ARMED FORCES PAY REVIEW BODY

HC Deb 06 May 2004 vol 420 cc1516-33

1. '(1) The Armed Forces Pay Review Body (the "Review Body") shall monitor the extent to which the scheme meets the recruitment and retention needs of the Armed Forces.
2. (2) The Review Body shall publish its observations in a supplement to the following annual report and the Secretary of State shall publish his response to these observations.
3. (3) The Secretary of State shall consult the Review Body in advance of any variations in the Schemes which he is minded to make.
4. (4) Any person (including serving members of the Armed Forces) or organisations concerned with the working of the Schemes or about Legacy Issues covered by existing schemes shall make such representations in writing (and in confidence if appropriate) to the Review Body in summary form in the first instance and the Review Body may, at its discretion, invite further representations on the matter in such form as it may prescribe, but the Review Body shall not be obliged by this provision to look into individual cases.
5. (5) The Review Body shall set out the arrangements to apply to servicemen and women who elect to transfer to a new Armed Forces Pension and Compensation Scheme.
6. (6) Before the introduction of any new scheme the Secretary of State shall submit to the Review Body the mortality and longevity assumptions upon which such scheme is based.
7. (7) The Review Body shall keep the Schemes and Legacy Issues under regular review and shall report annually to the Secretary of State and may so report more frequently if they believe that to be necessary.
8. (8) The Secretary of State shall cause any report to him by the Review Body to be published if the Review Body so requests.
9. (9) The Review Body may make to the Secretary of State recommendations for variations in the Schemes.
10. (10) The Secretary of State may, at his discretion, reject, vary or accept and apply recommendations by the Review Body.
11. (11) If a recommendation is made under subsection (10), the Secretary of State shall make a written statement to Parliament setting out—
1. (a) the Recommendation;
2. (b) the Review Body's reasons for making the recommendation;
3. (c) the Secretary of State's decision in relation to the recommendation;
4. (d) the reason for the decision.
12. (12) A legacy issue shall be defined as an historical anomaly in provisions of Armed Forces Pension Schemes causing inequitable treatment of certain clearly defined groups.'.—[Mr. Gerald Howarth.]

Brought up, and read the First time.

Mr. Gerald Howarth (Aldershot) (Con)

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

We had a series of very successful discussions in Committee. Although we were hampered in certain respects, and there were several fundamental disagreements, I think that the Minister will agree that we were able to deal with the issues in a courteous and civilised fashion. Conservative Members' criticisms of the Government—I suspect that their Back Benchers may have some, too—should not be misinterpreted. We are saying not that the Government are not supportive of our armed forces or careless with their lives and conditions, but merely that they could be doing better.

I pay renewed tribute to the Select Committee on Defence for the extensive work that it—or, if I may say so, we—carried out in examining these complex matters of pensions and compensation. One of its chief complaints was that the Bill is an enabling Bill. It contains virtually nothing save an unfettered and unlimited power for the Secretary of State to draw up such schemes as he thinks appropriate. We have only the possibility of a one-and-a-half-hour debate to consider and scrutinise schemes that are very extensive in their effect on the armed forces and detailed in the way in which they will affect their lives.

A second criticism was the lack of much of the detail of the schemes. No details about the early departure scheme were provided on Second Reading and were tabled only in Committee. I have outlined the two principal criticisms that the Select Committee on Defence made, and it is important to revisit some issues, not simply to rehearse earlier arguments but to give other hon. Members an opportunity to have their say.

The pension and compensation schemes have been subject to scant parliamentary scrutiny. I remind the Under-Secretary that, in the 2001–02 Session, 1,468 secondary legislation measures were tabled but only three were considered on the Floor of the House and we voted on only one. Last Session, there were no debates in the Chamber on secondary legislation. We must also hear it in mind that secondary legislation is not amendable. The Bill contains nothing about the schemes, which will have a huge impact on the lives of our servicemen and women. In Committee, we tabled amendments to include at least some of the main principles in the Bill.

Mr. Caplin

I, too, do not want to repeat all the points made in Standing Committee, but perhaps we can make the ground rules clear. We are considering a new scheme for members of our armed services on or after 6 April 2005. It is not directly relevant to those who are currently serving unless they choose to transfer to the new scheme.

