schemes, by the National Association of Pension Funds, employees in the United Kingdom contribute 4.4 per cent. towards the cost of their pensions and employers 8.8 per cent. So in the United Kingdom as a whole, employers pay twice as much as employees whereas, in our scheme, hon. Members pay more than twice as much as the Treasury.

I must remind right hon. and hon. Members that the initial steps towards the improvements for which the Leader of the House is now providing were taken as long ago as May 1987, when we debated the Bill which became the Parliamentary and Other Pensions Act 1987. That Act allowed for the amendment of the rules governing Members' pension arrangements by secondary legislation. Draft regulations under the 1987 Act will be considered later this evening in relation to the TSRB's latest report. However, we still await consolidated regulations, which is a matter that I raised with the Leader of the House for the trustees at a recent meeting with him.

In the debate on the Second Reading of the 1987 Act, strong pressure was exerted by Members, notably on the rate of their contributions and the level of benefits. In consequence, the then Leader of the House, the right hon. Member for Colchester, South and Maldon (Mr. Wakeham), agreed to refer the parliamentary contributory pension fund to the Top Salaries Review Body, as reported in the Official Report of 24 July 1987, column 502. The TSRB's report was published in May 1988, since when the trustees of the fund have discussed them, at innumerable meetings, with three successive Leaders of the House: the right hon. Members for Colchester, South and Maldon, for Surrey, East (Sir G. Howe) and for Norfolk, South (Mr. MacGregor).

With all of them, the trustees pressed the claims which were set out to the House in my speech of 17 January 1990. I know that all three right hon. Members sought and, indeed, helped to close the gap between us, and that the Bill that we are debating would have been much less satisfactory but for their efforts. It must be emphasised that the present Leader, within days of his appointment, made plain his readiness to help in every way possible and that at least one important change to the Bill, as originally drafted, owes a very great deal to his responsive attitude to our representations.

The Bill now includes a clause which will enable the House to express an opinion and, indeed, to reject any proposal by the Leader to vary the Exchequer-Member contribution ratio which appears unreasonable to the House. The clause does not guarantee a debate. The House will be unable to act unless the Leader tables a proposal and I hope very much that he will go as far as he possibly can in this debate to assure us that it will be his firm purpose, and must also be that of his successors, to provide parliamentary time on an amendable motion to enable the House to state its views whenever the interests of Members are affected by any question on which he can act by making a proposal under the clause. Not to do so will merely increase dissatisfaction with the present imbalance as between ministerial and parliamentary control over the scheme. For the moment, however, I wish to thank the right hon. Gentleman for going further in this matter than any of his predecessors were able to go.

Mr. Ray Powell

I am rather concerned about the TSRB and its responsibility. Can my right hon. Friend satisfy me and other right hon. and hon. Members that, if the TSRB rejected what the House suggested to it, the avenue open to hon. Members, particularly on resettlement grant, would be to take action in the House by a majority of the House—351 hon. Members out of 650 who could attend the House and sign an early-day motion, perhaps excluding Ministers and a few others—appending their signatures to an early-day motion? At least, if the TSRB rejected our suggestion, we could take action. Will my right hon. Friend assure me and others that that will be possible?

Mr. Morris

Ultimately the power to decide rests with this House. The Treasury has enormous control over Ministers, yet we need help from them. Further to my hon. Friend's comments, I must tell the Leader of the House that I believe the pressure for change as far as resettlement grant is concerned is now becoming totally irresistible.

Very clearly, as I know the right hon. Gentleman accepts, it would have been preferable if the regulations on the Order Paper could have been laid before now, but I have been given assurances, which are reflected in the regulations, that some of the improvements and amendments for which they provide will apply as if they had been laid when they were first agreed between Leaders of the House and the trustees.

