§ Motion made, and Question proposed, That this House do now adjourn—[Mr. Kirkhope.]10.53 pm
§ Mr. Winston Churchill (Davyhulme)
The redress of grievance has been a time-honoured role of the House of Commons over the centuries, and remains as important today as it did in the days of monarchical despotism. It is for that reason that I wish to draw the House's attention to a serious injustice—indeed, the most serious injustice that I have come across in the 24 years I have been privileged to serve in this House.
It concerns the plight of Britain's expatriate pensioners, living in those countries where their pension was frozen at the date on which they left the United Kingdom, or when they first became eligible for a pension.
Ninety-five per cent. of Britain's retirement pensioners remain in this country for their retirement. Approximately 2 per cent. live in the European Union, the United States or that tiny handful of countries where they enjoy the uprating of pensions. The ambit of this Adjournment debate is therefore to focus on that 3 per cent. of British state pensioners who have contributed throughout their working lives to their retirement pension, but who are denied that retirement pension at present.
Of 676,000 British pensioners drawing their retirement pension abroad, more than half—about 381,000—have their pensions frozen. Although they have exported the costs of their health care and their old age, to the great relief of the British taxpayer, instead of receiving a bonus for so doing, they are, on the contrary, penalised—some very cruelly indeed.
There is no rhyme or logic to that discrimination. War pensions and war widows' pensions are payable anywhere in the world at the full current rate. State retirement pensions, on the other hand, to which individuals have contributed throughout their working lives, are frozen in certain foreign countries, although not in the European Union, the United States and a handful of other countries. Nor is there any logic in the selection of those countries.
Why, for example, are pensions frozen at the northern end of Lake Superior, in Canada, but not at the southern end, in the United States? Why are they frozen in Trinidad and Tobago but not in Jamaica or Barbados? Why are they frozen in India, Pakistan and Bangladesh but not in Iceland? Why are the pensions of the 14 British pensioners residing in retirement in the Falkland Islands frozen, when hundreds of millions of pounds of British taxpayers' money has been spent reclaiming those islands as British sovereign territory from the Argentines?
Why, above all, are the pensions of those people who have retired to the old dominions, who make up nine out of every 10 of those being discriminated against, singled out for especially unfavourable treatment when, prior to 1955, they had received privileged treatment for pension purposes, and rightly so? Up to that point, it was only in His Majesty's dominions overseas that retirement pensions were payable overseas at all.
The biggest groups affected are 160,000 British pensioners in Australia and 118,000 in Canada. It is no wonder that, in recent months, the Prime Ministers of both those Commonwealth countries have made vigorous representations to our Prime Minister, regarding the shameful way—there is no other word for it—in which the 427 British Government expect their pensioners to be given a free ride on the shoulders of the taxpayers of the old dominions.
For example, British pensioners in Canada are today receiving an average weekly pension of £17.86 per week—not even one third of the current United Kingdom pension to which they have contributed. One of them, a Mr. R.S. Totman, of Fort Saskatchewan, Alberta, is just one of many thousands who has written to me in recent months to protest. He writes:Living in Canada, as I do, and having left the United Kingdom in 1968, my pension is frozen at the princely sum of £4.50 per week. If I had moved to the country of one of our former enemies, such as Germany, I would receive the full current pension…twelve and a half times as much!…I urge your Prime Minister, the Rt. Hon. John Major, to press for this reform and not to let Britons abroad suffer any longer.The most poignant pleas for help come from British pensioners living in South Africa and Zimbabwe. Neither country has any social security net available to those in need. Mrs. Edna Thompson of Durban wrote to me last year saying:I am an 86-year-old widow living alone and along with many of my peers I am almost destitute. Please try to get the British Government to do what is right by us regarding equality of pensions for us overseas oldies—we would come back to UK to claim a living but haven't the fare. My pension is £24.30 every 28 days. I dread the winter as I cannot afford to use any heat. Please help us.Mrs. Hannah Riddle wrote from Cape Town saying:I hear that you are trying to help people who get a very small old age pension who do not live in England to get same upgraded. My late husband paid into the fund all his working life in England. We went out to Rhodesia in 1951 and he continued to pay into same yearly, until the age of 65…He got £6 a week but only lived to draw it for two years. I got £4 a week which is the sum I still receive. I am in my 90th year and find it hard to make ends meet these days. I wish you every success in your effort.That lady and others like her are being cheated—there is no other word for it—by the Government of £53.60 per week of the pension to which they contributed. If we were talking about a private personal pension or a life insurance policy and the directors of the company tried to restrict the territorial area of payment, I am sure that my hon. Friend the Minister would have a shrewd idea of where those directors would be languishing now. They would be in gaol, and rightly so.