Mr. Howarth

That is a poor start by the Under-Secretary. We know that the new scheme that comes into effect next year will be mandatory for those who join on 6 April or thereafter, if the Bill reaches the statute book—perhaps that is a big assumption. However, the Under-Secretary glided over a fundamental issue, which I shall tackle shortly. Those who serve today and continue to serve beyond 6 April next year will face a choice. He accepted but brushed over that. They will have to choose whether to stay in the existing scheme or to join the new scheme. I leave aside compensation, about which there will be no such choice. However, it exists for pensions and it will affect servicemen and women and their families for the rest of their lives. The fact that there is nothing in the Bill about that makes it difficult for us to scrutinise the matter as we would have wished.

Another complaint that we made was that, unlike members of other public services such as the fire or police services, Her Majesty's armed forces had no representative body to speak up for them. We therefore called in Committee for independent oversight to be given to a body of, for example, representative trustees. The Under-Secretary rightly pointed out that an unfunded scheme cannot have trustees, and we accepted that. We welcome the fact that, last Friday, the Under-Secretary announced that he had considered the representations that we made in Committee. To be fair, there was concern in all parties in Committee about the lack of independent oversight of the armed forces pension scheme.

We are pleased that the Under-Secretary listened to our arguments but his announcement did not go far enough. We have tabled the new clause to include in the Bill an issue that the Government acknowledge to be important, and to add other matters on which the Under-Secretary's announcement did not go far enough. We welcome the fact that oversight will be given to the Armed Forces Pay Review Body. As I said in Committee, that organisation has worked well and is respected by everyone. Given that we all believe that our armed forces need to have confidence in the oversight of the pension scheme, they will be encouraged to know that the remit has been given to the Armed Forces Pay Review Body.

However, the review body's role in externally validating, as the Under-Secretary describes it, will be done in the context of their quinquennial valuation of the AFPS". — [Official Report, 30 April 2004; Vol. 420, c. 65WS.]

We are worried that we have no detailed statement of the exact powers that will be given to the Armed Forces Pay Review Body. Will it be limited to considering pension issues every five years, as the comment about the quinquennial review suggests? Can it maintain—as we believe that it should—a watching brief, and report as and when it considers that to be appropriate? We believe that that is a much better way of granting power to the review body.

If members of the armed forces knew that the matter would be considered not only every five years, but as and when those highly professional and splendid people who make up the Armed Forces Pay Review Body felt that the Government should take action or at least investigate a matter, that would have the added advantage of further consolidating confidence. I hope that the Under-Secretary will tell us how he envisages the pay review body's remit being effected.

Why will the Armed Forces Pay Review Body be constrained in making its views public until the following year's annual report is published? There may be a good reason for that, but if the body discovers something about pensions that should be drawn to the attention of the armed forces or to that of the House, it should be able to do so and not be constrained. If it looks into a matter and finds a cause for concern, it should not have to wait until the following year to publish its anxieties. That is an unacceptable limitation. I reiterate that there may be a good reason for that, but we need to know why the Under-Secretary has chosen that route.

Mr. Caplin

Perhaps I can help. Last week, I announced a quinquennial review of the new armed forces pension scheme. That would not prevent the Armed Forces Pay Review Body from commenting on pensions in relation to recruitment and retention of current armed forces staff.

Mr. Howarth

That takes us a little further forward. If I understand the Under-Secretary correctly, he proposes to give the Armed Forces Pay Review Body a statutory remit whereby it must conduct a review every five years but will not be constrained from making a report to the Secretary of State or, as I would hope, to Parliament, if something arises in the meantime. Perhaps the Under-Secretary will confirm whether I am right.

Mr. Caplin

The Armed Forces Pay Review Body reports to the Prime Minister. It is not in the Ministry of Defence in that respect. I am clear that it can consider all the issues that relate to recruitment, retention and pay. It makes the appropriate reports to the Prime Minister and we announce them to the House in a statement. Those terms of reference are unchanged. I propose that the body should undertake the additional work of examining every five years the workings of the new pension scheme. I shall say more about that shortly, but I hope that I have cleared the matter up.