In the debate on 17 January 1990, there was wide support for improving the benefits of the scheme. At the same time, concern was again expressed about the Exchequer-Member contribution ratio. That concern was reinforced by the publication of the Government Actuary's report on the valuation of the fund as at 31 March 1987, showing a surplus of £7.4 million. Today there is even stronger feeling, as I hear daily from right hon. and hon. Members on both sides of the House, that urgent action must be taken to redress the balance. What the Bill demonstrates is that the trustees' representations to successive Leaders of the House have produced some improvements in benefits, not least for widows, and in the pace of progress towards a more acceptable balance between Members' and Exchequer contributions to the Fund.

While I must again emphasise that we have not achieved all that we had hoped for, Members will see that there are real improvements in the Bill. If the trustees had been the sole arbiters, these improvements would have been at once more substantial and of quicker effect; but the House must recognise that the extent of our power to change the scheme is limited. As of now, we have the power to recommend, but not the authority to act executively, in relation either to benefits or the level of contributions to the scheme. That basically is why the parliamentary scheme still compares unfavourably with others in terms of the proportion of the scheme's costs paid for by its Members and of the benefits that it provides.

One of the most important changes provided for by the Bill is the increase in the rate of pensions payable to widows to five eighths, rather than the current half rate. It is less than the two thirds that the trustees argued for. Nevertheless, it is a welcome step forward. As the Leader of the House knows, under the current Inland Revenue rules, the maximum widow's pension that may be paid is two thirds of her husband's pension. The trustees asked that the surplus in the fund, shown by the Actuary's report, should be used to increase the widow's pension to the rate acceptable to the Inland Revenue. We won only half a loaf, however, and I give notice now that there will be further strong pressure for a two-thirds widow's pension.

Anyone who thinks that such pressure is uncalled for should look at some of the pensions now in payment to the widows of former Members of Parliament. At his death in 1984, the widow of a former colleague, and very close friend of mine, with total service of some 20 years, was entitled to barely £50 a week. That is but one example of the way in which the widows of former Members have fared and why Sir Anthony Kershaw, formerly the Member for Stroud, said here on 27 April 1987: It is an absolute disgrace that this should be tolerated … even to speak of it ought to give one a sense of shock."—[Official Report, 28 April 1987; Vol. 115, c. 104.] Some of the regulations on the Order Paper will apply with effect from 6 April 1988. In one case, the effect will be to provide an increase in benefit for widows or widowers of hon. Members who have died since that time. It will be clear to hon. Members that a large number of widows and dependants will not, however, benefit from the rise, including the widow of my colleague and friend who died in 1984.

To help in meeting the problems that can arise, I am glad the Government have agreed that measures may be taken, under the extension of the Members' Fund Acts, to allow the trustees to relieve any hardship for widows or widowers who lost their husbands or wives before April 1988. The trustees have been told that the question of retrospection is difficult. We accept that it is clearly logical to have April 1988 as the date of automatic entitlement to the higher pension of five eighths, but the possibility of any extra help for those whose husbands died before then will become available only after regulations to amend the Members' Fund Acts have come into force. The House will know that I speak in the debate also as chairman of the managing trustees of the House of Commons Members' Fund.

In relation to other improvements, I turn to one for which the trustees have pressed for some years: to allow Members to cease payment of contributions when entitlement to a maximum pension of two thirds of salary has been achieved. Members in this position now have to continue paying a 9 per cent. contribution without gaining any increase in their pension rights. Happily the regulations referred to on the Order Paper now provide for them to retain a notional holding within the fund without the deduction of further contributions, so the wholly reasonable case made by the trustees is now conceded. On a technical but important point, I must also thank the Leader of the House for including the necessary powers to allow the trustees formally to appoint investment agents, as required under the Financial Services Act 1986.

Further improvements, which result from pressure by the trustees and recommendations contained in the 26th report of the TSRB, include an increase in the death-in-service gratuity from one year's salary to twice the annual salary of a Member. I am naturally very glad to note that, in keeping with the trustees' request, this will be backdated to 1 May 1988, thus covering all deaths in service during the present Parliament, of which there has been a tragic number.

