§ The Lord President of the Council and Leader of the House of Commons (Mr. John MacGregor)
I beg to move,That this House endorses the proposals for changes in Members' pension contributions and scheme benefits to achieve reductions in the Member contributions from 9 per cent. to 6 per cent. and improvements in the ill health provisions of the Parliamentary Pension Scheme, thereby implementing the recommendations in the Top Salaries Review Body Report on the Parliamentary Pensions Scheme presented on Friday 28th June (Cm. 1576).As the House knows, the Government Actuary's latest report on the parliamentary contributory pension fund, the Top Salaries Review Body report and the Government's response were all published on 28 June. The Government accepted all but one of the TSRB's 10 recommendations. On behalf of the whole House, let me pay a warm tribute to all the members of the TSRB, especially those on the sub-committee, who did a great deal of detailed and worth while work in producing the report so speedily. We are in their debt.
Of the TSRB recommendations——
§ It being Ten o'clock, MR. SPEAKER interrupted the proceedings.
That, at this day's sitting, Parliamentary Pensions may be proceeded with, though opposed, until half-past Eleven o'clock or the end of a period of one and a half hours after it has been entered upon, whichever is the later.—[Mr. Kirkhope.]
§ Mr. MacGregor
Of the TSRB recommendations that we have accepted, three require amendment to the scheme. As the House knows, we now have power to do that by regulation under the Parliamentary and Other Pensions Act 1987, without having to use primary legislation.
As required under the Parliamentary Pensions Acts, I have consulted the trustees of the scheme on the proposed changes. I should add that we have undertaken to mirror, where possible, the changes that we are making in the basic scheme in the supplementary ministerial scheme. I shall explain the implications of that under each heading.
Two of the changes—the reduction in the Member contribution and the ill-health enhancement—are provided for in the draft regulations covered by the motion. Copies of the draft regulations themselves have been available in the Vote Office. I am pleased to be able to say that the regulations have been agreed by the trustees. The third change requiring amendment to the scheme is the TSRB's recommendation 9, to guarantee that a full pension should continue to be paid for five years after retirement if a Member of Parliament dies in that period. That is more complex and, with the agreement of the trustees, we are holding it over until later. I shall say more about this shortly, but I assure the House that I firmly intend to deal with the matter at the appropriate time—that is, when we have worked out exactly how we shall implement it.
I remind the House that we have been determined that the move to amend the scheme by regulations under the 1987 Act—which are subject to the negative resolution procedure—should not mean that the House loses the opportunity to discuss proposals to change the scheme and, if appropriate, agree amendments to those proposals. That is why, in line with the commitment given by the Paymaster General in 1987, the regulations are available to 612 the House in draft, with an opportunity for hon. Members to comment before those regulations are laid in their final form. We followed exactly that procedure in January this year, when we debated regulations to increase the widow's pension.
As for the recommendations which we accepted but which did not require regulations, let me draw attention particularly to recommendation 3, which requires the trustees to be asked to review the scheme from time to time when the Government Actuary's triennial report is presented. I believe that that recommendation is sensible, and I was happy to accept it.
Let me now deal with the regulations themselves. The centrepiece of the TSRB recommendations is a cut in the Member contribution from 9 per cent. to 6 per cent. I know that there has been a strong feeling in the House —which I share—that Members are paying too much, and I am pleased to accept the TSRB's view that the contribution should be cut. I believe that much of the pressure for the so-called balance of contributions last year reflected concern about that point. The cut in Member contribution puts that argument in a new light, especially since the TSRB has rejected—rightly, in my view—the case for moving to a fixed-ratio system. I hope that the House will share my view that we can now put that argument behind us, and concentrate on the reduction to 6 per cent.
I shall not dwell on the TSRB's arguments for the cut, which are spelt out very well in its report. I emphasise, however, that the TSRB took the view that, as only 4 per cent. of occupational pension schemes have an employee contribution in excess of 7 per cent., the Member contribution in the PCPF was seriously out of line with practice elsewhere in the public and private sectors. That is what led it to recommend the reduction in the Members' rate. I emphasise that there is no special treatment for Members. Indeed the position is quite the opposite for we have been paying a higher contribution than the vast majority of other occupational pensioners. Given the surplus, there is no need to continue to do so. The TSRB report makes it clear that we should come into line with other occupational pensioners and that we have every justification for so doing
§ Mr. Stanley Orme (Salford, East)
The point should be made loud and clear that we are asking for nothing more than that which exists already in the public and private sectors. We do not want any special privileges, but we want to be treated equally with others
§ Mr. MacGregor
I very much agree with the right hon. Gentleman. Quite a considerable surplus has been built up, as I have said, and no doubt that is partly as a result of high contributions. I believe that the case for making the proposed change is clear.
Regulations 2 and 3 implement the cut in contribution, which applies to both the basic and supplementary schemes. The cut takes effect from next April to fit in with the new valuation period.
I should say a word about how the cut in contribution fits in with the new Government Actuary's Department valuation, on which the TSRB recommendations are based, and the overall costs of the scheme. As the GAD report brings out, because the fund remains in surplus the actual Exchequer contribution would have been 2.8 per cent. until the year 2000, when it would have risen to the long-run standard rate of 14 per cent. I shall not weary the 613 House with the complexities of the difference between the two because it is an arcane pension fund matter which I think most of those who are in the Chamber understand. The point is that the contribution would have risen to the long-run rate, the rate that would have been reflected over a longer period had the surplus not existed.
Had the Exchequer contribution been 2.8 per cent. until the year 2000, I think that I can predict the response from colleagues on both sides of the House, especially as we are so much out of line with other occupational schemes. That is why I was so keen for the TSRB to take the GAD report into account in its own report. The cut in Member contribution which it recommended, and which the Government accepted, significantly alters the overall position because it correspondingly increases the implied Exchequer contribution by 3 per cent. The improvements in the death and ill-health benefits, which we are also implementing, will increase the long-run total cost of the scheme by a further 1 per cent., to 24 per cent. of salary. As the benefit improvements are made without changing the Member contribution, the Exchequer contribution will also rise by a further I per cent. As a result, the long-term cost payable by the Exchequer—leaving aside surpluses or deficits—will now be 18 per cent., against a Member contribution of 6 per cent., but the actual Exchequer contribution, taking the present surplus into account, will be 6.8 per cent.