2 pm

Mr. Howarth

I take encouragement from the last part of the Minister's remarks, because one of the issues that will become apparent—it is not apparent now—is just how successful some of the new measures will be in retaining the servicemen and women whom we want and need to retain in our armed forces. None of us here today, not even the Minister, can say with any certainty that the measures will have the desired effect in that respect. I therefore welcome the fact that there will be a requirement to review every five years, but it seems, from what the Minister has said, that there will be an opportunity for the review body to make known concerns as and when they arise, rather than being limited to doing so every five years. I do not want to be churlish: I welcome that.

Given the importance of this issue, however, we feel that the new clause ought to be in the Bill. That would help the Government, because it would give them a clear framework within which to operate. We have included a number of other issues in the new clause that we felt ought to be addressed and to be given to the Armed Forces Pay Review Body as specific remits. Perhaps I can just go through some of them.

New clause 2(5) would require the pay review body to set out the arrangements to apply to servicemen and women who elect to transfer to a new Armed Forces Pension and Compensation Scheme. As I have just pointed out to the Minister, this involves serious issues that must be addressed by every serviceman and woman who is serving in the armed forces next April—issues that are likely to affect them and their families until the end of their days. We raised this matter in Committee.

The Minister was present at our meeting yesterday with some of those who feel that the scheme has not moved on to help them sufficiently. Some of those people are in their 80s and 90s, and are living with a scheme that was established in the past. Whether they elect to stay in the existing scheme or move to the new one next year will be a matter of concern to them and to their families, and I envisage a great deal of debate on the issue in married quarters up and down the land, and certainly in my constituency of Aldershot.

In Committee, when we called on the Minister to make advice available to our servicemen and women, he said that the Ministry of Defence could not act as a financial adviser, and nor, by implication, could any member of the chain of command. Given the way in which the oversight of our financial services is administered today, I quite understand the elephant trap that might lie ahead if the Minister or those under his command were to give such financial advice.

The Minister helpfully provided us with a leaflet, however. I am not sure whether other hon. Members have seen it, but it is a little purple leaflet representing a tri-service view of these matters, entitled "The New Armed Forces Pension & Compensation Schemes". It sets out some of the key conditions and tells people: You can remain on the current scheme", and You will get the opportunity to choose whether to stay where you are or transfer to the new pension scheme. You do not have to decide now. Well, they are going to have to decide in due course, and these are momentous decisions. The leaflet says: Where can I find out more? and advises people, in the modern usage, to go to the MOD's website. I have managed to master the necessary technology to have a look at the website, and it does give some comparative examples of conditions under the existing scheme and what will apply under the new one. I have to say, however, that it is all pretty basic.

The leaflet goes on: If you have any general questions on the schemes, address them to your commanding officer or your local administration office in the first instance. I suspect that the Minister has already advised those people not to offer anything that might constitute individual advice to individual soldiers, sailors or airmen, and to ensure that their remarks are of a very generalised nature. The leaflet continues: You can email general questions to the pensions team". I have not done that yet, but I might give it a try. Here is the rub, however. The last sentence says: They will not be able to respond individually". That is the issue. Our armed servicemen and women will not be able to look to their employer for individual advice.

Mr. Hancock

The hon. Gentleman has been uncharacteristically generous to the Government in not repeating the condemnation of the Select Committee, on which he and I served, regarding this whole process. The Committee made it clear that the consultation on the process was "uninformative" and that the MOD had failed to grasp the importance of the issue to the service personnel involved. That leaflet is still vague in the extreme, and it still does not properly open the door for those issues to be discussed fairly with the individuals concerned. Does the hon. Gentleman agree that, once again, the Ministry of Defence has failed miserably to put its case properly to the people it serves?

Mr. Howarth

The hon. Gentleman and I both still serve on the Defence Committee, and we did indeed make those forceful criticisms. In fairness, however, this leaflet came out after the Committee's report was published.

Mr. Caplin

indicated dissent.

Mr. Howarth

The Minister shakes his head, but I do not think that any of us knew that the leaflets were in circulation until we asked, in Committee, what advice was being given. At that point, the Minister stood up and told us that the Ministry had put out a little leaflet. The following day, he came armed with a supply of them so that we should know exactly what was being given to our servicemen and women to enable them to make up their minds. However, as the hon. Member for Portsmouth, South (Mr. Hancock) said. it is pretty generalised stuff, and I return to my point that the leaflet says that the pension team will not be able to respond individually.

