THE APPROPRIATE ANNUAL RATE

HC Deb 15 February 1993 vol 219 cc78-85 7.23 pm

Sir Ivan Lawrence (Burton)

I beg to move amendment No. 21, in page 5, leave out lines 1 to 5 and insert—

1. '(1) In the case of—
1. (a) a person who, at the time of his retirement from qualifying judicial office is not either a circuit judge or a high court judge, and has completed in the aggregate, at least 20 years' service in such office, or
2. (b) a person who at the time of his retirement from qualifying judicial office is either a circuit judge or a high court judge, and has completed, in the aggregate, at least 15 years' service in qualifying judicial office,
2. the "appropriate annual rate" for the purposes of this Act is an annual rate equal to one-half his pensionable pay.'.

The purpose of the amendment is to give half pay on retirement to a circuit or High Court judge when he has served 15 years as a judge. The Government's proposal to extend the length of time which a High Court or circuit judge must serve by five years before he qualifies for his full pension is unfair, unreasonable and will cause serious problems for the working of the system.

In clause 2 of the Bill, the retirement age of judges has been reduced by five years. If, as the Government propose, the retirement age of judges is reduced in that way and the period which a judge must serve is increased from 15 to 20 years before he receives full pension, it follows that any judge who is appointed after the age of 50 will not be able to receive a full pension.

What does that mean for judges? It means that few judges will be able to receive a full pension. That will have ramifications for judges' wives—and widows—and children. Other amendments will address that matter. The effect is a reduction in pension for judges which is totally unfair. That is not the way to treat such an important and vital part of our community as the judiciary.

What effect does it have on the system? It means that those with less experience will become judges in order to serve the 20 years before qualifying for a pension and having to retire at the age of 70. Younger judges will have to be appointed, which will mean that they have had fewer years of experience at the Bar.

At present, the appointment of judgeship comes at the end of an experienced and successful period in the practitioner's life. Those who are successful at the Bar will not want to become judges. If they are earning about £200,000 a year with a successful practice at the Bar, why on earth should they take the appointment of a judgeship with a substantial reduction to about £60,000, £70,000 or £80,000 a year which will bring with it a reduction in pension? Do we want less successful practitioners to become judges—those who have not had the experience or the success at the Bar which comes from ability?

Those who have burnt themselves out after 15 years will have a reason for wanting to hang on for another five years to collect their full pension. There is such a factor as the burnt-out judge. Work at the Bar is intensive and demanding. The more successful the practitioner, the more demanding the work becomes. When one becomes a judge, one must apply one's mind with no let-up. It is relentless: day after day, one case follows another. When a practitioner at the Bar gets tired he can say, "No more work for a week or two while I take a holiday and recoup some of my strength." When one sits as a judge, effectively as a civil servant, one must maintain the days, weeks, months and hours of sitting.

There is absolutely no doubt, and it is obvious to those of us who practise at the Bar, that there are burnt-out judges—judges who should have retired some years ago but are hanging on for their pension. This measure may well cause a lot more burnt-out judges to hang on for another five years to qualify for a full pension. Do we really want extinct volcanoes gracing our benches?

There is a worrying aspect to the matter. If we do not get enough judges because successful and experienced practitioners do not want the massive drop in income and the resulting fall in their pensions and the money available to their widows, or if they do not want to be appointed at an early age before they have reached their apogee of earnings at the Bar, in the fullness of time there may well be a shortage of judges.

How will judges be recruited if there are so few coming forward due to the total lack of attractiveness of the pay, the terms of work, and the pension that they receive at the end? The answer is simple. We do what every other country in the European Community does: we appoint career judges, who will leave school and university and immediately become judges. That practice takes place elsewhere. Now that we are part of a federal super-state and all of the trading, industrial, social and other activities are standardised, there is a level playing field throughout the Community. Why should we not appoint our judges as career judges from the moment they leave university, as happens in all the other countries? I am not a conspiracy theorist. I do not suggest that, when that happens, it will be the result of a deliberate act of harmonising our system with that of our European partners, but if we cannot get enough judges because the attractions to a judge both in payment and pension are so diminished, it is inevitable that we shall have a career judiciary, which no one in the United Kingdom regards as remotely desirable.