In carrying out its review, the TSRB examined the benefit structure of the scheme. We have been persuaded by its case that it is right on welfare grounds to make some minor but nonetheless important changes to ill-health enhancement. The existing arrangements are complex and the proposed changes simplify matters considerably.
The essential TSRB recommendation is that, for the calculation of ill-health retirement pensions and spouses' pensions in the event of the death of a Member in service, years of potential pensionable employment to age 65 should be credited to replace the existing less favourable enhancement rules. This would correct the inadequacy of the existing low level of pensions for young Members faced with retirement due to ill health or, if they die, for their surviving spouses. In addition to improving the existing provision greatly, because of the simplified basis of calculation Members and their spouses would know in advance what their entitlement would be in the event of ill health, retirement or death. I am sure that I do not have to underline the importance of that, when during this Parliament we have seen a number of tragic cases of colleagues who died young. Accordingly, regulation 5 implements the granting of full potential pensionable employment to age 65, to replace the existing complex enhancement rules for the calculation of ill-health retirement pensions and of spouses' pensions when Members of Parliament die in service. Ill-health enhancement is not available under the supplementary scheme, and regulation 5, therefore, applies only to the basic scheme.
The House will know that the TSRB considered the position of former Members of Parliament who die within a few years of starting to draw their parliamentary pensions. Some 76 per cent. of schemes other than our own have some form of five-year guarantee that the scheme Member's pension will be available to the spouse in the 614 event of death. We accepted that recommendation, which will ensure that, at relatively low cost, beneficiaries receive value for contributions paid.
Unfortunately, that recommendation is difficult to implement even-handedly. I discussed the position with the trustees and we identified a number of cases where, depending on the drafting of the regulations, closely parallel circumstances might result in very different treatment. We reached the conclusion that we should not rush into implementing that particular recommendation, and the trustees and I agreed that we should ask officials to establish arrangements which will not lead to such anomalies but which will meet the recommendation.
I am happy to give a definite commitment to introduce at a later date regulations to implement that recommendation in a way that is acceptable to the trustees and to the House. Those regulations will also be put before the House for discussion in draft, in accordance with the procedure to be followed under the 1987 Act, which we are adopting tonight.
§ Sir Geoffrey Finsberg (Hampstead and Highgate)
The provision for doubling the widow's death benefit was backdated because the Government were unable to introduce the regulations at the right time. Will the ill-health regulations to which my right hon. Friend just referred be made retrospective to today's date or to the date when the current regulations go through?
§ Mr. MacGregor
If my hon. Friend is referring to the death guarantee regulation, I shall seek to ensure that which he suggests.
I should explain why we have not decided to agree to the TSRB recommendation backdating the faster rate of accrual. I know that it is argued that the TSRB had offered its recommendations as a package, but against that I have to take account of the fact that our regulations must achieve a fair balance between the Member of Parliament and the taxpayer. More importantly, I believe that within the scheme we now have the balance between benefits and contributions right.
I must start by saying something about the use of surpluses. I believe that it is wrong to start from the point that the surplus should be run down in the fastest possible time, especially since it is important not to exaggerate its size. Although it may look large, we must remember that the GAD valuation makes it clear that the surplus is well within Inland Revenue limits.
At the same time, we are using some of the surplus. The reduction in the contribution to 6 per cent. not only gives a better balance between the Member of Parliament and the Exchequer; it in itself will act to reduce the surplus, but in a prudent way. I do not believe that it would be right to go further. Taking account of the benefit improvements last March and the minor new improvements now, additional to the 6 per cent. reduction, the total additional cost to the scheme will be 4 per cent. Members of the scheme are not being asked to pay any of that now. If we appropriate the surplus today, we shall bring forward the day when Members will have to bear the cost of the improvements. I do not believe that we should do that.
None the less, I considered very carefully the TSRB proposal that the accrual rate for service before July 1983 should be converted from one sixtieth to one fiftieth for serving Members of Parliament, but I do not believe that it made a strong case for doing so. I am struck also by the 615 fact that the TSRB did not point to other schemes, public or private, which have adopted that approach on accrual. If we adopted that retrospective change—which is what it would be—we should be under strong pressure to make similar changes to other public service schemes and the repercussions could be very expensive. I do not believe that it is possible to justify going back almost two full Parliaments to undo a decision made eight years ago, and never questioned in the interim. Moreover, it is a particularly unnecessary change as provision already exists for Members to purchase added years at the improved rate of accrual. Those who have chosen not to upgrade their pension have obviously felt that they had good reason for not doing so. Of course, many of our colleagues did upgrade their pensions. I believe that the choice should continue to be left to the individual Member. The trustees are keenly aware of that and, apart from anything else, given that many Members have taken the opportunity to convert their service at 40 per cent. of the true cost, augmentation such as the TSRB suggests might not be practicable.
That is our one point of difference. In general, I hope that the House will agree that the Government's response to the TSRB recommendations has been positive. I believe that they are totally justified and I repeat our warm thanks to the members of the TSRB for their report, for the report's great thoroughness and for the speed with which they brought it forward. I commend the motion to the House.
§ Mr. Stanley Orme (Salford, East)
I associate myself with the comments of the Leader of the House about the TSRB report and the thoroughness with which it examined these matters. We referred them back to the TSRB as a result of pressure from hon. Members who felt that an injustice had been committed with regard to the percentage that we pay and because we wanted the TSRB to consider once again the position of widows and ill health. We also wanted to raise with the TSRB whether we should pay sixtieths, fortieths or fiftieths.
We welcome the reduction from 9 per cent. to 6 per cent. of salary. As I said in my intervention in the speech of the Leader of the House, that is fully justified and does not place Members of Parliament in a special category. We are now being treated the same as the public and private sectors. That point struck home when we gave evidence to the TSRB. Obviously the TSRB did its homework, and when it examined pension schemes generally it discovered that we were being treated unfavourably and that we had been asked to make contributions which were totally unjustified. That change is very welcome and I am sure that hon. Members will benefit from it.