In Committee, the Minister said that as part of our preparations for the transition, we are obviously considering how to provide and facilitate access to independent financial advice. That is the responsibility of a good employer, which is what the Ministry is."—[Official Report, Standing Committee B, 10 February 2004; c. 131.] We concur with that, but so far, I see no evidence that any details of those preparations have been vouchsafed to us. Certainly, I have been given no new information that extends beyond this little leaflet. It is incumbent on the Minister to tell the House how the preparations for the transition are going, and whether he has come to any conclusion on how to provide and facilitate access to independent financial advice. That is the issue, and we and those whom we represent need an answer. The Minister is driving this measure through—I shall be contrary here and say that he has both gripped it and rushed it through. but I am in opposition and I am entitled to say that—and he is pressing ahead with the April 2005 deadline. We need to know what detailed provision he has made to facilitate access to independent financial advice.

The Minister also told us that plans were under way to provide comparative individual benefit statements to enable servicemen and women to make an informed decision. Fearful as we all are of the capacity of government to cope with any new IT system, he ought to tell us what progress has been made in establishing the system necessary for the provision of that information. He was very confident in Committee that this could be done, so we would like to know that the system will be up and running and that it will provide what is needed to supply the individual benefit statements.

Subsection (6) refers to the mortality and longevity assumptions, which underpin much of the complex debate on the affordability of the pension scheme. On Second Reading, my hon. Friend the Member for Mid-Sussex (Mr. Soames) said: During interminable debate on this issue, the Ministry of Defence has effectively moved the goalposts by changing the actuarial assumptions on which everything is based. As the Defence Committee reported, the expected cost of the existing scheme to the Ministry in 30 to 40 years' time has been recalculated from 22. per cent. to 24.5 per cent. of pensionable salary. The new scheme will reduce the estimated cost to 22 per cent. However, if the original actuarial assumptions were applied to the new scheme, it would cost 20.3 per cent. of pensionable salary, so the total value of the new scheme is 1.7 per cent. less than the value of the current scheme". As my hon. Friend went on to say, that flatly contradicts the Government's claim that any savings in one area would go to enhance benefits elsewhere."—[Official Report, 22 January 2004; Vol. 416, c. 1500.] However, he might regard the Chancellor of the Exchequer as a benefit.

Given the capacity of Government to manage—that is the word I use—the figures, it is essential that there is some independent scrutiny of how a scheme as important as this is arrived at. The mortality and longevity assumptions on which it is based should be in the Bill, hence proposed subsection (6).

Subsection (7) would provide for the Armed Forces Pay Review Body to keep under review the legacy issues, which are defined in subsection (12). The Minister and all of us are aware of the great concerns out there, particularly among those who retired some time ago or their widows, about the feeling that there are issues that have never been addressed, either by this Government or by previous Conservative Governments. Therefore, it would be helpful if we provided for the AFPRB to have a specific remit to keep those legacy issues under review.

That would help us and the Minister. Indeed, it would help me when we swap places after the next election, as we would be able to have some independent assessment. [Interruption.] My hon. Friends say that the Minister will not be here then. Well, Brighton and Hove Albion are doing pretty badly at the moment, so he may follow suit. It would help Ministers of whatever description if some well-regarded, well-respected and professional organisation could have a look at issues that have been of concern to a number of our constituents over a great many years.

Subsection (9) states: The Review Body may make to the Secretary of State recommendations for variations in the Schemes. That would enable the AFPRB to keep the compensation scheme under review, as well as the pension scheme. It is important to recognise that we are dealing with two schemes—one relating to pensions, the other to compensation. Again, the proposal would assist the Minister, as the compensation scheme could be kept under review. I suspect that the way in which he proposes to change that scheme—I will come on to that when we discuss another new clause—is likely to cause problems for him and his successors. Therefore, giving the AFPRB a remit there would be valuable.

I hope that I have made a compelling case as to why we should include provisions on the review body. I acknowledge that the Minister has listened to some of the arguments and moved a long way to meeting our concerns. I hope that he goes the extra mile, as that would please us all.

