§ Motion made, and Question proposed, That this House do now adjourn.—[Charlotte Atkins.]8.28 pm
§ Mr. David Laws (Yeovil)
I am pleased to be able to raise this extremely important issue on behalf of a number of my constituents, although it will also be very relevant to many other people across the country.
The compulsory retirement age for people working for the Ministry of Defence was raised with me at my advice centres in Yeovil by a number of constituents who were employees working in the Ministry of Defence in the constituency area. I was surprised when they first told me that they would be forced to retire at the age of 60 because that appeared to go against the thrust of Government policy, including the Department for Work and Pensions Green Paper that was published recently. I told the individuals who came to see me that I would check matters with Departments but that I would be surprised if the Ministry of Defence was not about to change its view.
The Government's position is that we should no longer have a compulsory retirement age of 60 and that we should consider not only increasing it to 65 but giving people the option to work beyond that age if they wish. I refer hon. Members and the Minister to a statement that the Minister of State, Cabinet Office made to the House of Lords on 22 November 2000. He clearly said that:it is Government policy that there should be no unfair discrimination in the Civil Service on the basis of age."—[Official Report, House of Lords, 22 November 2000; Vol. 619, c. 807.]The Treasury confirmed that policy as recently as this month in response to a question from me about compulsory retirement ages. In a written answer, it stated:Government policy as set out in last year's pensions green paper is to encourage people to work up to the age of 65 and beyond if they wish. Public service employers are reviewing their retirement policies to take account of that."—[Official Report, 23 January 2003; Vol. 398, c. 429W.]The Department for Work and Pensions underlined the position of the Treasury and the Cabinet Office in a Green Paper in December and in a parliamentary written answer to me on 15 January, in which the Minister for Pensions clearly stated:The Government will continue to encourage all employers, including those in the public sector, to review their retirement policies to allow people who want to work beyond normal retirement age, and should they wish, beyond state pension age, to do so."—[Official Report, 16 January 2003; Vol. 397, c. 667W.]Government policy in all the Departments that have primary responsibility for pensions—the Cabinet Office, the Treasury, the Department for Work and Pensions and the Department of Trade and Industry, which is conducting a review of the matter—is reinforced by the trend in European Union legislation. The Under-Secretary knows that the Green Paper that the Department for Work and Pensions presented last month confirms that the Government are developing proposals to outlaw age discrimination in employment and vocational training by December 2006. 853 The Green Paper states:This accords with the EU Employment Directive on equal treatment. It will bring sharper focus on changing culture and attitudes regarding older workers, and offers us a significant opportunity to address wasteful discrimination that is damaging to the well-being of so many people in their fifties and sixties.The Government confirm that, under the directive, which is due to be introduced at the end of 2006,compulsory retirement ages are likely to be unlawful unless employers can show that they are objectively justified.In the light of clear Government policy, it is surprising and disappointing that the Ministry of Defence has declined to make any movement in its direction. I hope that I do not anticipate too much of the Under-Secretary's contribution from his letters to me on the subject in the past month or so. I should like to believe that he has had an opportunity to reflect on the powerful arguments that my constituents presented. Perhaps he will tell us that the Ministry of Defence will inch towards general Government policy.
I was disappointed to receive a response from the Under-Secretary in his letter of 23 January 2003. It suggested that, following a recent Ministry of Defence review,we had decided for the moment not to change our retirement policy … we believe we must strike the right balance between the business needs of the Department, the interests of our workforce as a whole, and the aspirations of those who wish to work for longer.It is difficult to ascertain how that balance has been struck when the Ministry has so clearly rejected the trend of Government policy and EU law and declined to give people the opportunity to work beyond the age of 60 if they wish.
That is particularly surprising in the light of the fact that the Minister himself recognises in his correspondence with me that there is an EU review in this area and that under that review the Department will be forced to look again at this issue and probably to change its practices.
When we consider the reasons for the Ministry of Defence rejecting the Government's position in this area we find some even more surprising arguments being deployed by the Minister. I refer him to his letter of 30 October 2002 to me on this point, in which he appears to set out the policy of his Department and explain why it is different from that of the Government as a whole.
The Minister refers to four reasons for rejecting the movement of the Government as a whole towards giving people more choice in this area. The first is that there is, according to the Minister,no compelling business reason for us to retain people who currently have a normal retirement age of 60 beyond that age. Recruitment and retention in these grades is not generally a problem".There are very many reasons to reject that line of argument. They are clearly set out in the pensions Green Paper. When I put that specific argument yesterday by telephone to one of my constituents and quoted the Minister's statement thatRecruitment and retention in these grades is not generally a problem854 my constituent told me that he did not find that particularly convincing, since he is being paid a recruitment and retention premium precisely because he is in a job where the Ministry of Defence needs his skills. Yet there is no presumption that he will be allowed to work on when later this year he reaches the age of 60. That seems completely irrational and unfair to him.