I welcome recommendations Nos. 8 and 9 from the TSRB about the enhancement rules for ill health and retirement pensions and for spouses' pensions when Members die in service. I also welcome the comments of the Leader of the House about that, and about the fact that regulations will have to be drafted and presented to the House. He gave a clear undertaking to do that, as he did in respect of the recommendation for former Members who die during the first five years of retirement that an Member's pension should continue to be paid to a surviving spouse for the remainder of the five years after 616 retirement. That matches normal practice. As the Leader of the House said, 76 per cent. of pension schemes have such a provision.
As the Leader of the House said, there have been unfortunate circumstances in the past two years when younger Members have died leaving families and people with responsibilities. We have improved the death grant. Changes have been made which are small but positive alterations that we all welcome.
I now refer to the recommendation on the existing accrual rates of fiftieths and whether they should be applied to all currently sitting Members in respect of their future entitlement, with appropriate change for those who have voluntarily been making up the shortfall as outlined in detail in paragraph 40 of the TSRB report. I listened carefully to what the Leader of the House said, but that is a unanimous recommendation from the TSRB. In another paragraph, it states that it saw no reason to reduce the rate from fiftieths to fortieths, for example, but it recognised that, by implication if nothing else, our rate of sixtieths was an injustice, particularly bearing in mind the average length of time for which many hon. Members are in the House, as opposed to spending a lifetime in commerce, business or industry. That recommendation is positive and sound. Perhaps the Leader of the House, having heard what has been said, will at least consider the matter again. Obviously, he cannot make a decision this evening, but that recommendation warrants consideration.
The money exists. Perhaps another way of using it could be found. If the right hon. Gentleman does not feel that it is right to pay back on the fiftieths and accrual rate, perhaps it could be done either by enhancing the pension or doing something extra for widows. The TSRB states that that would cost about £3 million, but that £3 million is available without any extra stress being imposed upon the fund
§ Mr. Ray Powell (Ogmore)
With all his experience and knowledge of the pension scheme, will the right hon. Gentleman disclose the current balance of the parliamentary pension fund? What figure are we talking about?
§ Mr. Orme
I do not have the exact figure in front of me, but we are talking of a considerable amount—perhaps £70 million or £80 million. I am not sure of the total, but it varies, as the hon. Gentleman will recognise—and it varied on stock exchange black Monday, which had an unfortunate effect. I cannot give the figure now, but I will certainly ensure that the hon. Gentleman receives it. Perhaps the Leader of the House has the figure
§ Mr. John Greenway (Ryedale)
The right hon. Gentleman will find that the current surplus is £7.3 million, which is substantial
§ Mr. Orme
I understand that £7.3 million is the figure.
I am sure that hon. Members on both sides of the House will press those points on the Leader of the House. That issue aside, however, the proposals are satisfactory and in line with natural justice, they are not out of line with anything within the public or private sectors, and I welcome them.
§ Mr. Alfred Morris (Manchester, Wythenshawe)
As the House knows, I intervene in the debate as chairman of the managing trustees of the parliamentary contributory 617 pension fund. This is the third debate that we have had on pensions in the last 18 months. Earlier debates were about improvements we were seeking and the mounting criticism there has been of the gross imbalance between the Member's and Exchequer contributions to the fund. My fellow trustees and I have taken the lead in securing many improvements to the pension scheme over recent years, most recently the increase in the widow's pension from one half to five eighths of the Member's entitlement. It was pressure from the trustees that led to the TSRB's latest review of the scheme, the outcome of which was reported to the House in the right hon. Gentleman's reply to my parliamentary question of 28 June. The trustees want me to place on record tonight their appreciation of both the thoroughness of the TSRB's review and the speed with which it reported. While we wanted the review board's recommendations to go further, we welcome the improvements its report will secure.
It may be helpful for me briefly to compare the recomendations with the thinking of the trustees on the issues with which the TSRB's report deals. In recommendation 1, the TSRB says that the balance of cost method should be retained for determining the relationship between the Member's and Exchequer contributions to the fund. In their submission to the review board, the trustees had repeated their previous requests for a fixed relationship between the Member's and Exchequer contributions and suggested a ratio of 3:5. The TSRB's examination of this issue is covered by paragraphs 11 to 23 of its report. Naturally, the trustees regret that their renewed request for a fixed relationship was unacceptable to the review board.
Recommendations 2 and 3 say that the Government Actuary should continue to be responsible for reviewing the financial position of the fund and for recommending the balance of cost contribution required from the Exchequer, and also that the TSRB should review the pension scheme on a regular basis at the time of the Government Actuary Department's triennial review. The review board has noted and accepted the points made by the trustees about the Actuary's dual role. While we do not dispute the objectivity of his advice, we are concerned that he has two functions and about the dangers of trying to serve two masters. It is now proposed that the TSRB should play a more active role, one that would assuage our concern, and the trustees welcome these recommendations.
Recommendation 4 is that the Member's contribution rate should be reduced from 9 per cent. to 6 per cent. of salary from next April. The trustees have pressed strongly and repeatedly over a long period for a reduction in the Member's contribution rate and, as I have said, we also sought a fixed relationship between the Member's and Exchequer contributions. The trustees are, of course, very pleased that the contribution paid by Members will now be set at a much more realistic level.
Recommendation 5 is that the accrual rate——
§ Mr. Ray Powell
I am grateful to my right hon. Friend for giving way because this is an important point. Why have the trustees recommended that the reduction in the percentage that we pay into the pension scheme should be implemented in April, not immediately?
§ Mr. Morris
It is not our recommendation that the reduction should take effect from next April; that is the recommendation from the TSRB. For our part as trustees, as the hon. Members for Horsham (Sir P. Hordern) and for Hampstead and Highgate (Sir G. Finsberg), who work with me as trustees, will confirm, we have wanted a reduction in the Member's contribution for a very long time. We have argued that the contribution of 9 per cent. has had no relationship to the financial needs of the fund. The result has been that the Exchequer contribution has gone down to a point where, in contrast to other schemes, we have been paying twice as much as the Treasury. We wanted a reduction long before now. The House should recall, and the Leader of the House will know, that the TSRB itself has said more than once that the 9 per cent. contribution is far too high.