2.15 pm

Rachel Squire (Dunfermline, West) (Lab)

I welcome the fact that the new clause has been tabled and I welcome its contents, which raise a number of issues. I also welcome last week's written statement by the Minister on the Armed Forces Pay Review Body, which shows that he has indeed taken careful note of the concerns of the Select Committee, of which I am a member, and those expressed in Committee, as well as the views from a range of individuals and organisations. I am pleased that the AFPRB will now have a role in externally validating the provisions of the armed forces pension scheme.

The review body will enable all views to be expressed on the issues that involve all ranks of the armed forces. While debating and consulting on the Bill, I and others have been concerned about how much voice—or rather, as it often seems, how little—has been given to all ranks of our armed forces, instead of focusing on officers having their say. The most junior ratings and privates get little opportunity either to be informed of the proposals or to respond to them.

May I ask the Minister two questions about his response in last week's statement? First, I welcome the clarification he has given on the five-year proposal not constraining the AFPRB from considering recruitment, retention and pay more frequently. However, I still want to press him on whether he will consider the possibility of the AFPRB being able to consider matters related to the pension and compensation schemes more regularly than every five years. One of the interesting suggestions in the new clause is that a range of individuals serving in the armed forces and other organisations should be able to write to the AFPRB to express their views and concerns about the operation of the new scheme and how things are happening.

Secondly, and linking up with the question I have just asked, the Minister said in his statement that we plan that this will be done in the context of their quinquennial valuation of the AFPS, though more frequent examinations of the scheme provisions could be undertaken if wider developments justified this."—[official Report, 30 April 2004; Vol. 420, c. 65WS.] What does he mean by "more frequent examinations"? Could that mean every year? Will he give examples of the "wider developments" that would justify the AFPRB looking at things more regularly? The new clause suggests an annual review of the new scheme.

I welcome the fact that the new clause also considers consultation, the impact that the new scheme may have on retention and recruitment, the transfer arrangements and the AFPRB making a critical examination of the longevity and cost-neutrality issues, which have been addressed previously.

On consultation, I welcome the fact that the Minister and the Government have responded to some of the concerns that were raised about how little opportunity it seemed that Parliament would have to debate the detailed regulations, as they were introduced, to this enabling Bill. I welcome the assurance that statutory instruments will be available for discussion, and that the House will be able to give a negative response if it feels strongly about them. I am not content, however, with the way in which the consultation on the proposed new pensions and compensation scheme has been conducted over the past six or seven years by the Ministry of Defence. I always react strongly to the argument that says, "This is the way that things will be done, because that is the way that they have always been done", whatever the issue. Half of the population of this country—I and other women—would not have been allowed to vote or stand as Members of Parliament if that argument had been upheld and the established arrangement therefore maintained.

As for other aspects of the new clause, subsection (6) raises the issue of mortality and longevity, which was certainly an issue for me and other members of the Select Committee. The Armed Forces Pay Review Body should have an opportunity to consider the straitjacket, as we see it, of cost neutrality. Many of us are still concerned that the new armed forces pension scheme is not based on what our armed forces deserve but on how much they get now. Improvements are being paid for by reductions in benefit to compensate for the fact that people are expected to live for longer. In its report, the Select Committee made the point that the Government's proposals do not deal with what we considered was the likelihood that due to the reduction in service personnel, the MOD's total bill would decrease over time in spite of the increased life expectancy of all pensioners. Will the Armed Forces Pension Review Body be able to consider the fact that personnel are being asked to bear some of the burden of increased cost, rather than the MOD? I will listen with great interest to the Minister's response to the issues that have been raised by new clause 2.

Mr. Breed

I endorse all the comments of the hon. Member for Aldershot (Mr. Howarth) and the hon. Member for Dunfermline, West (Rachel Squire).

I welcome the Minister's announcement that the pay review body's remit will be wider than it has been hitherto. Many of us believe that it is a pity that that was not the case some time ago, as it would then have been able to comment on the very scheme that we are now discussing. If the MOD had allowed that improvement to the remit of that body, we would have had the benefit of its comments. Nevertheless, the improvement is welcome.