The second reason the Minister gives for sticking with the Ministry of Defence existing policy in this area is that, according to him,our review has highlighted the age structure imbalance in the MOD's civilian workforce which has arisen over the past 10 years".The Minister goes on to explain that his Department, in particular areas, has a large number of more elderly people in employment and wishes to see that change.
That is a very strange argument. Many other Departments, many businesses, will have experienced the same sort of changes as the Ministry of Defence has experienced over the last 10 years, and their age structure will have moved in that way as well. The Ministry of Defence age structure will also in part have moved in that direction because the proportion of those in employment is becoming greater for the elderly age groups right across the economy.
Therefore, the reasons that the Minister gives seem particularly weak, and should seem particularly weak in this place, where the age structure would look rather similar—indeed, perhaps rather more serious from the Minister's perspective. It might be unsubtle of me, Mr. Deputy Speaker, to reflect upon the age and experience of those who preside over our proceedings, but if we applied the same sort of logic as the Minister is applying in this case we would lose many talented and experienced people who preside over, and are involved in, our activities.
The third reason the Minister gives for sticking with the existing Government policy in this area was linked to the second. It is that, according to the Minister,a higher retirement age would inevitably slow down the rate of upward movement through the organisation.In other words, it would not create enough ability to bring on the good young people coming through.
The Minister himself at some stage in the not too distant future, perhaps shortly after the end of this Parliament, will begin to approach the age that we are discussing. I wonder whether it is in his mind that he should at that stage make way for some of the young people who were elected as Labour Members in 2001 and 1997. I wonder whether he is putting that proposal to the Prime Minister. He is nodding his head. I am willing to let the Prime Minister—the right hon. Gentleman is always faced with this sort of difficulty at reshuffle time—that the Minister, in spite of all his skills, is willing to put his post at the Prime Minister's disposal in order to make way for the able young people in the Labour party.
I do not find that particularly convincing. The Minister has a great deal of skill and experience; he knows his job well. We should retain such skills and abilities, and not assume that at the age of 60 people should be cast adrift in the way that the Minister appears to imply in his correspondence with me.
The final argument of the Ministry of Defence for sticking with the existing Government policy is that it may have to make further manpower reductions, that it 855 does not want to have to make additional people unemployed, and that therefore it wants to focus its efforts to reduce the workforce on those aged 60.
To me, it is clearly ageist and clearly prejudiced to judge whether people should work in an organisation not according to their ability, competence and the skills that they have accumulated, but simply on the fact that they have reached some age that has been chosen arbitrarily. That is precisely the reasoning that the Department for Work and Pensions is seeking to challenge in its Green Paper.
I refer the Minister to chapter 6 of that document, which is entitled "Extending opportunities for older workers". He will see that the Department cites, with some admiration, employers who continue to employ many people who have reached or gone beyond 60. Employers such as the packaging company in south Wales referred to on page 97 point out:Our continuing profitability and success is a testament to the commitment, loyalty and productivity of our older workers.The Minister is missing something there.
I am also disappointed because one of the final paragraphs of the Minister's letter acknowledges:There are good arguments on the other side too".However, he merely mentionspromoting age diversity and lessening hardship for those who have to leave".He does not mention the importance of experience, talents, fairness and the fact that those individuals have accumulated experience, and therefore that training and other costs would necessarily be lower.
The Minister is missing a number of key points here, and the penultimate paragraph of his letter to me of October 2002 says:I cannot agree that our policy discriminates unfairly on the grounds of age.That is very odd indeed, and it puts him in direct conflict with Ministers at the Department for Work and Pensions.
Today, I received a letter from the deputy general secretary of the Civil Service Pensioners Alliance on enforced retirement at 60 in the MOD. Mr. John Amos states:Our understanding is that the MOD is now the only one of the major Departments, which has refused to move from its policy of requiring all people to retire at age 60.Some of our members have been victims of that policy, having been required to retire at age 60 irrespective of the fact that they were still doing a good job and irrespective of their financial commitments. Such a waste of commitment and expertise.He points out:The MOD is going to have to fall in line eventually. It should have the good grace to do so now.Discrimination on the basis of age should be no more acceptable in our society than any other discrimination. The reasons that the MOD is giving for sticking with its existing policy are weak and unconvincing. It must get its act together in this area. Its policy is out of step with that of the Department of Trade and Industry, the Cabinet Office, the Treasury, the Department for Work and Pensions, stated Government policy and the emerging EU legislation. It is wasteful, unfair, out of date and inefficient.