There are also improvements in the Bill for the provision of pensions on early retirement. Under the present system, the entitlement is determined at the point at which the Member leaves the House. There is then a sharp cut-off so that, for example, a Member with 20 years' service, who leaves just before his or her 60th birthday, is under severe disadvantage compared to one who leaves just after the age of 60. The new arrangements provide much more flexibility; and I commend them to Members on behalf of the trustees.

The regulations on this will also allow for service in the European Parliament to count towards the qualifying period. Here I need to ask the Leader of the House, on behalf of the trustees, if he can give any assurance that the change will be reciprocated in the parallel European parliamentary scheme. I fully understand the concern of former MEPs who feel that they are seriously disadvantaged by the Government's decision not to make retrospective the provision for counting their service as MEPs in relation to early retirement. The trustees have had many and strong representations from former MEPs on this vexed issue. We played our part in ensuring that they were drawn urgently to the attention of successive Leaders of the House. We did not, however, and do not now, have the power of decision in the matter; and, as the House knows, the Government, in holding the line against retrospection, feel that they cannot go, as it were, the extra mile.

I stress again also my understanding, and that of my fellow trustees, of the extent of feeling, in all parts of the House, about the serious imbalance between Members' contributions to the fund and those of the Exchequer. The mechanism for determining what is paid into the fund, agreed as long ago as 1972, was essentially to ensure that the Member's contribution would be fixed and the Exchequer's contribution would vary in such a way as to keep the fund at a viable level to meet its pension liabilities.

What this means in practice is that when, as a result of good management by the trustees, the assets of the fund increase, the Exchequer contribution is decreased and the Treasury benefits rather than Members or pensioners. The absurd situation has now been reached whereby, I repeat, Members contribute over twice as much as the Exchequer to the fund, while outside the House the average employer pays twice as much as the employee to his occupational pension scheme.

Some aspects of the Bill are outside the responsibilities of the trustees: for example, severance pay for Ministers. That innovation stems from a recommendation by the TSRB on which the Government have resolved to act in the interests of right hon. and hon. Members who lose ministerial office. Another issue that is outside the trustees' terms of reference is that of the resettlement grant, to which both my right hon. Friend the Member for Salford, East (Mr. Orme) and the Leader of the House referred, for Members who lose their seats or otherwise leave Parliament at a general election. I am, of course, aware of how resentful Members are about the manifest inequities of the present rules for payment of the grant. Indeed, as the House knows, I sought recently to reflect the strength of feeling on the issue by tabling a motion which attracted 336 signatories, a clear majority of the House, on the day it was tabled.

It was more than a modest start, but the motion now has still more signatories, from both sides of the House, and I have had numerous messages from Members, not least Conservative Members, who would have signed had they not been inhibited from doing so by the offices they hold. Thus the number of signatories of the motion, huge and unprecedented though it may be, is well below the total support for its purposes.

The grant is not, of course, a severance payment or one for redundancy. As its name says, it is a resettlement grant, for people with two places of work when they retire from the House. As of now, there is a pot luck element in the rules for the grant. One former Cabinet Minister received the grant—a year's salary—because the last general election was called just before his 65th birthday, while others less fortunate, but some with over 30 years' service, received nothing because they were just over 65.

The motion would make the grant payable, subject to a minimum length of service rule, unless the Member stands for election after his or her 65th birthday. There is also provision for payment, at any age, to Members with long service to the House. This is in recognition of the resettlement problems of Members with long service, many of whom have to uproot from their homes because they can no longer afford to live in London on their incomes as pensioners.

I remind the House that there has been only one general election since the rules were made, and that it was not until afterwards that the inequities of the rules became apparent. The grant is, however, payable from the Consolidated Fund, not from the parliamentary pension scheme, and it will be for the House to remove, as I hope it very soon will, the undoubted injustices which its Members see in the current rules.

