HC Deb 04 July 1995 vol 263 cc267-81 `(1) The Secretary of State shall consult with representatives of other countries where persons are resident who are entitled to retirement pensions under Part II or Part III of the Social Security Contributions and Benefits Act 1992 but whose pensions have not been uprated as they would have been had they been resident in Great Britain ("affected pensioners"). (2) Consultation under subsection (1) shall be for the purpose of ascertaining what problems are encountered by affected pensioners, and by what means such problems may be ameliorated. (3) The Secretary of State shall lay before both Houses of Parliament a report on the outcome of his consultations within one year of the passing of this Act.'.—[Mr. Alfred Morris.]

Brought up, and read the First time.

Mr. Alfred Morris

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

Mr. Deputy Speaker (Mr. Michael Morris)

With this, it will be convenient to discuss the following: New clause 9—Entitlement to pension uprating (residence outside Great Britain)`—(1)The Social Security Contributions and Benefits Act 1992 shall be amended as follows. (2) In section 119 (Persons outside Great Britain), at the beginning there shall be inserted "Subject to section 119A". (3) After section 119, there shall be inserted — "Entitlement to pension uprating (residence outside Great Britain) 9A. Notwithstanding the provisions of any other enactment, no person who is entitled to a retirement pension under Part II or III of this Act shall be disqualified by reason of residence outside Great Britain from any benefit under this Act, or any uprating of any such benefit, if he would have been entitled to such benefit or such uprating if he had instead been resident in Great Britain.".'. New clause 10—Entitlement to pension uprating (residence outside Great Britain) (phased introduction) (No. 2)—(1) The Social Security Contributions and Benefits Act 1992 shall be amended as follows. (2) In section 119 (Persons outside Great Britain), at the beginning there shall be inserted "Subject to section 119A". (3) After section 119, there shall be inserted — "Entitlement to pension uprating (residence outside Great Britain) (phased introduction) 119A—(1) This section applies to any person who is entitled to a retirement pension under Part II or III of this Act and who is disqualified by reason of residence outside Great Britain from a retirement pension under this Act, or any uprating of any such pension (an 'affected pensioner'). (2) There shall be paid to any affected pensioner any uprating of a retirement pension which is payable to any other pensioner under this Act at any date after the passing of the Pensions Act 1995. (3) The Secretary of State shall by regulations made by statutory instrument make provision for a scheme which shall ensure that, within the period of five years after the passing of the Pensions Act 1995, no affected pensioner shall receive a retirement pension of any lesser amount than he would have received if he had been resident in Great Britain throughout the period from which he first became eligible for a retirement pension. (4) So far as practicable, a scheme under subsection (3) above shall ensure that an affected pensioner's retirement pension is increased by an equal amount in each year of the five year period referred to in that subsection.".'. New clause 17—Pension uprating (Australia and Canada)`—(1) So far as it applies to retirement pensions, Regulation 5 of the Social Security Benefits (Persons Abroad) Regulations 1975 (or any regulation replacing that regulation) shall cease to apply to persons resident in Canada or Australia. (2) This section shall come into force two years after the passing of this Act.'.

Mr. Morris

Whatever differences of view there may be about this group of new clauses, we must surely all agree that it does nothing for the reputation of this country that state pensions paid to our compatriots who today live in Australia, Canada and other Commonwealth countries are so low that they put those who receive them below the poverty line in the countries where they have gone to live.

The problem of frozen British pensions is a long-standing issue that ought now urgently to be settled and it is in the interests of all the countries involved—including the United Kingdom—to reach a solution very soon.

The preferred solution of those of us who have taken part in drafting and proposing the amendments to the Bill—not least the hon. Member for Davyhulme (Mr. Churchill)—is for the UK to bring all pensions that it currently pays up to the level that would have been reached if those pensions had been indexed year on year, in line with past annual increases granted to British pensioners in the UK. That solution—sometimes referred to as full unfreezing and which certainly has my support—would be the most equitable possible. It would ensure that British pensioners in Australia, Canada and elsewhere receive the level of benefits to which they or their spouses contributed during their working years in the United Kingdom. What could be fairer?

I realise that the cost of full unfreezing, estimated at £168 million in the first year for British pensioners in Australia and Canada alone, would be substantial. However, the Australian and Canadian Governments are wholly prepared to consider other options, the costs of which to the UK would be significantly less. With good will and co-operation, an option can be found that is acceptable to pensioners living abroad and patently affordable by the UK.