The Parliamentary Secretary, Lord Chancellor's Department (Mr. John M. Taylor)

I wish to take up my hon. and learned Friend's point about the attraction or otherwise of the package. I must ask him to accept that the Bill is not a cost-cutting exercise. The cost of both schemes —if I may put it in the vernacular, "before" and "after" —has been actuarially assessed, on the basis of detailed calculations, at 28 per cent. of pay. The cost and attraction of the package is the same before as after.

Sir Ivan Lawrence

It sounds as though my hon. Friend has a guilty conscience. He is over-sensitive. I did not suggest that the reason for the proposal was cost cutting. I would not have been so presumptuous as to make that allegation about my hon. Friend.

Mr. John M. Taylor

My hon. and learned Friend's suggestion might have taken a different form of words, but the meaning is scarcely different. He suggested that on the far side of the changes the package was less attractive. I addressed that suggestion by saying that the package was just as expensive to the taxpayer. The total package of receipts in the hands of the pension holder is of the same value and worth after as before.

7.30 pm

Sir Ivan Lawrence

I did not make the allegation, but if I had been able to do so because I felt justified in making it there would at least have been an explanation for the appalling treatment that the Government are meting out to judges. It would have been logical to say, "We are overspending on the legal system; we must reduce the amount of money that goes into it, so let us shorten the years in which a judge sits and lengthen the time they have to serve before they receive their pension."

As I am concerned about the need to reduce the enormous expenditure on our legal system and elsewhere, I am not sure that I would not have seen some justification in that argument. I am astonished to hear that that is not the justification for the measure—that it is not a cost-cutting exercise.

One is driven to ask why on earth we are taking action in the Bill which will have the bad effects that I have suggested. It will discourage the best practitioners from becoming judges, and make those who are not the best practitioners soldier on long beyond their sell-by date. Why on earth are the Government taking that position if it is not to save money, unless it is as a result of a misunderstanding of the effect that the measure will have on the judicial system? I have some reason for thinking that other misjudgments may have been made of the judicial and legal system in recent years. Perhaps the measure is just another in a line of misjudgments about how the legal system should work.

Mr. Gerald Bermingham (St. Helens, South)

I declare an interest as a practising barrister. Does the hon. and learned Gentleman agree that, whichever way one looks at the package which has just been outlined to us, it does not deal with the heart of the matter, which is how do we attract the best people to become judges so that we can have the best judicial system? To go backwards does not seem to be a way of going forwards.

Sir Ivan Lawrence

It is not just going backwards—it is going a long way backwards. We are not talking about tinkering for a few months or a year. We are talking about a five-year extension in the accrual rate. Judges will have to be appointed after fewer years of service to the profession than hitherto in order to receive a full pension, so looking ahead the position will be markedly worse. It is difficult to see how any possible improvement in the legal system can be achieved as a result of the proposals on pensions in the Bill.

When I am told by my hon. Friend the Minister that the measure has not been taken for reasons of cost cutting, it becomes all the more incomprehensible. I have moved the amendment so that the matter can be properly ventilated in the Chamber and so that those who are involved in the legal profession and other professions and, indeed, the public can see how the future of our proud judiciary may be undermined to a marked extent by the proposals.

Mr. Roger Evans (Monmouth)

I rise to support the amendment. My hon. Friend the Minister repeated what appears to have been the Government's position throughout the proceedings on the Bill. Their position is that the Bill is not intended to be anything other than fiscally neutral. In the present circumstances for Government expenditure, I appreciate and accept the force of that. If that is the case, so be it. My hon. Friend the Minister's difficulty, and the reason why the amendment has been moved, is that so far he has not succeeded in removing, especially from the mind of many of the judiciary, the perception that the Bill is a cost-cutting exercise.