I turn to recommendation 5, namely, that the accrual rate should remain at a fiftieth of final salary for each year of service. The trustees requested the TSRB, in reviewing the accrual rate, to take into account the relatively short time span of the average parliamentary career. In response, the review board has noted that improved "portability" of pensions now allows Members to bring pension rights into the parliamentary scheme and argues that this development, together with the existing rate of accrual, should enable Members of Parliament to acquire good overall pensions. Nevertheless, the feeling persists, on both sides of the House, that a faster accrual rate would be well justified for an occupation in which the average length of service is so short
§ Mr. Nigel Spearing (Newham, South)
Can my hon. Friend tell the House from his experience as chairman what proportion of Members, especially those joining the fund, are able to bring the whole of their contributions—not only theirs but those of their employer—into the scheme? I should have thought that the phrase "improved portability" might be slightly optimistic
§ Mr. Morris
Details of our practice over the years can be made available to my hon. Friend. When I entered the scheme, I brought from the electricity supply industry my total entitlement as of that time. It bought a number of years in the parliamentary scheme. My hon. Friend raises an important point. We will certainly provide him with any more detail he may wish to secure.
Recommendation 6 proposes that the existing accrual rate of fiftieths should be applied to all service for currently sitting MPs, with appropriate augmentation for those who have been making up the shortfall voluntarily. The Leader of the House stated in his parliamentary reply to me on 28 June, at column 565, that the Government do not propose to accept this recommendation, to which I shall return shortly.
Recommendation 7 is one which the trustees find extremely disappointing. The TSRB proposes that pensions for widows and other surviving spouses should not be improved further from five eighths to two thirds of the Member's pension. The trustees have been pressing for a two thirds widow's pension and are not persuaded that this is unjustified. We note the TSRB's point that 80 per cent. of other schemes allow for only one half spouse's pension, but feel that our scheme, to which Members have been paying a contribution of 9 per cent. since 1983—very 619 much higher than the employee's contribution in the vast majority of other schemes—could have afforded a two thirds widow's pension.
I turn now to recommendation 8. This proposes the grant in full of all the years of potential pensionable employment to the age of 65 to replace the existing enhancement rules for ill-health pensions and for spouses' pensions when MPs die in service. The trustees asked for a minimum level of widow's pension in these cases and are grateful for the considerable improvements the TSRB has proposed.
Recommendation 9 is about former MPs who die during the first five years of retirement. The TSRB proposes that a Member's pension should continue to be paid to the surviving spouse for the remainder of the five years after retirement, followed by dependant's entitlement. The trustees have noted, as the right hon. Gentleman has also seen, that this could produce some anomalies in apparently similar cases, and we agree that further discussion is necessary about this proposal. We are grateful to the Lord President for his firm commitment to the trustees and to the House tonight to bring forward regulations to implement this recommendation at the earliest possible date. As the right hon. Gentleman said, recommendation 10 proposes that the changes should also apply to the supplementary scheme for Ministers and office-holders.
The trustees welcomed the speed with which the right hon. Gentleman responded for the Government to the TSRB's recommendations, but were not wholly satisfied with their response. We were concerned about the loss to Members of the Government's rejection of the TSRB's proposal, in recommendation 6, that the existing accrual rate of fiftieths should apply to all service for currently sitting MPs. While we understood the Government's reluctance to accept the retrospective aspect of the recommendation, the trustees saw the TSRB's report as an affordable package of improvements and were concerned that the rejection of this recommendation left some £3 million of the surplus in the fund unused.
We made strong representations to the Leader of the House for use of the £3 million for other improvements to the scheme, one of which would have allowed Members to enhance widows' pensions from five eighths to two thirds. We are very conscious of the strain parliamentary life places on Members' families and of the widely held view in the House that the claims of surviving widows of Members must be a very high priority. It was for this reason that the trustees felt justified in pressing the Leader of the House to use the £3 million we are losing from the TSRB's package on improving the lot of widows.
We were turned down, but still feel strongly that it is quite wrong for Members and/or their dependants to lose £3 million from a package, seen as affordable by the TSRB, simply because of the Government's inability to accept one of the recommendations and their unwillingness to agree to suggested alternative ways of spending the money.
The central and indisputable fact here is that Members will lose £3 million to which independent arbitrators think they are entitled. We must, therefore, very soon find some way of addressing this wrong. If the Government are saying that they can think of no way of spending the £3 million now missing from the review board's package—which, I repeat, the TSRB saw as affordable—Ministers are saying, by implication, that the scheme is incapable of 620 improvement. That clearly is an indefensible posture, and I urge the right hon. Gentleman now to agree that Members must be given the full value of the TSRB's package if the scheme is to become more comparable with better schemes elsewhere.
The suggestions made by the trustees for further improvements to the scheme have all been rejected by the Leader of the House, but we want him to agree tonight that, in consultation with us, he will look urgently for costed improvements that we can all approve and, by preference, steps to ease the problems of widows and other dependants.
I and my fellow trustees will continue to strive for improvements to the pension scheme. All of my colleagues work hard and with genuine commitment to the interests of their fellow Members and dependants alike. We have achieved much over recent years, for which the right hon. Gentleman can take some credit, but there is still much more to do if we are to make the benefits of our scheme anything like comparable with those in other Parliaments, not to mention many other pension schemes in Britain today.
I conclude by paying tribute to Jim Dobson, who retired last month as our secretary after long and highly distinguished service in the Fees Office, to his successor Tony Lewis and to all who work with him and us in the service of Members and their dependants. Their work goes far beyond the calls of duty, and they deserve the very warm appreciation of the House as a whole.
§ Sir Geoffrey Finsberg (Hampstead and Highgate)
The right hon. Member for Manchester, Wythenshawe (Mr. Morris) chairs the managing trustees very ably, and we have made an enormous amount of progress in the past few years. I also pay tribute to the Leader of the House for what he has done. I have been a trustee since 1983 and we have made substantially more advances in the past 12 months than we did in the previous period. I believe in making progress stage by stage, and the review body and the Government's response have, as the right hon. Member for Wythenshawe said, made substantial advances.
The right hon. Member for Salford, East (Mr. Orme) rightly said that the reduction in Members' contributions was a matter of equity. As there are a substantial number of non-contributory pension schemes, taking into account the reduction to 6 per cent. we still pay more than many other people. It is a chicken-and-egg situation. Because the trustees, through careful management, built up a substantial surplus in the fund, the Government Actuary decided that the Government's contribution could be reduced. Had we been less skilful and built up a smaller surplus, the Treasury might not have been placed in that position. So there was no advantage to the trustees or the House to manage the affairs of the parliamentary pension fund as effectively as we did.