One such option receiving serious consideration by the Australian and Canadian Governments is to forgo any cost of living increases granted prior to the entry into force of any unfreezing arrangement, but to pay all increases granted after such an arrangement comes into force. That approach, sometimes referred to as partial unfreezing, was the basis for the UK's unfreezing arrangement with the United States of America and other countries. Its first-year cost would be £26 million for British pensioners in Australia and Canada.

There may be other options. The identification and analysis of viable options for unfreezing are complex tasks that will require co-operation between UK social security officials and their counterparts in the other Commonwealth countries. They could be sought within the framework of bilateral social security arrangements already in place.

The core of what the Australian and Canadian Governments are proposing to end the current impasse is that the UK should agree to hold meaningful bilateral talks, at the official level, with each of the countries in which frozen pensions are paid to identify and analyse options for unfreezing, with the overall goal of finding an option that is acceptable to all the countries concerned. I believe there should be an agreed time frame for these talks, long enough to allow officials to do the work required of them and to seek guidance from Ministers, but not so long as to delay a reasonably early conclusion.

I repeat, and with emphasis, that the preferred solution is full unfreezing, or one as near as possible to that aim. At the very least, we should agree in this debate to what new clause 7 proposes. That would demonstrate a commitment by the British Government, equal to that of other Governments, to finding a solution to the unfreezing problem. It would position any possible solution within the framework of the existing bilateral social security arrangements between the UK and other countries. It would provide an opportunity for Australian Ministers to show the British Government that, among other wrong assumptions, indexation would not be swallowed up by the Treasuries because 92 per cent. of pensioners from Britain have been in Australia for over 10 years and deduction of UK pension from the rate of Australian pension ceases after 10 years. The new clause would also avert a total breakdown in intergovernmental talks while there is still time to find a mutually acceptable solution to a problem that stains this country's reputation and that will not go away if we fail to reach agreement tonight. Time is short if we are to resolve an issue that in the view of many of us is one that involves principle and honour. I implore the Minister not to miss the opportunity that the new clauses present to reach a just settlement.

11.45 pm
Mr. Winston Churchill (Davyhulme)

The hour is late and I shall be brief.

As we stand between the 50th anniversaries of VE and VJ days, the nation's thoughts are inevitably with the heroic generation who saved the world from Hitler. There would be no more fitting moment to rectify a clear injustice that affects 375,000 British expatriate pensioners who, unlike those who retired to an EU country or the United States, find that they receive no uprating to the pension to which they have contributed. These frozen pensioners live overwhelmingly in the old dominions of Canada, Australia, South Africa and New Zealand. Many are facing severe hardship, especially those in South Africa where there is no social security net.

Time permits me to cite but one example of a wartime Royal Navy commander, who two years ago wrote to me from Nordhoek in South Africa. I shall quote only a paragraph of his letter. It reads: My wife and I have lived here since 1951. I am now 85 and she is 77. We receive £6.75 for self and £4.15 per 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 Pensions and National Insurance dated 12 July 1963 I quote in part: The Class Three contributions which you are paying maintain the title to retirement pension, death grant, widow's benefit and maternity benefit, all of which are payable abroad subject to territorial currency restrictions. Those were the only restrictions suggested.

That gallant gentleman has indisputably been misled by a Government Department. In consequence, he finds himself deprived of more than £50 a week of the pension to which he contributed throughout his working life. The Government have never sought to dispute the injustice that is caused to expatriate British pensioners, but plead that the cost of £235 million cannot be afforded.

We are talking of pensioners who contributed throughout their working lives to their national insurance pension. They find it hard to understand how a Government who have found it possible to increase social security expenditure in real terms since 1979 by a staggering £39, 800 million, providing billions of pounds of benefit to unmarried teenage mothers and others who have never contributed a penny to the national insurance scheme, cannot afford £235 million, barely one quarter of 1 per cent. of the social security budget, to rectify a fundamental injustice.

Both new clauses 9 and 10 would end the discrimination that I have outlined and remove any geographical limitation on the payment of the annual uprating to state retirement pensioners. New clause 9 would do so outright; new clause 10 would phase in the uprating over five years. I intend to press new clause 10, bearing in mind that it would reduce the first-year cost to £62 million. It would not increase the cost to the full £235 million until the next millennium.

I am most grateful to my 250 colleagues from all parties who have signed my early-day motion 279 in support of the campaign. I look forward to them registering their support in the Lobby. I hope that my right hon. and hon. Friends will signify their acceptance of a reasonable proposal.