856 In a few years, the Minister will have to come back to the House, or one of his successors will have to do so, to tell us—
§ Mr. Laws
As my hon. Friend says, perhaps one of the Minister's younger successors, or the Minister himself, will have to come back to the House to tell us that he is changing his Department's policy and give us the reasons for that. However, that will be too late for many people who are facing compulsory retirement at 60 now. The Government should get a grip on the issue now and the MOD should change its policy now.
§ The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie)
I congratulate the hon. Member for Yeovil (Mr. Laws) on securing the debate and pay tribute to his efforts in pursuing the cause that he is further pursuing tonight. He has made important points on an issue that I know is of real concern to his constituents who want to continue their employment in the Ministry of Defence beyond the normal retirement age. I am very sympathetic to the difficulties that retirement at 60 will present for some of them, so I want to explain why we have concluded that it is not, at present, in the wider interests of the Department as a whole to make a change in retirement ages.
The Ministry of Defence employs some 89,000 civil servants who work alongside military colleagues at all levels, from the London headquarters to operations overseas, to achieve defence objectives. We need a wide range of skills. Civilians in the Department include engineers, scientists, project managers, logisticians, commercial officers, claims and legal experts, accountants, and IT specialists—I need not go on.
We need people to do strategic planning and to develop policy on the size, shape and deployment of the armed forces. We need people to work on support operations, international defence policy and defence relations, defence diplomacy, the modernisation of NATO and enhancing European defence capabilities. We need people to do science and technology research and management, to acquire and support equipment for the armed forces, and to do logistics support for the armed forces. Other functions include finance, personnel and contract management. We are a large, complex and diverse organisation.
Ensuring that we have the right people with the right skills in the right place at the right time requires a personnel strategy that recruits suitable people, trains and develops them, deploys them, rewards and recognises them and manages their performance effectively. Retirement also forms a key part of that strategy, as it has a direct influence on recruitment, advancement and the availability of core skills, and on our ability to match our work force to the job that they need to do.
Since 1992, more than half the civilian employees in the Ministry of Defence, mainly industrial skilled and semi-skilled grades and junior support staff, have had the option to retire at any time between 60 and 65. The remainder, mainly those in professional and managerial 857 grades, have a normal retirement age of 60, although extensions beyond that age are allowed exceptionally where there is a business need to keep someone on for a short while. There are good reasons for this difference, based on the Department's needs for different skills, and the recruitment and retention position in our many different grades and occupational groups. That does not lend itself to a one-size-fits-all solution.
§ Mr. Laws
Is the Minister sympathetic to looking at the position of people who receive a recruitment and retention allowance or premium? They are clearly valued and needed by the Ministry of Defence. Could not they be given particular attention, given that they do not meet the criteria that the Minister listed?
§ Dr. Moonie
The hon. Gentleman raises an interesting point. I shall describe in a moment how we sometimes allow people to stay on, and hope to show how the circumstances that he set out are covered by present policy.
In 1999, the Government published their code of practice on age diversity in employment, and Departments were asked to review their employment practices with a view to implementing any changes by 2005. At the Ministry of Defence, our review has been of the case for giving those who have to retire at 60 the option to work to age 65.
The review was very thorough. We examined the business case, the impact on promotion and careers, on our diversity policies and objectives and on pay bill and redundancy costs. Our conclusion was that we should not make a change at the moment. I should like to explain our reasons for this.
Our starting point was the business needs of the Department. We concluded that there was no compelling business reason to raise the age of retirement to meet the Department's needs to keep people in employment whose skills we would otherwise lose. We have pockets of recruitment and retention difficulty, and some isolated skills shortages, but they are not necessarily of the kind that can be remedied by retaining staff beyond the age of 60.
Of course, like other employers, we face a challenging recruiting climate, with a reduced number of younger people becoming available for employment. The 16 to 25 age group will decline from its 1991 level of 16 per cent. of the population to 12 per cent. in 2011. However, keeping staff at the end of their careers is not a substitute for recruiting.
Retraining forms an important part of our strategy. It is vital that we are ready to equip employees of all ages to cope with new demands and challenges, but we need also to attract people who can bring with them new skills. Our retirement policy therefore needs to sustain a throughput of people to create the headroom for recruitment.
It is particularly important that the Ministry of Defence competes successfully in its traditional recruiting area to address a worrying upward drift in the age of our work force. The Ministry of Defence has a markedly older work force than the rest of the civil service: our age distribution peaks in the age category 50 858 to 54, whereas the rest of the civil service has a peak at 35 to 39. Nearly half of the Ministry of Defence's staff are over 45, with only 22 per cent. under 35. That compares with 30 per cent. under 35 in the public sector and 41 per cent. in the UK labour force as a whole. Only 10 per cent. of our junior managers are under 30. The peak age of staff in our key middle management grade has risen from the mid-40s to the mid-50s in the past decade.