There are above all two reasons for that perception. First, the scheme as a whole may well be neutral in terms of public expenditure but certain sections of the wide series of judicial appointments will benefit considerably from improvements under the arrangements in the Bill. However, the circuit bench and the High Court bench see not that; they see only things which point to severe detriment for future appointees to those positions. That is the importance of the increase from 15 to 20 years, which will have incalculable—although difficult to predict in detail—consequences on the character of the next generation of the judiciary.

My hon. Friend the Minister has not persuaded the judiciary because there are different types of judges among whom there are losers and gainers. I respectfully suggest that time is still left for him to persuade us all that there is fiscal neutrality. The mystery of this controversy is that the Council of Her Majesty's Circuit Judges still has hot had supplied to its actuary detailed calculations in answer to questions which he has put.

Mr. John M. Taylor

There has been plenty of opportunity for members of the judiciary or their representatives to raise questions on cost. There have been exchanges of correspondence since last summer. Meetings have taken place between various parties and there have been discussions on the telephone. In response to questions put to me in Committee, I facilitated the holding of a meeting between the actuarial advisor representing the circuit judges and a senior official of the Government Actuary's department. A meeting was arranged but it was cancelled at the last minute by the judiciary's advisor. I can assume only that the advisor was satisfied with the information that he already had.

Mr. Evans

My hon. Friend has the advantage over me as to the detail of the cancellation of that meeting. However, the arguments which have been put me, and which I put to the House and invite my hon. Friend the Minister to answer, are as follows. First, the assumption has been made in the actuarial calculations of the Government Actuary that under the old and new schemes judges will retire at the same time evenly throughout the relevant years. That is an implausible assumption.

Under the existing arrangements, whereby pension is linked to pay, there is a built-in incentive for judges to retire shortly after their pay has increased. In other words, there will be a distinct difference between the patterns of retirement throughout the year before and after the proposals are implemented. That has a significant consequence of about 1.1 per cent. on the figures.

The second factor which has been challenged but has not been answered is that the real rate of discount assumed by the Government Actuary is 3.5 per cent. whereas 4 per cent. or more would be realistic over the longer period.

The third and perhaps most startling of the Government Actuary's assumptions is that the age and sex composition of the population of judges under the new system—I use the bizarre technical term "population" beloved of statisticians—will not change in the next 20 years. I have no doubt that if that were the case it would create utter amazement, if not criticism, among hon. Members on both sides of the House. We appreciate that one of the factors about the present judiciary is the age at which they join the bench and the time that they were in private professional practice. With the advent of larger numbers of women at the Bar and becoming judges, it is inevitable that the composition of the judiciary—as regards both age and sex—will change during the next 20 years.

The actuary advising the Council of Her Majesty's Circuit Judges has said that for those three reasons—which the Government Actuary has never dealt with as far as I am aware—there is more slack in the measure and, in some regards at least, my hon. Friend has the opportunity to be slightly more generous. I urge him to consider the amendment and to decide what response he can make.

Mr. John M. Taylor

Taking the last point first, the actuarial adviser to judges assumes that there is some slack in the equation because the significance of the move to pensionable pay has been underestimated. He says that this hypothesis would be confirmed by evidence of a bunching of retirements after the judges' April salary increases. The information on judicial requirements, however, shows that that is not the case.

My hon. Friend the Member for Monmouth (Mr. Evans) expressed his arguments with his customary urgent lucidity. I urge him to accept that, for months, every effort has been made to answer all the questions and to make information available. All the information specifically requested by the judiciary or the actuarial advisers has been provided. As I said, the circuit bench actuary met the Government Actuary last October and was offered another meeting last Friday, which was secured last Tuesday. I am advised that he telephoned to decline that meeting last Thursday. It is not for me to account for that but, whatever differences may still lie between my hon. Friend and myself, the Government extended themselves comprehensively to ensure that the information was available for discussion with anyone with whom he wanted.