Mr. Kirkwood

I concur entirely with the sentiments expressed by hon. Members on this group of new clauses and I shall refrain from rehearsing the long-established arguments about the social justice and equity of the case. I want to put a proposition to the Government that is drawn from the speech of the right hon. Member for Manchester, Wythenshawe (Mr. Morris).

In recent conversations with representatives of the Canadian and Australian Governments, I was struck by the extent to which they are exasperated by the Government's refusal even to discuss the issues surrounding the problem. They believe that if officials were given a bona fide mandate to get round the table and discuss the principles involved, ways could be found, in the best diplomatic fashion, to accommodate the differences.

As the right hon. Member for Wythenshawe rightly said, those representatives are looking for a full unfreezing, but they are prepared to settle for less and to try to establish a bona fide compromise, which they believe is achievable. It is causing great concern to them and to me. It should also concern the House because those two countries are faithful allies and stout friends of the United Kingdom in all other international forums and discussions and if they perceive the issue as an outstanding irritant, we should give it careful attention.

If the Minister is looking for evidence, I am advised that, when the Canadian Prime Minister was in London to participate in the recent victory celebrations, he took the opportunity, in a short interview with the Prime Minister, to raise the issue. If the Prime Minister of Canada considers it important and if it is the only outstanding matter between Britain and Canada, the House of Commons is bound to pay attention to that fact alone, leaving aside the merits of the case.

I have put my name to a new clause on the amendment paper this evening. If the Minister is prepared to tell the House in good faith that discussions will be entered into and that officials will be instructed to talk through this subject with the Australian and Canadian Governments to deal with the principle, I will accept that. However, it will not be enough for the Government to produce the same old tired and inadequate justifications about money.

Full unfreezing would cost a significant amount. I am not arguing for that, but if the Government stick to the brief that we have heard on previous occasions and in previous debates, I fear that there will be a mood to divide the House and put the question to hon. Members in the Division Lobby. This evening, the Minister need say only that talks will commence. That is all that would be necessary to satisfy me that some progress had been made on a very important issue.

Dr. Marek

I rise briefly to support the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) and my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who moved new clause 7.

New clause 7 does not involve the expenditure of any money whatsoever; it simply asks that the Government undertake investigations to identify the problems and find out whether anything can be done.

My name also appears on new clauses 9 and 10, and I too believe that something should be done. I realise that the Government do not want to spend any money because they want to cut taxes in the Chancellor's November Budget. But even if they do not want to spend money on frozen pensions at this stage, I hope that, as all hon. Members who have spoken have urged, we can at least persuade them to investigate the problems and then to lay a report before Parliament.

I do not want to rehearse all the well-known arguments, but I must emphasise the fact that pensioners have contributed to their pensions. They may have contributed not for 40 years of their working life but for only 20 years, but that would still mean that they had contributed enough for half the pension. It will be robbery by the Government and theft by Parliament if pensions continue to be frozen, because they lose their value with inflation.

I know that the Minister is an honest person with integrity, and I appeal to him to read new clause 7. It does not commit the Government to spending a single penny, but simply tells them to investigate, to find out whether there is a problem and to come back with some answers, because the economy may be better in a year's time. I also hope that the official Opposition will support the new clause, because it does not entail the use of a single penny, and I look forward to receiving a bit of support from my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar).

Mr. Dewar

I hear that invitation, Mr. Deputy Speaker.

I recognise that there are strong feelings concerning this group of amendments, and widespread concern extending to hon. Members in all parties. I do not under-estimate that for a moment, although I sometimes think that signatures can be appended to early-day motions somewhat carelessly, so the level of commitment may not be as great as the hon. Member for Davyhulme (Mr. Churchill) would like it to be. But there we are; we live in a real world, and we shall see.

The facts have been set out, and I congratulate the Select Committee on Social Security, whose Chairman, my hon. Friend the Member for Birkenhead (Mr. Field), is here, on the useful memorandum that it produced. It came to no conclusions, but set out extremely usefully all the facts and figures, and the history of this long-standing affair.

Mr. Jeremy Corbyn (Islington, North)

I too am a member of the Select Committee. We have come to no conclusions because we have not yet discussed the matter. We wanted to publish the memorandum so that the whole House, and everybody else, could understand the basis on which the curious calculation, whereby some pensioners get an uprating and many do not, is made. It seems grossly unfair, and I hope that, when the Select Committee considers the matter, we shall recommend universal uprating of all the pensions, wherever the people happen to live, in line with the amendments tabled.