To conclude, I place on record, on behalf of the trustees, and indeed all Members and their dependants, our warmly renewed appreciation of the quiet and often unseen but painstaking and always caring work of Jim Dobson, Tony Lewis and all who help to administer the scheme. They go far beyond the calls of duty in the service they provide, and they deserve the gratitude of the House as a whole.

6.47 pm
Sir Peter Hordern (Horsham)

As a trustee of the fund, I am grateful for the hard work which the right hon. Member for Manchester, Wythenshawe (Mr. Morris) has done as chairman, on behalf of the House. Thanks to the extent and comprehensive nature of his remarks, there are many matters on which I shall not have to follow him.

I should like to stress one point at the start. There may be some outside the House who believe that we are discussing improvements in benefit for which the taxpayer will have to pay. It is important to stress that ours is a funded scheme, which means that we make contributions to it and that improvements in benefit come from improvements to the fund and its performance. That is unlike the great majority of public sector schemes which are wholly funded by the taxpayer. Indeed, the measures which we are discussing will result in a smaller contribution from the taxpayer than has been the case in the past. I make no apology for saying that the benefits which we are considering are in themselves not only worthy but arise from the efforts of the fund and those who manage it to secure better benefits, which we fully deserve.

For that reason, however, I do not think it right to compare our scheme and the benefits which we have as Members of Parliament with schemes in other countries, tempting though it would be to do so, because I believe that those schemes are generally funded by taxpayers who must take the responsibility for them. But if ours is to remain a funded scheme, which it should, we must expect the benefits that flow from it and no others.

It would not be right for us to recommend and carry into being improvements in our own scheme. They must be sent to the TSRB which, after careful consideration and having made its recommendations, should allow the Leader of the House to bring them before the House, as is proposed in clause 6.

These matters have been referred to the TSRB in the past and on three separate occasions they have suggested that the contributions made should be in the proportion of three eighths from Members and five eighths from Government. I see no reason why that proportion should ever have been altered. It was only because the TSRB understood it to be the wish of the House that we should make a contribution of 9 per cent. I do not wish to go into the antecedents of that decision. Apart from anything else, I do not have the time. I say only that it was a scratched-up deal done rather late at night and most unworthy of us. I hope that, when the TSRB looks at the matter again, it will forget that 9 per cent. and look at the matter squarely on its merits, as should be the case.

As a result of that, not only do we pay 9.9 per cent., but the Government contribution, because of the health of the fund and the way in which it has performed, has been reduced to 4.4 per cent.—somewhat less than half the rate that Members contribute. That is the case not just for one or two years—many schemes in the private sector take a contributions holiday for a year or two. This idea is to have 4.4 per cent. for no fewer than eight years while we continue to pay double. That is a most extraordinary state of affairs which must be addressed carefully. It simply cannot be right. Therefore, it has been arranged—I congratulate my right hon. Friend the Leader of the House on doing so—that the TSRB will recommend whatever the appropriate contribution should be. In my opinion, our contribution should be nearer 6 per cent. at most and the Treasury's 8 per cent., rising to 14 per cent. in seven years' time.

However, there is now a new factor in the equation because there is to be a new valuation of the assets in the fund as at June last year. That valuation should show a further substantial surplus and, because the Government Actuary has no power to do anything else, we might have to say that because of that substantial surplus the Treasury contribution should be reduced to nothing while we continue to pay 9 per cent. I dare say, Mr. Deputy Speaker, that I would have your support in saying that that arrangement would be unacceptable. Therefore, it is not enough simply to say what the balance of contribution might be. The TSRB should also look carefully at what further improvements might be made in our fund, as the right hon. Member for Wythenshawe said.

One of the things that we considered was widows' pensions. We originally proposed two thirds, which is the proportion paid in many private sector schemes, to be paid to widows in future. But if we were to get anything it was to be five eighths or nothing, so we had to accept five eighths.

The TSRB should have looked at benefits in other funded schemes in the public sector. For example, teachers have favourable arrangements for early retirement and British Airways has a three-year salary payment rather than two for death in service.