More disturbingly, many of those facing the greatest hardship appear never to have been warned that by going abroad they would be depriving themselves of their entitlement to a full retirement pension at the current rate. Commander A.O. Johnson, retired from the Royal Navy, wrote to me from Noordhoek, South Africa and said:My wife and I have lived here since 1951. I am now 85 and she 77. We receive £6.75 for self and £4.15 (for her) a week frozen. In 1951, having received Admiralty permission to emigrate, I wrote to ask if I would get the pension. You will see the reply.The reply from the Ministry of National Insurance, dated 21 July 1951, states:If you take up South African nationality at some future date your title to benefits under the National Insurance scheme will not be affected by this change…Retirement Pension, Widow's Benefit and Death Grant are…all payable in South Africa.That reply was reinforced more than a decade later by the Ministry of Pensions and National Insurance in a letter of 12 July 1963, which stated:The Class Three contributions which you are paying maintain title to retirement pensions, death grant, widow's benefit and maternity benefit, all of which are payable abroad subject to territorial currency restrictions…If you regularly maintain 428 contributing to British National Insurance you will be entitled to this standard rate of retirement pension when you attain age 65.No mention was made in any of that correspondence of the fact that they would be depriving themselves of all future upratings by going to live abroad alongside their children.
Finally, I want to quote from a letter from Mr. R. O. Craske of Harare, Zimbabwe. He writes:May I quote the devastating and ludicrous situation of an old friend of ours who died recently at the age of 101 years with a British pension being paid to her at the rate of 50 pence per week, i.e. the rate of 10/-(ten shillings) which she was receiving when she came to this country before English decimalisation. In point of fact the cost of processing this payment absorbed the amount completely.How tragic that this hero generation, who struggled through the great depression and gave their all for Britain in the second world war, should be so monstrously neglected and abandoned in their declining years. How shameful that their cries for help fall on the deaf ears or stony hearts of a Government in London who can readily find £4 million to finance the legal fees of an Iraqi millionaire business man, yet claim they cannot find £230 million to pay our pensioners the pension to which they contributed throughout their working lives.
My hon. Friend the Minister will no doubt tell us what an astronomical sum it is—but is it really? It represents less than 1 per cent. of the £36.6 billion by which the Government have so fecklessly increased social security expenditure since 1979 in real terms. It is not even one third of 1 per cent. of the overall DSS budget of £87.1 billion.
I am grateful to Back-Bench colleagues on both sides of the House for the powerful support that they have lent to my all-party early-day motion No.205 entitled "Inequality of treatment of British state pensioners living abroad." So far, 282 colleagues from all quarters of the House have signified their support, representing fully half of all Members entitled to sign EDMs.
Furthermore, the Government have been forced to admit that they have overestimated the cost of paying full state pensions to those living abroad by more than £100 million a year. As recently as 1991, the Government put the cost at £337 million. That was revised downwards in 1992 to £275 million and this year to a mere £230 million—almost one third less than the 1991 figure, despite a growth of 8 per cent. in the number of pensioners living in those countries and increases in the value of pensions of 6 per cent. What is going on? What can be the explanation for that? What confidence can we have that the latest figures are accurate?
I am bound to say that I have no sympathy whatever for the suggestion that the Government should wriggle out of their obligations to these, the most deserving of all our pensioners. A month ago today, on the beaches of Normandy, I saw how deeply moved was our Prime Minister as more than 7,000 British Normandy veterans marched past Her Majesty on the sands of Arromanches. The British expatriate pensioners that this Government are so shamefully seeking to disown are of the very same hero generation.
I call upon the Government tonight and specifically upon our Prime Minister, in the name both of moral obligation and natural justice, to end that shameful discrimination between British pensioners dependent on where they chose to retire, and to bring the United Kingdom into line with such countries as France and Italy, 429 where state pensions, including increases, are paid regardless of the country of residence and without the necessity of any reciprocal social security agreement.
Would it not be a fine thing in this year, when we celebrate the 50th anniversary of D-day, to remember those who have borne the heat and burden of the day and acquit the debt of honour that we owe them by unfreezing all those frozen pensions?