In answer to my hon. and learned Friend the Member for Burton (Sir I. Lawrence), who tabled amendment No. 21, the Government do not accept the argument that the combination of the 20-year accrual period and the new retirement age of 70 will discourage suitable candidates from accepting appointment to the bench. Under the existing arrangements, a number of candidates are appointed at an age which will not permit them to earn full pension. Others continue in full-time service after they have completed the years required to earn a full pension. The special position of judges, who come to their careers relatively late in life, is recognised in the scheme by the tax concession of retained benefits. That is a most significant privilege for the judges, but the Government do not justify their opposition to a 15-year accural period on that ground alone. There are more telling reasons why the 15-year accural period, and the amendment, should be rejected.

The amendment would shatter the uniformity of treatment of the judiciary, which it is one purpose of the Bill to create. Where the Government are seeking to establish a common accrual period for all judicial officers, the amendment would create a two-tier pension regime, in which circuit judges and High Court judges alone would have to work for 15 years before earning maximum benefits, while all other judicial officers would have to work for 20 years. In doing so, it would perpetuate—perhaps even accentuate—the inequities of the existing judicial pension arrangements.

7.45 pm

At present, different judicial officers have to work for different periods to earn a full pension. There are 15, 20 and even 40-year schemes. Those differences are not based on logic; they are the product of historical decisions, the reasons for which are no longer evident. The Government seek to remove the inherent unfairness in the arrangements by establishing a uniform accrual period of 20 years for all salaried judicial officers in the United Kingdom. The amendment, however, would enshrine the present unfairness in the new arrangements.

Let me give two examples. First, what possible justification remains for circuit judges in England and Wales to work for 15 years in order to earn a full pension, while their counterparts in Scotland, the sheriffs, have to work for 20 years as they would under the amendment? If the work of circuit judges is such that they should retire after 15 years, as my hon. and learned Friend the Member for Burton suggests, why should the same not hold for Scottish sheriffs who perform similar duties north of the border? And what about their Northern Ireland counterparts, the county court judges? They too already have a 20-year accrual period. Is their work less demanding than that of English and Welsh circuit judges? No, it is not. So why does the amendment omit to mention them? The amendment is illogical and plainly unfair.

A second example of the unfairness of the amendment is what is it about the offices of circuit judge and High Court judge that singles them out to remain in a 15-year scheme? There are other offices which presently have 15-year accrual periods, but the amendment does not seek to preserve their positions. For instance, the amendment does not extend to others in 15-year schemes, such as the heads of division, Lords of Appeal in Ordinary or the Lords Justices of Appeal, or to the senior judiciary in Scotland or Northern Ireland. Is it suggested that the work of a Lord Justice of Appeal is that much less onerous than that of a High Court judge or that of the Lord Chief Justice much less burdensome than that of a circuit judge? If this amendment were passed, there would be cause for resentment indeed.