I thought that it might be interesting to compare our pension scheme with others, so I checked out some journalists' pension schemes. Most of them are contributory and contributions range from 6 per cent. to 7 per cent. The BBC has a contributory scheme to which the contribution is 6 per cent. to 7 per cent. None of the schemes has a 9 per cent. contribution, so our proposed reduction to 6 per cent. cannot be deemed out of line.
621 Queries were raised when, a few months ago following a review, the widows' benefit was increased to two years' salary. I notice that the average scheme in the media industry provides rights for widows or widowers, after a death in service, at a level of three times the deceased person's salary. The best schemes provide for a level of four times the salary. We should occasionally put those issues in the balance. It will be interesting to see whether they are mentioned.
§ Sir Michael McNair-Wilson (Newbury)
Can my hon. Friend also tell us what salaries are paid to the media and what level of pension is therefore enjoyed by journalists when they retire?
§ Sir Geoffrey Finsberg
That would be interesting, but I did not have time to make that comparison. However, had I done so I do not think that it would have been unfavourable toward Members of Parliament—[Interruption.] I shall not enter into the many tax-free expenses that have existed in so-called Fleet street practices for many years.
On balance, the proposal is very reasonable. Naturally, we should like more, but that will always be the case when one is looking after the interests of other people. However, one must concede, that everything cannot be done at once. We have a major instalment.
I took comfort from recommendation 3, which calls on the review body to look at the scheme on a regular basis at the time of the Government Actuary's triennial valuations. That means that the points put forward by the chairman of the trustees can be reconsidered in the context of the next review. By then, who knows, the Committee, under the chairmanship of my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling), may have made some revolutionary proposals. For example, it may have proposed that the House sits for two days a week or for 42 weeks a year. If one links the salary with that, it may make a difference to pensions. I do not think that we are losing anything by not opting for the total package now. It would have been welcomed, but all of us are realistic.
We must thank my right hon. Friend the Leader of the House not merely for the action that he has taken, but for the speed with which he has done so. I also welcome what he said tonight about retrospection in the regulation when he is able to get the parliamentary draftsmen to work out the complicated regulation needed for the five-year period.
§ Mr. Nigel Spearing (Newham, South)
The speech of the hon. Member for Hampstead and Highgate (Sir G. Finsberg) underlines the fact that the proposals bring us close to achieving the sort of contributory scheme that many hon. Members would have experienced had they not had the good fortune to be here.
I add my thanks to the trustees, the Fees Office staff who have contributed to our deliberations, and my right hon. Friend the Member for Salford, East (Mr. Orme), who has gathered information from colleagues. I was glad to assist him in giving evidence to the Top Salaries Review 622 Body. I was not an advocate of the fixed ratio, but thought that the ratio should be equitable. It is clear from the recommendations that we have broadly achieved that.
However, a few more improvements should be made. The theme of my contribution relates to the basis for further change which has not yet been discussed.
First, I shall correct what might otherwise be considered a misleading intervention which I made during the speech of my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris). Paragraph 36 of the report refers to "improved portability". Like my right hon. Friend the Member for Wythenshawe, I was lucky enough to come to the House with full transfer rights. I was aware then that many hon. Members were not so fortunate. I assumed that the same position more or less existed today. I checked with the Fees Office officials and was happy to find out that legislation—which no doubt passed through the House, so I should have known about it—has made virtually equivalent transfer possible since 1988. Therefore, the Top Salaries Review Body is correct to say that there is improved portability.
§ Sir Peter Hordern (Horsham)
It is true that portability has been allowed for some years. Am I not right in thinking that, when the hon. Gentleman and some of his colleagues were allowed to transport their pension rights to the parliamentary scheme, they did so on the old basis, which was not particularly generous? Since 1988 and the introduction of full transferability, the position is altogether different. The point that the TSRB is making—that more and more people are able to transfer their pensions from their occupational schemes—is not good in respect of those hon. Members who have been in the House for some time. That point applies in a useful way only to those hon. Members who were elected after 1988
§ Mr. Spearing
I am grateful to the hon. Gentleman, as one of the trustees, for explaining that. It adds weight to the case for at least some degree of retrospection, to which reference has been made.
The criterion of the operation should be whether there is any perceived disadvantage to anyone seeking to become a Member of Parliament. It is possible that a prospective Member could perceive that he or she would suffer a disadvantage in terms of pension rights on his election. He or she may be willing to take the risk, and many of us probably would have done. It is more important to determine whether taking aboard any risk would constitute a risk for a Member's family and dependants. That is where improvements are necessary.
It is important to consider paragraphs 41 and 42, which contain recommendation 7. They state that the present pension of the surviving spouse should stay at five eighths of the Member's salary rather than be increased to two thirds of it. It also notes that 80 per cent. of occupational pensions offer the remaining spouse only half the original pension. However, as the hon. Member for Horsham (Sir P. Hordern) said, it is not a sum of money that is being referred to, but two thirds, five eighths or a half of the Member's pension. That pension, particularly for older Members, might be rather less than it otherwise would have been for reasons already given. If so, the pension for the widows, and, possibly, the dependants, will be less.
623 The report states that the scheme will be subject to review. When we come to consider the total operation of the scheme, the trustees, the Government of the day and the TSRB—it might reconsider the scheme on the triennial valuation—must ask what disadvantage exists not only for 624 the prospective Member but for the families and dependants who do so much to sustain our work. If there is a deficiency in our scheme in comparison with most other schemes—I espy that there probably still is—it should be made good.
§ Sir Peter Hordern (Horsham)
We have come a long way in the past two years when we consider that the contribution rate of Members was 9 per cent. and that of the Government was 4.5 per cent. As a trustee, I pay my tribute to the chairman of the trustees who has led us so well. I also pay tribute to the Fees Office on the advice that we have received from it.
Sometimes, when one considers the power available to the Treasury to advise my right hon. Friend the Leader of the House in comparison with the power that the Fees Office gives to the trustees, it is clear that the battle is unequal—like David and Goliath. However, we have received excellent advice from the Fees Office and long may we continue to do so.