I understand that the TSRB has been asked to look only at the level of contributions, but as the Government Actuary can look only at the state of the fund as at June 1990 and report this summer on what should be done, there will be time for the Government to consider the TSRB report on contributions. We could use clause 6 to carry that into effect. Surely it would be better if the TSRB were to take evidence from Members about desirable improvements, such as widows' pensions. It is, after all, nearly three years since the TSRB last reported and it will be aware of the defects in our scheme compared with other funded schemes. It will also be aware of the lack of balance in our contributions and the resources available to us.

Therefore, I propose that after the Government Actuary recommends what the contributions should be in order to provide existing and proposed benefits, the TSRB should come forward with further recommendations before the end of the year which the Government Actuary could then calculate and quantify. That would be in time for the Government to carry the proposals into effect under clause 6 before June 1992.

The House will know that under clause 6 the Leader of the House may, with the consent of the Treasury, by regulations, make provision for the benefits here. I do not understand why the Treasury—

Mr. Ray Powell

On a point of order, Mr. Deputy Speaker. Is it the case that if the debate concludes at 7 o'clock, we do not have to come back at 10 o'clock, but that if it does not conclude at 7 o'clock, we may have to come back at 10 o'clock?

Mr. Deputy Speaker (Mr. Harold Walker)

What the hon. Gentleman does this evening is a matter for him.

Sir Peter Hordern

I am just coming to the end of my remarks and I hope that the House will be patient. I am, after all, a trustee of the fund. This is a bad deal and it is quite wrong that we should have only an hour and a half in which to debate it. I appreciate the hon. Gentleman's point, but I am going to have my say.

I do not understand why the Treasury should be mentioned specifically under clause 6. It is bound to take a view anyway. The Treasury is getting off lightly, through no merit of its own. It has nothing to do with the success of the fund. If the trustees had wanted to, we could have invested all the money in Government securities, and where would the Treasury have been then? It must distinguish between the pay-as-you-go schemes and the funded schemes. A period of silence and modesty on the part of the Treasury would be welcome. Its part in all this has been distinctly shabby. I am astonished that the Treasury has had the nerve in clause 6 to show its head above the parapet. If that had happened in the private sector, the Treasury would have been castigated as a bad employer.

I congratulate my right hon. Friend the Leader of the House on bringing the Bill to the House and I wish him every success.

6.56 pm
Mr. MacGregor

I am grateful for the way in which the Bill has been received. Several of those who have spoken have great experience in these matters. My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) was a distinguished Minister and a key architect of the personal pension scheme. I have no doubt that he will mount a powerful case to the TSRB along the lines that he put to the House tonight.

I pay tribute to the right hon. Member for Manchester, Wythenshawe (Mr. Morris) for all that he does as chairman of the trustees. He does a tremendous amount of work on matters of detail, as well as on the kind of things he has been talking about this evening.

There is a general feeling that the Bill should now go ahead so that we can get on with it. It has been long delayed. As hon. Members have said, it is comparatively modest, but it is right that it should be enacted. Therefore, I hope that we can now reach a conclusion on the Bill.

Some issues that have been raised during the debate are more relevant to the regulations—particularly the point regarding Members of the European Parliament, to which we may have time to return later. It is not a simple point that can be dealt with quickly, but it is one that I am considering. However, there are real complexities which we may be able to discuss later.

I said a great deal in my opening remarks and I now recommend the Bill to the House.

Mr. Peter Fry (Wellingborough)

On a point of order, Mr. Deputy Speaker. I understand that the debate can continue after 10 o'clock. I agree with my hon. Friend the Member for Horsham (Sir P. Hordern) that an hour and a half is a ridiculous amount of time to debate such an important matter. I ask for your guidance, Mr. Deputy Speaker. If we allow the Bill to go forward, can the debate on the motion continue after 10 o'clock? I do not wish to delay the House, but I do wish to talk on the motion.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House—[Mr. Wood.]

Committee tomorrow.