Mr. Dewar

I would expect nothing else of my hon. Friend. There was no hint of criticism in what I said—indeed, there was the opposite. However, I did not realise that the Select Committee's work was the preliminary to a full investigation; I thought that it was an attempt to inform debate. That is not an ignoble objective of Select Committees—

Mr. Corbyn

We do it all the time.

Mr. Dewar

As a former Select Committee member, I am a great defender of the system. Among other things, Select Committees provide information that is not otherwise easily available to Members of Parliament, and certainly not to the public. A current Select Committee investigation is one of the most useful quarries for arguments and information, and I would never under-estimate or undervalue that aspect of their role.

Like many other hon. Members, I have been lobbied with great courtesy by letter from almost every country that I can think of, including several that I had not thought of before. Like the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), I have seen the high commissioners for Australia and Canada, who, good diplomats that they are, put their case with great skill.

I have some sympathy with the point that was made by my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris). I can see that there is something to be said for talking to friends, even if it is not, in the view of the Minister, likely to be productive in the short term. Who knows, the Minister might get a surprise. It could reduce some of the irritation that might be building up, although I have to record that the high commissioners were far too diplomatic to indicate any irritation to me, although Liberal antennae may have discovered it.

Mr. Kirkwood

There is nothing wrong with my political antennae.

Mr. Dewar

That should not necessarily be taken as any sort of comment on the insect-like propensities of the Liberal party.

There is a case for talking—this is where I come to the point made by my hon. Friend the Member for Wrexham (Dr. Marek), and his request—but it would be rather odd to put it in the form of a new clause in the Bill. I do not think that future generations reading the Bill would find it a likely interpolation into statute, but it would be useful to try to get a positive response from Ministers on the need to talk.

12 midnight

Mr. David Nicholson (Taunton)

Does the hon. Gentleman agree—I am one who declined to sign the early-day motion last year because I appreciated the public expenditure consequences—that there is an anomaly here? I understand from written questions that my hon. Friend the Minister has answered that the previous Labour Government made agreements with Spain and Portugal, countries with which this country does not have any particular historic tradition, to uprate pensions, whereas pensioners in the old Commonwealth countries—the British countries, as my hon. Friend the Member for Davyhulme (Mr. Churchill) puts it—do not have that benefit. Is there not an anomaly between what happens in foreign countries, where British pensioners have the uprating, and in British countries—Commonwealth countries—where they do not?

Mr. Dewar

Spain is now in the European Union and so operates in a rather different context, and different considerations apply.

There is a case for looking sympathetically at the uprating problem in the best of all possible worlds. The problem—I have explained it as honestly as I can in probably hundreds of letters—is that it is a matter of competing claims and priorities. The Government have to take decisions on that. Another Government would have to take those decisions when the time came. I have had to say to people, who have written to me with great courtesy, that I cannot give an undertaking that the matter would be a top priority when, as would happen with every other Government, there would almost certainly be only limited room for manoeuvre.

People would have to compete for the £235 million, which is, I understand, full uprating but no payment of arrears. They would have to compete against pensioners who live in this country and their special needs, poor pensioners, pensioners with special difficulties, carers and the disabled—a range of others.

The Labour party—and, no doubt, other parties—keeps its priorities under review and does not regard them as set in stone. I have not been able to promise that uprating would be a top priority for a Labour Government in an initial period in power. Given that inhibition, it would be inconsistent of me to vote for it on this occasion. I do not say that to belittle in any way the genuineness of feeling or the fact that there is a case to answer, but I am afraid that I have had to take a prudent line—the hon. Member for Taunton (Mr. Nicholson) has virtually accepted that it is a prudent line—and it must be followed through consistently on this occasion. I intend to do that tonight.

Mr. Arbuthnot

I acknowledge that many overseas pensioners feel a sense of injustice that their United Kingdom pensions have not been uprated, but I do not accept that, in the present circumstances, the Government are under an obligation to respond in the ways that have been suggested tonight. Our argument, which is well known, is that the full cost of unfreezing the pensions would be £235 million a year. There are options that cost less to start with but which nevertheless build up to that figure, or to lesser but still substantial sums. The right hon. Member for Manchester, Wythenshawe (Mr. Morris) mentioned one such option.

The point for the House to decide is simply this. If we could find nearly a quarter of a billion pounds extra for social security, is this what the House would want to spend it on? We are talking about people who have left this country knowing that their pensions would not be uprated. The policy is not new; it has been in place since 1955.