The reduction in Members' contributions from 9 per cent. to 6 per cent. is the major triumph of the review which the TRSB has set out in such detail and with such careful consideration. That is especially significant when one considers that, had there been no change, the Government's contribution would have gone down from 4–5 per cent. to 2–8 per cent. That would have been extraordinary and the trustees would have found it difficult to commend it. The change in contribution has been a major triumph.
I understand the view of the TSRB on the accrual rate. I think that one fiftieth is a reasonable proportion, but I do not accept, for the reasons that I gave to the hon. Member for Newham, South (Mr. Spearing), the argument about portability. The argument about hon. Members being able to transport their previous occupational pensions into the parliamentary scheme is not a good one. Most people come here when they have already served between 15 and 20 years, perhaps longer, in an outside occupation. It is only recently that the transfer rights have been valuable. The transfers to which the hon. Member for Newham, South referred were useful, but they were not as good as the existing rights. I do not believe that the TSRB was right in that context.
The argument about the value of the fund today and what should be done with it remains. As the right hon. Member for Salford, East (Mr. Orme) said, we have had a balanced review and a balanced award. It was intended that the fund should be used to pay out special benefits to those who had previously bought in extra years so that they received some compensation for doing so.
I understand and accept the view of my right hon. Friend the Leader of the House that that would have made it retrospective and therefore undesirable. It is a good point. Nevertheless, as the right hon. Member for Manchester, Wythenshawe (Mr. Morris) said, it means that the fund is £3 million in surplus more than it otherwise would have been.
I thought I heard my right hon. Friend, when reading from his Treasury brief, use words such as, "It would be wrong to run down the pension scheme too quickly, and we must not spend all the money at once"—as though it had not been the recommendation of the Top Salaries Review Body that the £3 million should be spent on compensating those who had already bought previous years. I know that my right hon. Friend is a man of great native Scottish caution and that, as a general rule, we should not spend all the money at once, but that money was earmarked for this purpose.
626 I thought I heard my right hon. Friend also say, although my ears must have deceived me, that having reached that stage, which would be most undesirable, members of the fund might have to pay more. I have news for my right hon. Friend. It is not the members of the fund who might have to pay more; the Treasury, on the balance of contribution argument, would have to pay more. It was a Treasury brief. My right hon. Friend—most untypically for him—did not pick up that point as quickly as he should have done.
The £3 million still exists. The right hon. Member for Wythenshawe, the chairman of the trustees, was correct to point that out. The question is, what should be done? May I remind the House of the reason why the added years were there in the first place. Members were given the right to buy added years at a subsidised rate. As one of those who benefited, I can tell him that there is no particular joy to be gained from parting with money, only to find that everybody gets the same, anyway, and that all that money has now been wasted. But that is bye the bye. The question is, what can reasonably be done with the extra £3 million?
On the widows' benefit, the trustees felt very strongly that, good though the increase in widows' benefit to five eighths was, there was a strong case for increasing it to two thirds. That is partly because of the argument that I used when I intervened during the speech of the hon. Member for Newham, South—that portability is not a good argument and that it applies to only a few hon. Members who have been able to transfer their old occupational pensions in a realistic and beneficial way to the parliamentary scheme.
It should be possible—I put it no higher than that—for hon. Members to contribute, in the way that they did to added years, and make an additional provision that would amount to a two thirds pension for widows or widowers. That was the reason why we were allowed to buy added years in the first place. It would be a contributory scheme. If those who contributed to the added years scheme were offered compensation by the TSRB, they should be allowed to buy improved benefits for widows or widowers. There would be no question of a straight gift being made. Contributions would still be made by those hon. Members. It would be a reasonable benefit to offer.
If that does not happen, unless the TSRB makes further recommendations about benefits during the next three years, the Treasury's contribution will be reduced by exactly that sum or more, because the £3 million will have been intelligently invested and by then will be worth a great deal more. That money should be used in that way.
I have been very critical—I hope not unkindly so—of my right hon. Friend the Leader of the House. However, I commend his extraordinary ability in getting this through the Treasury. How that was done I do not know. It has been tried on previous occasions, with no luck. I can only imagine that he employed his great gifts of intelligence, charm and knowledge to get the better of the Treasury. Again I commend him on it.
§ Mr. Speaker
Order. I remind the three hon. Members who are now standing that the debate ends at 11.30 pm and that time should be left for the Leader of the House to reply.
§ Mr. Tom Cox (Tooting)
The debate is obviously of great interest to all of us because we are Members. What is discussed and approved affects us as much as it affects our families. I should like to bring another aspect to the attention of the Leader of the House which we have a duty to consider, although it may present problems.
Like my hon. Friends the Members for Ashfield. (Mr. Haynes) and for Ogmore (Mr. Powell), I am a trustee of the parliamentary Labour party benevolent fund. There one sees at first hand the problems faced by former Members. We have a 96-year-old former Member who was a senior Minister but, sadly, left the House many years ago when there were no pension arrangements. We have an 85-year-old former Member who was in the House for seven years but has no pension from it. There are also the widows of former Members, many in their 90s. The small sums that the parliamentary Labour party is able to give them through contributions—which are very small—are of great help to them.
We have a duty to look after the interests of former Members. Those of us who have been Members for a while will have seen salaries and pensions improve considerably, but some former Members were here when salaries were low and pensions non-existent. They face enormous hardships. Ex-Members and their widows gave great service to the House over the years.
Colleagues have paid warm tribute to the Fees Office, and I join in that. Over the years, I have consulted the Fees Office about ways in which we can help ex-Members and it has always been generous in its advice and in the time that it has given.
I have given the background to this matter because of what could happen to any Member, no matter what his party or on what side of the Chamber he sits. As we have heard, recently several young Members have died, many of whom had young children—it would be inappropriate for me to mention those Members' names, but hon. Members know to whom I refer.
The hon. Member for Horsham (Sir P. Hordern) and others referred to the £3 million surplus. Because of the contacts that my hon. Friends the Members for Ogmore and for Ashfield and I have had with the widows of young Members who died recently leaving young children, we know of their worries about their future. Obviously, substantial improvements have occurred, but we all know from our own lives of the costs borne by women with young children. Given the sums available, I ask the Leader of the House to examine ways in which we can give some security—it does not have to be total security—to the wives of ex-Members.