§ 11.8 pm
§ The Parliamentary Under-Secretary of State for Social Security (Mr. William Hague)
I thank my hon. Friend the Member for Davyhulme (Mr. Churchill) for raising this matter on the Adjournment. I thank my hon. Friend the Member for Castle Point (Dr. Spink), the hon. Member for Thurrock (Mr. Mackinlay) and our Whip, my hon. Friend the Member for Harrow, West (Mr. Hughes) for being here.
My hon. Friend the Member for Davyhulme made his case very powerfully, as we would expect. As he knows, this issue has been discussed for many years and the House is well aware of his commitment to it. He has written often to my right hon. Friends the Prime Minister and the Secretary of State for Social Security and has tabled a number of questions and an early-day motion. I am also aware of the strength of feeling among many British pensioners overseas.
§ Dr. Robert Spink (Castle Point)
My hon. Friend the Minister mentioned the early-day motion; he will know that I do not sign early-day motions, although I support my hon. Friend the Member for Davyhulme (Mr. Churchill). Does the Minister agree that the undertakings given by the Ministries of Pensions and of National Insurance, which were outlined so eloquently by my hon. Friend the Member for Davyhulme, should be honoured?
§ Mr. Hague
I note that my hon. Friend the Member for Castle Point registers his support for what my hon. Friend the Member for Davyhulme said, notwithstanding his reluctance to sign early-day motions. I shall be dealing with precisely the matter that he raised.
British pensions are paid anywhere in the world and we pay nearly 700,000 pensioners in more than 150 countries, but, as my hon. Friend the Member for Davyhulme said, more than half of them do not receive annual cost of living increases. That means that retired people who go to live in certain countries abroad will continue to receive their pensions at the rate payable when they left this country. Those who emigrated when younger get a pension payable at the rate in force when they reach retirement age. The expression that is commonly used, and which was used by my hon. Friend, is that pensions are frozen.
This policy has been followed by successive Governments ever since regulations were made in 1955, although my hon. Friend drew attention to advice given to individuals before those regulations—advice which clearly could not anticipate those regulations.
§ Mr. Hague
If my hon. Friend has a particular case in mind, I will of course consider it. The 1955 regulations, which provided for pensions to be paid abroad, did not provide for increases to be paid on top.
430 The principal difficulty in extending the payment of pension upratings abroad is the cost, as my hon. Friend anticipated. This year, the Government will spend some £800 million on pension payments to beneficiaries who live outside the United Kingdom. I know that my hon. Friend is only too well aware of the huge size of the social security budget and the need to ensure that it is sustainable and affordable in the future.
If all pensioners overseas were to be paid at the same level as pensioners in this country, that figure of £800 million would rise to about £1,030 million—an increase of nearly 30 per cent. or £230 million. That figure is no longer an estimate, in that it is based on the actual count of 85 per cent. of the pensioners overseas and what their entitlements would be. It is a huge amount of money and would have to be found from the existing social security budget paid to people who are resident in this country. The House knows that there are many worthwhile claims on that budget; we cannot meet them all at once.
The only circumstances in which overseas pensions are not frozen are where the pensioner is in the European Economic Area or where we have a reciprocal agreement with another country which provides specifically for upratings. We have some 30 such agreements, including those with member states of the European Economic Area, although most of the latter were in existence before our accession to the European Community. The costs of making any further agreements are a very important consideration, as I am sure my hon. Friend will recognise.
More than 80 per cent. of those pensioners who do not receive upratings live in Australia, Canada, New Zealand and South Africa. We have reciprocal agreements with Australia, Canada and New Zealand, but they do not provide for upratings. I know that my hon. Friend is particularly concerned with the situation of pensioners in these countries of the old Commonwealth, and he drew particular attention to them tonight. I should point out that to unfreeze pensions completely in those four countries alone would cost about £200 million, an increase of 25 per cent. on current expenditure on overseas pensions.
To pay future cost of living increases in these countries alone would cost some £10 million in 1994–95, rising each year until all pensioners in those countries were paid at the full United Kingdom rates, and eventually reaching the same cost of £200 million.
§ Mr. Churchill
Surely my hon. Friend appreciates that those are people who have contributed to their pension throughout their working lives. What right have this Government, or any Government, to cheat those people of more than £50 a week of the pension to which they have contributed?
§ Mr. Hague
I recognise my hon. Friend's point about the payment of national insurance contributions, and I shall talk about that in a couple of moments.