Mr. Churchill

My hon. Friend cannot have been listening when I mentioned the case of the Royal Navy commander in South Africa. He was advised by the Ministry of Pensions and National Insurance that his pension rights would be unaffected—and that is by no means the only such instance that I have encountered. Many other people have been given the same advice, and they were clearly lied to.

Mr. Arbuthnot

I have read the advice that was given. If I remember correctly—I think that I read it some six months ago—the advice was given in an entirely different context from that which is suggested.

Mr. Corbyn

The Minister's argument is unsustainable. As the hon. Member for Davyhulme (Mr. Churchill) said, advice has been given to a number of people who believed that their pensions would be uprated wherever they happened to live. The Minister also seems to be skating over the fact that the state pension is a contributory pension. Surely it is just for it to be paid regardless of where the recipient happens to live, irrespective of any other factor.

Mr. Arbuthnot

The United Kingdom national insurance scheme is financed on a pay-as-you-go basis. Pensions that are being paid today are financed by national insurance contributions today. It should be remembered that paying contributions gives no automatic entitlement to any particular benefits. The agreement between an individual and the state is that payment of contributions will give entitlement to benefits under certain conditions: for example, pensions are payable, but only when the recipient reaches the age of 65, in the case of men, or 60, in the case of women. Moreover, pensions are not generally uprated outside the United Kingdom. Although I understand the hon. Gentleman's point, the conditions that apply to the benefits do not give rise to the rights that he suggests.

Rev. Martin Smyth

Will the Minister give way?

Mr. Arbuthnot

I will, but I had better get on with my speech after that.

Rev. Martin Smyth

We are all aware that we shall not receive pensions until we are 65—or 60, in the case of women. As far as I know, however, no one has ever been told that they will not receive a pension if they leave the country. Earlier, in answer to some of our questions, the Government blamed the Canadians for not moving forward, but at the time they were discussing relations with the various provinces of Canada. I have raised the issue before, but I have a personal interest now: my sister migrated, and was not aware of the rule until she reached Australia.

Mr. Arbuthnot

I am a little surprised that the hon. Gentleman's sister was not aware of it. Advice is available from my Department, and has been given since 1955. A clear warning is given in a leaflet called "NI 38: Social Security Abroad". If there are individual cases in which the wrong advice has been given, I shall of course look into them.

Mr. Churchill

I mentioned one.

Mr. Arbuthnot

My hon. Friend suggests that he is acquainted with one such case, and I should like to look into it, although I may have done so already.

At home, we are having to take steps to contain the cost of social security expenditure, as with all public expenditure. There is no extra, or spare, £250 million to meet the bill, so we would have to find the money from within the existing social security budget. Hon. Members who suggest that it would be easy to find it should suggest where we should cut at home to pay extra money to people abroad.

New clause 7 requires the Secretary of State to consult representatives of countries where United Kingdom pensioners who do not receive annual upratings live to find out what their problems are and how they might be ameliorated. It also requires him to report to Parliament within no more than a year. More than 400,000 pensioners do not receive pension increases. They live in 150 countries worldwide. No doubt their problems are many and diverse, and amelioration of those problems would lie in many different directions outside the power of any Government.

The circumstances of pensioners who do not receive upratings are extremely varied. They may have occupational pensions or other income. Many receive pensions from their country of residence, and not all would be better off if their UK pensions were uprated, because an increase in the UK pension could simply reduce their pension entitlement from the country in which they live.

We have no reason to think that representatives of other countries would wish to enter consultations with the Secretary of State on the basis that the new clause envisages. I believe that the Australian Government have been canvassing an approach similar to that in the new clause, but it is not clear that the other 149 Governments involved would take the same view. After all, they may not know what problems, financial or otherwise, are experienced by the pensioners concerned, and they would need to carry out detailed personal inquiries.

Mr. Frank Field

Will not the Minister tell the House that, in fact, most of these pensioners live in only a few countries? I am puzzled. Do the Government not want to undertake the inquiry because they think that they will learn nothing, or because they are fearful of what they might learn?

Mr. Arbuthnot

Neither. The point about undertaking talks is that there would be a commonality of objective and there is no such commonality of objective between the countries in which pensions are not uprated and the objectives of the British Government that relate particularly to the restraint of our social security expenditure.