In talking about money, nothing is clear cut—many situations cause problems. We know the reluctance of any Government to become involved in retrospective legislation, but those of us who are privileged to be Members of the House, and whose futures when we have ceased to be Members are reasonably well safeguarded, have a duty to remember our colleagues who served in the House when conditions were not so good. I accept that there will always be problems, but I beg the Leader of the House—I join in the tributes that have been paid to him—to consider the cases of the wives of some young ex-Members who have, sadly, left us in recent years. I also 628 ask him to give his attention to the cases to which I have referred. I shall be delighted to provide him with the necessary documentation if he wishes.
We have a duty to look after not only ourselves, but colleagues who were our friends. As you know, Mr. Speaker, the great strength of this place is that no matter what one's party, one builds lasting friendships here. I know Conservative colleagues who have faced the same problems as Labour ex-Members. It is our duty to look after their interests. Even though they have left us, their families and relatives are still here.
§ 11.5 pm
§ Mr. Peter Bottomley (Eltham)
I shall also heed what you said about speaking briefly, Mr. Speaker. I echo every word of what the hon. Member for Tooting (Mr. Cox) said and I look forward to hearing the contribution of the hon. Member for Ashfield (Mr. Haynes). My hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg) sensibly said that we cannot expect to have in one go everything that we believe to be right, and it would make sense to take what is being offered tonight.
It is worth echoing what was said in previous debates. For at least 12 years, the Treasury's contribution to the pension scheme was substantially higher than that made by hon. Members. Although that position has been reversed, we should acknowledge the fact that from 1972 to 1984 the taxpayer made a substantially greater contribution than we did. That does not detract from our responsibility to the dependants of those who were unable to serve in the House for a sufficiently long time, or sufficiently recently, to gain the extra advantages for which we are paying. I speak with a certain disinterest as I hope to survive my wife and to get the benefits of being a widower—it may be rare for a Tory Member of Parliament to say such a thing, but I wanted to share that thought.
What I said in a previous debate was right. Most Members of the House are not especially interested in a reduction in their contributions from 9 per cent. to 6 per cent. if the 3 per cent. differential could be used more effectively. That issue has been considered by the Top Salaries Review Body and by the Government, and I pay tribute to the Government, to their advisers and to the board.
Following what my hon. Friend the Member for Horsham (Sir P. Hordern) said, hon. Members' attention should be drawn—preferably as soon as they are elected—to the opportunities for additional voluntary contributions, whether for themselves or for survivors' benefits for widows or children. Hon. Members should also be informed of other ways in which we can sacrifice a part of our present salary so that various contingencies can be met at a higher rate. That is one of the issues with which the civil service has dealt ever more satisfactorily since the end of the war, and it should be brought to the attention of hon. Members.
I agree that we have a responsibility to those people who were Members of the House some time ago, who were paid at lower rates and whose responsibilities were perhaps greater than ours. I do not think that the scheme should necessarily deal with those people—although I should like to see it do so—but perhaps we could adopt the suggestion made by the hon. Member for Tooting whereby those involved in the benevolent funds of the Labour and Tory 629 parties, and of the minority parties if they have them, could get together with my right hon. Friend the Leader of the House to consider how to use the surplus or find another way to ensure that we voluntarily give something to help those older and poorer than we are.
§ 11.9 pm
§ Mr. Frank Haynes (Ashfield)
I think that the pensions section of the Fees Office does a first-class job on our behalf, and always has. I am pleased that my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) mentioned Jim Dobson, the Accountant; no doubt his successor will do a first-class job, just as he did.
I also thank all the trustees for the work that they have done on behalf of hon. Members—and for themselves as well, for they, too, will enjoy the pensions. I wish to compliment the Leader of the House: we got nowhere before he became Leader. I have already complimented him privately, and now I want to do so publicly. He, too, has done a first-class job, although I think that he slipped up tonight. I ask him to think about what has been said by, for instance, my right hon. Friends the Members for Wythenshawe and for Salford, East (Mr. Orme), and the hon. Member for Horsham (Sir P. Hordern), who made an important point. It is obvious that the help for widows is coming from the trustees themselves.
Let me tell the Leader of the House that hon. Members from all parties regularly put their heads together in the Tea Room and on the Terrace and discuss what can be done about the unfair treatment of widows. A first-class suggestion, involving £3 million, has been made tonight and the Leader of the House should seriously consider it. I was a little upset when the hon. Member for Hampstead and Highgate (Sir G. Finsberg) mentioned the right hon. Member for Westmorland and Lonsdale (Mr. Jopling), who is to chair the Select Committee considering the House's working hours. He said that the Committee might recommend that the House sit for only two days a week. That would be awful: it would mean that we would see you only twice a week, Mr. Speaker, and I am not having that. There is no way that I would agree to that sort of thing. I want to see you five days a week, because I think that you do a first-class job as well. I remember things that have happened over the years, Mr. Speaker, and I think that you do a good job outside the House, never mind inside it. I think you know what I am referring to.
The hon. Member for Hampstead and Highgate mentioned the schemes that operate outside. They are far better than ours; they are non-contributory, for a start. The hon. Gentleman also mentioned journalists. From time to time, journalists accuse hon. Members of not turning up in the Chamber. We need only look up at the Press Gallery to see how many journalists are present tonight. They are either tucked up in bed, or sat around the table having a damned good dinner and a bottle of wine. They attack us sometimes, but it is my turn now: I have an opportunity to have a go at them. I think that they are unfair at times.
Let me come back to the Leader of the House. I think that the Top Salaries Review Body did a first-class job on behalf of Members. It looked at the position fairly and squarely and then made certain recommendations. I am a 630 little surprised that the Leader of the House is rejecting one of those recommendations. I think that he is wrong to do so, and I think that he will understand why, given some of the speeches that have been made.
Let me ask the Leader of the House a question: can he tell me what contribution employers are making in all the private schemes outside that are better than ours—and there are many? There is no doubt that the right hon. Gentleman has done a good job on the Treasury: he kicked them around a bit and he has got what he wanted on behalf of Members—and himself; he, too, will benefit. But I think that he will find that employees outside are paying a lot more than employers, although in many instances it is the other way round. Members' contributions have been unfair for a long time, but it has been recommended that they should be reduced. That recommendation is fair, and so is the argument that has been advanced this evening by right hon. and hon. Members about widows and the £3 million that is available. I have made a contribution to that £3 million, and I should like to see it directed to widows. That is where I stand and that is where most of us stand. The Leader of the House should take that on board.