There is no evidence that being members of a 20-year pension scheme has led to Scottish sheriffs or Northern Ireland county court judges becoming stale in the latter years of their service. I do not accept that judges who sit for more than 15 years on the bench are thereby less fit to perform their judicial functions, or to adapt to change, than those who do not. In fact, under the present arrangments, the average length of service of a circuit judge is not 15 years but about 18, and the average length of service of a High Court judge is about 19 years. So, the suggestion that the Government will be forcing judges to work longer than 15 years, against their better judgment, does not appear to hold water. I can do no better than quote my noble and learned friend the Lord Chancellor when he said in another place: I do not believe there is any real basis on which 15 years can be selected as self-evidently the right time at which to ask judges to retire. If it were so, it should apply to all judges." —[Official Report, House of Lords, 27 October 1992, c. 1066.] There is another reason why the amendment would be deeply unfair. I have spoken about it before. The occasion of this Bill was the change to the general tax law introduced by the Finance Acts of 1987 and 1989. The judicial pension schemes are now the only occupational pension schemes in the United Kingdom which have not been obliged to comply with the standards that the Inland Revenue lay down before they will grant tax relief on contributions and lump sums on retirement. One of those requirements is that occupational pension schemes must have a minimum accrual period of 20 years. If the amendment were passed, circuit judges and High Court judges would be the only members of occupational pension schemes in the kingdom to whom that rule would not apply. What justification for that can there be? I would be the first to accept that the work of circuit judges and High Court judges is of the highest importance and often extremely onerous. I cannot accept that it is uniquely so, to the exclusion of all other professions and all other judicial offices. Should not High Court and circuit judges be subject to the same general tax law as the citizens whose case they hear?

The Government's other concern with the amendment is, of course, the cost. The new pension arrangements have been designed to be as close as possible to the cost of the existing arrangements. Were we to keep the accrual period of the nearly 600 circuit and High Court Judges at 15 years, this would increase the cost of providing judicial pensions by 4 per cent. of pay.

I respectfully give the House one note of warning. If the amendment is passed, the judicial pension scheme will, as I have explained, no longer appear to meet the criteria set down by general tax law for tax approval. In such circumstances, the Government would have to consider very carefully whether it could continue to allow the judicial pension scheme to enjoy tax-approved status, and whether judges could continue to benefit from the tax privilege of retained benefits. I must ask the House, in the interests of fairness to all concerned, to reject the amendment.

Sir Ivan Lawrence

I notice that my hon. Friend has not addressed my important objection to the extension of the accrual time—the adverse effect that it would have upon the future of the judicial and legal professions—other than to mention some statistic about the length of time that judges are currently sitting. I should have liked my hon. Friend to address the concern expressed by those who understand and know best the consequences of this action —the judges themselves.

Judges represent a most reasonable section of society. They are not given to taking arms against any Government who check their privileges or the benefits that they may receive. However, they have sat down and, with great concern as well as understanding about the future of the system, highlighted the inevitable failures which will result from the Government's proposals.

My hon. Friend said that if the amendment were accepted it would lead to a 4 per cent. increase in costs. That may well be so; I am not in a position to dispute it. He said that it may lead to some kind of reconsideration of the tax status currently enjoyed by judges. I do not challenge that. My hon. Friend also said that uniformity of treatment was necessary and referred to the creation of a two-tier system. Such a system already exists; all that my hon. Friend is advocating is its continuation. That argument cannot be considered satisfactory by any fair-minded, objective person.

I see the logic behind my hon. Friend's argument and 1 accept that there may be a perceived unfairness about any distinction which now exists between the accrual time of 15 years and 20 years. That unfairness should not be removed by creating a greater unfairness, with the likely consequences that I have suggested, particularly when those consequences are as harmful to the future of our judicial system as the judges and those who have thought about the matter seem to think.

It may be that, to be fair, my hon. Friend and the Government should reduce the time served for the approval of full pension for the Lord Chief Justice, judges of the Court of Appeal, sheriffs and judges in Northern Ireland. Perhaps the Government should look forward to a time when they can proceed with such fairness. However, that argument is not an answer to the case that I have made in support of the amendment. It cannot be right that we should introduce a far greater unfairness, which will seriously harm the future of the legal profession and the legal system.

I note the less than full attendance in the House and I realise that when we come to discuss matters of pay, income and terms of service of lawyers or the judiciary it is an occasion for intense boredom and lack of interest by others in our society who think that lawyers earn enough, gain enough, do not contribute enough and should be hanged. Therefore, it would be impracticable and unrealistic for me to press the amendment to a Division, particularly since we have heard no word of support from those on the Opposition Benches. In those circumstances, I shall not press the amendment to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.