That age profile is a result of the reduction of about 40 per cent. in the size of the civilian work force since the early 1990s as a consequence of the changed international security situation. The achievement of that reduction by natural wastage and voluntary redundancy has meant that we have undertaken comparatively little recruitment over many years.
I should make it clear that nothing that I have said should be taken as implying that, as a Department, we do not value the contribution that older people make to the defence effort. In many areas we could not do without their experience and commitment and, as I have explained, a majority of our staff can already work to the age of 65. However, the health of any organisation depends upon maintaining a balanced age structure, with a regular intake of new blood and good opportunities for people to progress.
§ Dr. Moonie
I shall come to that point later in my speech.
Raising the retirement age would simply exacerbate our current imbalance. That brings me to a further reason for making no change at present. If we were to keep people in employment for longer, there would inevitably be an adverse effect on the opportunities for advancement and promotion of people in lower age groups. Our review included some detailed statistical analysis and modelling, which highlighted in particular a worsening of promotion prospects at our key middle management level. That would be damaging to one of our key personnel priorities: refreshing our work force by bringing in and bringing on talented people at all levels. It is important that decisions that improve the lot of one section of the work force are not at the expense of others: we need to have regard for the interests of everybody, whatever their age.
Our final consideration was the potential additional cost to the defence budget. At a time when the MOD faces continuing manpower reductions as we find new and more efficient ways of delivering defence capability, it would make little sense to allow some people to go on working beyond the age of 60 while paying redundancy costs to encourage others to leave below that age. That would not be a sensible use of taxpayer's money.
I recognise, of course, that a number of MOD employees have compelling reasons for wanting to work beyond the age of 60, and would undoubtedly be capable of continuing to deliver valuable service but at present cannot. I also understand that, for some, retirement at 60 can bring a degree of hardship, and I 859 naturally regret that anybody should find themselves in that situation. I have to say, however, that the retirement age of 60 has been in place in their terms and conditions of service since the early 1990s, and there has thus been time for them to make supplementary pension provision.
Those people who are aware that they will have fewer than 40 years' full service by the time that they retire have the option to buy added years of reckonable service, which increases the individual's pension and lump sum from the permanent civil service pension scheme on retirement, and the benefits payable to their family after death. Should an individual decide to buy additional years, they will receive tax relief on the payments.
In an ideal world I would, of course, want to extend the option to work beyond the age of 60 to anybody who wanted to do so. That has not been an easy issue for the MOD, and we have had to make very fine judgments in the light of a wide range of factors, many pulling in opposite directions. It is a matter of balancing the needs of the Department, our work force as a whole, and those who aspire to work for longer. We have concluded that for the moment our overriding priority must be to redress our age imbalance and to improve the upward flow of talented people. Moreover, maintaining a steady flow of recruitment and upward movement are the key levers in our strategy to widen diversity in the MOD by increasing the numbers from under-represented groups who join and reach more senior levels in our organisation.
However, the legislation that the Government have undertaken to have in place by 2006 to implement the EU equal employment directive on age discrimination will have wide-ranging implications for age retirement. It will extend the facility to all civil servants to work up to the age of 65. In the particular circumstances of the 860 MOD, it makes real sense for us to plan for our changes to happen in parallel with the implementation of that legislation rather than to rush into a change now that would not serve the wider interests of the Department.
That will also enable us to take into account the package of reforms set out in the recent Green Paper on pensions to encourage proper pension provision by individuals and employers and to encourage greater participation of older workers in the labour market. That included a proposal to raise the pension age in the civil service from 60 to 65, and we shall therefore at the same time be able to bring pension age and retirement age into line.
In my view, the key to all this is to encourage flexible retirement alongside longer working lifetimes. We must in future be able to provide options for people to retire at a time that meets their particular circumstances, and to step down or go part-time as they approach retirement. My Department will look at that as part of its further review, with a view to introducing flexible arrangements that meet the needs both of our business and of the people who work in it.
I hope that the hon. Gentleman will see from what I have laid out tonight that this is a complex decision that the Ministry of Defence has had to take and not one without some regret on my part. Having looked carefully at the issue within the Department, I feel that at present we have no option. When the Government introduce legislative changes that mean that we must comply with the new directive, of course we shall do so, but we need the additional few years that that delay gives us to correct the age imbalance in our work force and to provide proper opportunities for all of them for the future.
§ Question put and agreed to.
§ Adjourned accordingly at four minutes to Nine o'clock.