§ Mr. MacGregor
The most controversial remark in the debate was made by my hon. Friend the Member for Eltham (Mr. Bottomley), who had the temerity to say that he anticipated outliving the Minister for Health. Apart from that, we have had a good-humoured, sensible and level-headed debate. Mark you, Mr. Speaker, I think that the remark of my hon. Friend about the Minister for Health was good humoured.
I pay tribute to the right hon. Member for Manchester, Wythenshawe (Mr. Morris) and to the trustees for the work that they do. I am grateful to the right hon. Gentleman for paying tribute to Jim Dobson and the others in the Fees Office, including Tony Lewis, who have worked on all matters that we have discussed. I support that tribute, but I think that the trustees deserve great credit for advocating changes, some of which are before us this evening.
I am grateful to my hon. Friends the Members for Hampstead and Highgate (Sir G. Finsberg) and for Horsham (Sir. P. Hordern) for their kind remarks, as I am to the hon. Member for Ashfield (Mr. Haynes). I think that the right hon. Member for Wythenshawe was somewhat unkind when he said that Ministers were saying that the scheme was incapable of improvement. We are seeing many improvements being made to the scheme this evening and clearly the Government have accepted them. I am sure that the right hon. Gentleman did not mean exactly what he appeared to say. I hope that he will recognise that the Government have been positive in their response
§ Mr. Alfred Morris
I was saying that the implication is that the scheme is incapable of further improvement. The TSRB put forward a package, £3 million of which will now be missing. There are improvements that we could suggest. I hope that there will be agreement between both sides of the House that we should at least consider positively spending that money to improve the lot of widows.
§ Mr. MacGregor
No one has ever suggested that the scheme is incapable of further improvement, but I turn directly to the point that the right hon. Gentleman has raised, which I think is the main one this evening.
I must say to my hon. Friend the Member for Horsham that his remarks about accruals were not quite accurate. We must accept that the £3 million surplus to which the right hon. Member for Wythenshawe referred is not necessarily there for all time. The right hon. Member for Salford, East (Mr. Orme) said that we have a surplus because we have had, thanks to the Government, an effective improvement in the nation's prosperity, which has been reflected in surpluses in pension funds. Those are the results of improvements in the stock market and elsewhere. There is no guarantee, however, that the improvements will continue for ever or, indeed, throughout the 1990s. We should not regard the £3 million as money that is logged up that can be spent now in the expectation that there will not be changes in future.
We should take a prudent view of the surpluses, not least because the long-term cost as assessed by the Government Actuary, leaving aside surpluses and deficits, will now be 18 per cent. for the Treasury as against 6 per cent. for Members. There may therefore be an argument at some stage, if we find that we move into deficit and at the same time we have greatly increased benefits, that Members should contribute more as well.
I have advanced two other arguments. One is that the proposal that is based on accruals involves an element of retrospection. The second is that there would be repercussive effects on other public sector schemes in terms of accruals. Those arguments apply as well as the one about surpluses. Those are all points that we took into account when the Government changed only one of the recommendations.
§ Sir Peter Hordern
I appreciate my right hon. Friend's point concerning retrospection, but the TSRB recommended that the £3 million should be spent now, in the way that it proposed. Obviously we are not going to accept that. That £3 million would not have been available at all if the TSRB had its way—and there can be no question but that it is now available. Can my right hon. Friend confirm the extent of the Government's contribution? As I understand it from paragraph 50, with the £3 million—that is to say, with the retrospective element—the Government's contribution would have been 8.8 per cent
§ Mr. MacGregor
The Government's contribution is now 6.8 per cent. However, we must be free to accept or reject TSRB recommendations—although it is clear that we have largely responded in favour of them. The TSRB recommended against increasing widows' pension from five eighths to two thirds, and we must take that into account when considering some of the other pressures for changes to widows' benefits that have been exerted in the House tonight.
632 I am grateful to my hon. Friend the Member for Hampstead and Highgate and to the hon. Member for Newham, South (Mr. Spearing) for pointing out that our acceptance of the TSRB's recommendation for a three-yearly review means that we will have a regular opportunity to review the scheme, in line with the Government Actuary's triennial review. I hope that the House considers as helpful that regular opportunity to consider whether further improvements should be made. That was an important recommendation to accept and represents a further advance on the Government's position, because that aspect was left open in 1987.
The right hon. Member for Salford, East asked me to take away and to consider the Government's response on accruals and on doing something extra for widows. I will do so, but the arguments in respect of accruals are powerful, and there are two difficulties in respect of improving widows' benefits. They would be retrospective, and the TSRB recommended against an increase on the ground that the benefits are now quite reasonable.
I take the point made by the hon. Member for Newham, South that a number of occupational schemes offer better benefits, particularly in relation to the amount of service that Members of Parliament can sometimes put in, and which is of benefit to their pension scheme—and that, in our scheme, the proportion that applies to the widow's pension may not result in a vast sum of money. We must bear that point in mind for the future, and no doubt it is one that will be argued again to the TSRB
§ Mr. Spearing
I am grateful to the Leader of the House for accepting my point, which accords with others about widows' benefits made by my right hon. and hon. Friends. Would not it be useful to review the actual amounts of money received by widows, relative to other people's needs, and the increased percentage liability on the fund that an increase to two thirds would make?
§ Mr. MacGregor
Those points could be looked at again—certainly in the context of the three-year review.
I believe that right hon. and hon. Members agree that the proposals that we have made in the light of the TSRB's recommendations are a further advance—and that the reduction in the contribution from 9 per cent. to 6 per cent. is a considerable advance, and entirely justified. I will take away to consider the views that have been expressed—but without commitment, because there are strong arguments against them. I reiterate our thanks to the TSRB for the firmness and speed with which it acted. I commend the motion to the House.
§ Question put and agreed to.
That this House endorses the proposals for changes in Members' pension contribution and scheme benefits to achieve reductions in the Member contributions from 9 per cent. to 6 per cent. and improvements in the ill health provisions of the Parliamentary Pension Scheme, thereby implementing the recommendations in the Top Salaries Review Body Report on the Parliamentary Pensions Scheme presented on Friday 28th June (Cm. 1576).