New clause 9 takes a different approach to the same issue. Its intention, which must be gleaned from it, is to require the Government to pay retirement pension increases that arise after the Bill comes into force. It does not seek to restore the effects of upratings that have already been forgone, but it could have a far wider effect. It requires that no person entitled to a retirement pension should be disqualified by reason of residence outside Great Britain from any benefit under the Social Security Contributions and Benefits Act 1992. It would overturn the law that prevents payment of benefits such as income support and attendance allowance outside Great Britain. It could therefore make available to UK pensioners anywhere in the world any benefit that they could receive if they were living in Great Britain. That would entail vast cost.

Mr. Churchill

New clause 9 clearly refers specifically to retirement pensions. It refers to anyone entitled to a retirement pension under part II or III of the Act".

Mr. Arbuthnot

That is right, but retirement pensioners would then be entitled to attendance allowance and to income support wherever they lived in the world, and that could entail vast cost. Let us assume, however, that the effect of the new clause were to require the payment only of retirement pension, as my hon. Friend suggests. The cost would still be great. It would be about £16 million in the first year, but that would increase steadily as people who retired or went to live outside Britain had their pensions fully uprated from the outset. The full unfreezing cost, which would be £235 million a year at 1994 rates of benefit, would be reached as people whose pensions were partially unfrozen were replaced by those whose pensions had never been frozen.

My hon. Friend may say that that is spending in the future, but spending in the future is no less spending; it is simply spending that we would impose on our grandchildren rather than ourselves.

12.15 am
Dr. Marek

The Minister speaks of spending. It is not actually spending; we are talking of contributions that people have paid for part of their working lives. If the Government have the money, the Government can invest it and can pay the increased contributions out of the investment. It is not actually spending by Government.

Mr. Arbuthnot

That is a delightful but, I suggest, misguided view of economics. National insurance contributions generate a right to pensions under certain conditions, which are set down in the rules that we have at the moment.

New clause 10 would require the Government to pay future increases of retirement pension abroad and to make good, by instalments, upratings forgone in the past. The £235 million cost of fully unfreezing pensions would thus be reached over five years.

New clause 17 is also technically defective. The Secretary of State already has the power to amend regulations in the way proposed, so primary legislation is not needed. However, the intention of new clause 17 is clear and rather eccentric. It would give United Kingdom pensioners in Australia and Canada the upratings that take effect from two years after the Bill becomes law. About 80 per cent. of pensioners who do not receive annual upratings live in Australia or Canada. Even if upratings arising only in the future were paid in those two countries, they would cost about £11 million in the first year, but that cost would increase steadily to £200 million.

That is not the only factor. Many UK pensioners in Australia and Canada also qualify for pensions from those countries, so the UK pension is deducted, in whole or in part, from that pension. That means that, if the UK pensions were to be uprated in Australia, not all the additional expenditure would go to the pensioners. A proportion would go straight to the Australian exchequer.

Mr. Kirkwood

That is not true if they have been there for more than 10 years.

Mr. Arbuthnot

It is not true for everyone. I do not know the precise percentage, but it is not true for everyone. However, a proportion would go straight to the Australian exchequer.

The point of principle on new clause 17 brings me to the reason that I suggested that it was rather eccentric. It is blatantly discriminatory. It seeks to extend the payment of increases to pensioners in Australia and Canada but not to pensioners in the other 148 countries involved. Quite what the pensioners of New Zealand and the eastern Caribbean states have done to irritate the Liberal Democrats is beyond me, but I do not believe that it would be right to pursue that change to the law.

Mr. Nicholas Winterton (Macclesfield)

My hon. Friend obviously seeks to argue a difficult case with a House that, overwhelmingly, is sympathetic to the propositions made in the new clauses. I believe that he is doing quite a good job, but I do not believe that the proposal made by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is unreasonable.

I ask my hon. Friend the Minister, would it not help the House if there were an inquiry? Even if it takes two years, it would be very helpful in advising the House of the precise way in which pensioners overseas are affected. Then, when the matter is debated again, the House might undertake the debate from a position of knowledge of the way in which our pensioners overseas are faring and whether they deserve the sympathy that I believe that the House seeks to give them tonight.

Mr. Arbuthnot

The problem is that the inquiry and the sort of meetings and negotiations that my hon. Friend is suggesting would be based on a false promise, because we do not feel that it would be right at this stage to reverse Government policy. Now is not the time to spend £235 million on this matter. We pay out more than £900 million a year to more than 700, 000 pensioners overseas. To increase that would be to fly in the face of the Government's commitment to contain the cost of social security now and in the future. I therefore urge the House to reject the new clause.