There are 160,000 retirement and widow pensioners in Australia who receive their United Kingdom pensions at frozen rates. Some 110,000 of them receive the means-tested Australian age pension. Pensioners with other resources, such as an occupational pension, will not qualify for the Australian age pension because of their income. Many of those who do qualify will have been able to use the reciprocal agreement which helps them satisfy 431 the Australian test of residence there. The United Kingdom pension is deducted from the Australian age pension and the balance is paid by the Australian Government.
To bring pensions paid in Australia up to the level of those in the United Kingdom would cost £105 million a year. From time to time, the Australian Government raise the issue with the United Kingdom Government, but we have had to make it clear that the cost would be prohibitive.
There are about 30,000 United Kingdom pensioners in New Zealand. If upratings were to be paid in Australia, New Zealand would undoubtedly seek equal treatment. Again, the stumbling block would be cost—some £20 million a year. We also have many pensioners in Canada—nearly 120,000. To increase all pensions in Canada to full United Kingdom rates would cost some £60 million a year.
As my hon. Friend the Member for Davyhulme said, pensioners overseas have paid national insurance contributions. However, the money that an individual contributes to the national insurance fund is not, and never has been, earmarked for that person. Ever since it was established, the national insurance scheme has always worked on a pay-as-you-go basis. This year's contributions go to this year's pensioners. It has to be remembered that paying contributions does not give, and never has given, automatic entitlement to benefits.
The agreement between an individual and the state is that payment of contributions will give entitlement to benefit subject to certain conditions. For example, minimum pensionable age is currently set at 65 for men and 60 for women. Another condition is that retirement pension upratings are not generally payable abroad. That has been the position since 1955, and it has never been in any doubt under successive Governments of either party.
People who inquire about their pension position if they go to live overseas are informed of the policy. Public information about pension entitlements makes the position clear. For instance the current leaflet, "Social Security Abroad", explains that, for retirement pension, widow's pension and widowed mother's allowance, increases are not paid abroad unless very limited conditions are met.
The logic is that our social security system has been designed to provide for people in this country, and that annual upratings ensure that pensions are protected against price increases here. It is fair to point out that, since 1955, people affected would have known, or could have found out, that that would be the position—
§ Mr. Hague
—although I sympathise with the people whose cases have been described.
I shall now cover various other arguments that my hon. Friend has advanced. One is that the cost of pensions 432 uprating should be offset by the saving to public services here—in particular to the national health service, which pensioners overseas do not use. I understand the argument, but we do not know what calls those people as individuals would have made on the NHS. Moreover, many went abroad long before reaching pension age, so, for many years, they did not contribute to health service costs. Also, of course, the pensioners concerned have gone abroad anyway, so to pay them unfrozen pensions would still be a major extra cost.
I assure my hon. Friend—although no doubt he is all too well aware of this already—that the issue is frequently brought to the Government's attention. We are familiar with the arguments in favour of a change of policy, and we are sympathetic, but we cannot disregard the huge cost involved.
Let me emphasise that we pay out more than £800 million a year to some 700,000 pensioners overseas, of whom about 300,000 get fully uprated pensions. However much we might like to do more, social security spending is running at more than £80 billion a year. Social security is the Government's largest expenditure programme. In the current year, it accounts for 28 per cent. of planned public expenditure and nearly 13 per cent. of the gross domestic product.
The Government are committed to an efficient, effective and affordable social security system that is appropriate to modern needs and protects the most vulnerable, but we have to ensure that spending on social security does not outstrip the nation's ability to pay for it.
My hon. Friend is a keen advocate of carefully controlling social security spending and he will know that my Department is conducting a fundamental review of spending. My right hon. Friend the Secretary of State has announced some specific proposals for reform over past years. Incapacity benefit, our vigorous efforts to combat fraud and the gradual equalisation of a state pension age at 65 are all designed to help restrain the growth in cost.
In the interests of restraining the growth in cost, and of ensuring that the social security system is affordable in future, the control of social security spending must be tight. It is always easy to say that desirable items of spending would represent only a small addition to the budget, but if every idea was regarded in that way and accepted on that basis, the social security budget would soon be vastly greater.
Control of spending must be tight. Payments to people resident overseas cannot be an exception to that. In such a climate, I must tell my hon. Friend that I am afraid that I cannot hold out any prospect of our being able to increase our expenditure by adding to spending on pensions overseas.
§ Question put and agreed to.
§ Adjourned accordingly at twenty minutes past Eleven o'clock