Mr. Alfred Morris

If I may, I shall reply briefly. I listened very carefully to what the Minister said, but I still find it difficult to determine where he stands. He was critical of what new clause 7 says about the requirement to report within a year. Is he asking for a period of two years, or three years? He did not appear to argue in principle against the need for bilateral discussions and a report to the House, but said over and over again that the cost of the new clauses would be a quarter of a billion pounds.

That is not fair to the high commissioners of Australia and Canada. They have made it very clear, as I did in my opening speech, that they are seriously prepared to consider other, less costly, options. Thus, simply to repeat over and over again the figure of a quarter of a billion pounds is less than fair to high commissioners whose reputations are most highly respected in all parts of the House.

New clause 7 would not cost a penny and I see it as sheer obscurantism to say that we should not try to find out more. If countries do not want to consult, we would obviously not try to force them to consult, but there are countries that do want to consult. Therefore, I shall press the new clause.

Mr. Corbyn

I want briefly to put on record the fact that, like many hon. Members, I have had many letters from all over the world, often from desperate people. I think that the Minister's reply to the reasonable proposal is wholly inadequate.

It cannot be right that the Government understand that there is a problem, having been forced to publish a document about it, but then say that they do not want to undertake an inquiry because they do not want to know the results of that inquiry or exactly what the problem was in the first place. Inadequately uprated as the current state pension is, surely the principle that has to be borne in mind is that it is a contributory scheme. It may be pay-as-you-go, but the principle is that one pays into the national insurance fund during one's working life in the reasonable expectation of getting a pension at the end of it.

If one happens to go and live in another country for any number of reasons—family commitments, for example—one should not be penalised. The basic principle, which has been strongly supported by more than 280 Members of Parliament, should bend the Government a little further than was suggested by the Minister's obscure, waffling reply.

Question put, That the clause be read a Second time:—

The House divided: Ayes 39, Noes 179.

Division No. 196] [12.22 am
Ashdown, Rt Hon Paddy Lynne, Ms Liz
Barnes, Harry Mackinlay, Andrew
Beggs, Roy Marek, DrJohn
Bruce, Malcolm (Gordon) Marshall, Jim (Leicester, S)
Carlile, Alexander (Montgomery) Michie, Mrs Ray (Argyll & Bute)
Chidgey, David Morris, Rt Hon Alfred (Wy'nshawe)
Cohen, Harry Parry, Robert
Corbyn, Jeremy Pike, Peter L
Cunningham, Roseanna Rendel, David
Davis, Terry (B'ham, H'dge H'l) Ross, William (E Londonderry)
Denham, John Salmond, Alex
Ewing, Mrs Margaret Skinner, Dennis
Field, Frank (Birkenhead) Smyth, The Reverend Martin
Foster, Don (Bath) Taylor, Matthew (Truro)
Wallace, James
Graham, Thomas Welsh, Andrew
Harvey, Nick Wise, Audrey
Hill, Keith (Streatham) Wray, Jimmy
Hughes, Simon (Southwark)
Johnston, Sir Russell Tellers for the Ayes:
Jones, Nigel (Cheltenham) Mr. Archy Kirkwood and Mr. Paul Tyler.
Llwyd, Elfyn
Ainsworth, Peter (East Surrey) Bottomley, Peter (Eltham)
Alexander, Richard Bowis, John
Alison, Rt Hon Michael (Selby) Brandreth, Gyles
Amess, David Brazier, Julian
Ancram, Michael Bright, Sir Graham
Arbuthnot, James Browning, Mrs Angela
Arnold, Jacques (Gravesham) Bruce, Ian (Dorset)
Arnold, Sir Thomas (Hazel Grv) Burns, Simon
Atkins, Rt Hon Robert Burt, Alistair
Atkinson, Peter (Hexham) Carrington, Matthew
Baker, Nicholas (North Dorset) Cash, William
Bates, Michael Channon, Rt Hon Paul
Batiste, Spencer Chapman, Sydney
Bellingham, Henry Clappison, James
Beresford, Sir Paul Clarke, Rt Hon Kenneth (Ru'clif)
Biffen, Rt Hon John Clifton-Brown, Geoffrey
Bonsor, Sir Nicholas Colvin, Michael
Booth, Hartley Conway, Derek
Boswell, Tim Coombs, Anthony (Wyre For'st)
Cope, Rt Hon Sir John MacGregor, Rt Hon John
Couchman, James MacKay, Andrew
Currie, Mrs Edwina (S D'by'ire) Maclean, Rt Hon David
Davies, Quentin (Stamford) Maitland, Lady Olga
Davis, David (Boothferry) Malone, Gerald
Day, Stephen Mans, Keith
Deva, Nirj Joseph Martin, David (Portsmouth S)
Devlin, Tim Mates, Michael
Dorrell, Rt Hon Stephen Mayhew, Rt Hon Sir Patrick
Douglas-Hamilton, Lord James Merchant, Piers
Dover, Den Mills, Iain
Duncan, Alan Moate, Sir Roger
Duncan-Smith, Iain Montgomery, Sir Fergus
Dunn, Bob Nelson, Anthony
Durant, Sir Anthony Neubert, Sir Michael
Eggar, Rt Hon Tim Newton, Rt Hon Tony
Elletson, Harold Nicholls, Patrick
Evans, Jonathan (Brecon) Nicholson, David (Taunton)
Evans, Nigel (Ribble Valley) Onslow, Rt Hon Sir Cranley
Evans, Roger (Monmouth) Oppenheim, Phillip
Fabricant, Michael Page, Richard
Field, Barry (Isle of Wight) Paice, James
Fishburn, Dudley Patnick, Sir Irvine
Forman, Nigel Pattie, Rt Hon Sir Geoffrey
Forsyth, Rt Hon Michael (Stirling) Porter, David (Waveney)
Fox, Dr Liam (Woodspring) Portillo, Rt Hon Michael
Freeman, Rt Hon Roger Powell, William (Corby)
French, Douglas Rathbone, Tim
Gale, Roger Redwood, Rt Hon John
Gallie, Phil Richards, Rod
Garnier, Edward Robathan, Andrew
Gillan, Cheryl Roberts, Rt Hon Sir Wyn
Goodson-Wickes, Dr Charles Robertson, Raymond (Ab'd'n S)
Gorst, Sir John Robinson, Mark (Somerton)
Greenway, John (Ryedale) Rowe, Andrew (Mid Kent)
Gummer, Rt Hon John Selwyn Ryder, Rt Hon Richard
Hague, William Shaw, Sir Giles (Pudsey)
Hamilton, Rt Hon Sir Archibald Shepherd, Colin (Hereford)
Hamilton, Neil (Tatton) Spencer, Sir Derek
Hanley, Rt Hon Jeremy Spicer, Sir James (W Dorset)
Hannam, Sir John Spicer, Michael (S Worcs)
Hawkins, Nick Spink, Dr Robert
Hayes, Jerry Spring, Richard
Heald, Oliver Sproat, Iain
Hendry, Charles Squire, Robin (Hornchurch)
Higgins Rt Hnn Sir Terence Stephen, Michael
Higgins Rt, Hon Sir Terence Streeter, Gary
Hogg, Rt Hon Douglas (G'tham) Sweeney, Walter
Horam, John Sykes, John
Howarth, Alan (Strat'rd-on-A) Taylor, Ian (Esher)
Hughes, Robert G (Harrow W) Taylor, Sir Teddy (Southend, E)
Jack, Michael Thomason, Roy
Jackson, Robert (Wantage) Thompson, Patrick (Norwich N)
Jenkin, Bernard Thurnham, Peter
Jones, Gwilym (Cardiff N) Townsend, Cyril D (Bexl'yh'th)
Jones, Robert B (W Hertfdshr) Trend, Michael
King, Rt Hon Tom Twinn, Dr Ian
Kirkhope, Timothy Viggers, Peter
Knapman, Roger Waller, Gary
Knight, Mrs Angela (Erewash) Wardle, Charles (Bexhill)
Knight, Greg (Derby N) Waterson, Nigel
Kynoch, George (Kincardine) Watts, John
Lait, Mrs Jacqui Wells, Bowen
Lamont, Rt Hon Norman Wheeler, Rt Hon Sir John
Legg, Barry Whittingdale, John
Lennox-Boyd, Sir Mark Widdecombe, Ann
Lidington, David Willetts, David
Lightbown, David Wilshire, David
Lilley, Rt Hon Peter Wolfson, Mark
Lioyd, Rt Hon Sir Peter (Fareham)
Lord, Michael Tellers for the Noes:
Luff, Peter Mr. Andrew Mitchell and Mr. Timothy Wood.
Lyell, Rt Hon Sir Nicholas

Question accordingly negatived.

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