On cost neutrality. I mentioned on Second Reading the fact that it was restricted to the pension scheme rather than applied to the whole remuneration budget. Now that the review body is considering remuneration, pay and pension, it is even more sensible to consider cost neutrality within the wider context of the total remuneration budget. At present the application of cost neutrality is so restricted that those strictures bear heavily on existing pensioners who will pay for some of the benefits of others.

I also welcome the fact that the layout of subsections in new clause 2 indicates clearly what the remit of the review body would be. From what the Minister has said, however, it seems that the MOD will still decide what matters the pay review body will consider, how and when it will do so, and even whether it is allowed to do so. It therefore strikes me that it does not have much independence, and the MOD will still be very much in charge, which diminishes the role that the review body can play. For instance, if the Select Committee decides in a year or two to reconsider the matter, will that pay review body be able to give its views, or will the MOD say, "Sorry, you must wait five years to give an opinion". That seems to diminish the value of what the ministerial statement was encouraging us to think was happening last week. This opportunity to debate new clause 2 is therefore extremely valuable.

The leaflet is helpful, although some might say that aspects of its wording are premature. It still gives no indication, however, as to where a serviceman might go to get independent financial advice. It may be that a serviceman will have an independent financial adviser. Where will an IFA get the right answers to his questions to enable him to give proper advice to his client? Such decisions may be very significant, and must be made well in advance of the implications taking effect. If they are unable in any way to gain the information necessary to make the correct decision, there is at least the opportunity of a further round of mis-selling. It will not be mis-selling in the sense that people are—deliberately or not—sold something that is not appropriate to them, but in the sense that the adviser had been unable to secure all the relevant information to ensure that the client got the right advice and was not in any way restricted or ill advised in terms of the decision to change to the new pension scheme. That is an important issue, and I welcome the leaflet, but I am not certain of the implications if somebody says, "That's fine, but I want precise information about my individual circumstances." Where will they go for that information, and how will that be addressed?

Mr. Hancock

If the House agrees with the Defence Committee that the armed forces deserve a pension scheme that recognises the unique contribution that armed forces personnel make to the life of this country, it must also accept the advice that the Committee attempted to give to Ministers—that they would have to do more work on their proposals if best practice rather than cost neutrality was going to be the starting point for a review. Those words were spoken in the Defence Committee, by me and others, as far back as two years ago. Our report was published on 9 May 2002. It is a great disappointment to me that the Bill fails to grasp the point that we were making.

2.30 pm

I congratulate the hon. Member for Aldershot (Mr. Howarth) on pursuing the issue in his new clause. I hope that—unless the Minister proves extraordinarily generous—he does not withdraw the motion, thus depriving us of an opportunity to divide the House. New clause 2 is fundamental to the fulfilment of the principles spoken of in the Defence Committee's comprehensive review of the armed forces pension scheme. In its present form, the Bill does not address those principles. The new clause would allow the review body to take account of changed circumstances and reflect what happens in the real world, rather than waiting for five years.

The Minister said that the body reported to the Prime Minister, not the MOD. What goes to the Prime Minister, however, is not a public document. The Prime Minister can make a personal decision on whether to act on it. A report on something so fundamental should be presented to the House so that it can decide whether there should be structural changes in the way in which the armed forces are compensated for accidents, death or illness, or in their pension arrangements.

New clause 2 would enable us to help armed forces widows—who spoke to the Minister and others yesterday about their problems, and their dissatisfaction with what has been done by successive Governments. The hon. Member for Aldershot was right to acknowledge that this is not just a one-Government failure, but a traditional failure of all Governments to recognise the difficult position in which many widows find themselves. Most Members of Parliament would agree that it is unacceptable, yet we choose to do nothing about it. The new clause would allow it to be examined and ruled on not by the Prime Minister but, properly, by the House.

I was pleased to hear from the hon. Member for Dunfermline, West (Rachel Squire), who, as a member of the Defence Committee, listened to the evidence. It took a long time for the Committee to hear it all. We did not rush our review; the Committee is not renowned for its speed when it comes to matters as important as the pension and compensation rights of members of the armed forces. We heard a huge amount of evidence from all who could possibly be seen to have an interest. In her speech, the hon. Lady acknowledged that there were still improvements to be made. I sensed a more than willing acceptance that new clause 2 would help rather than hinder the Bill. I hope that the Minister will recognise that it is not a wrecking proposition, and is intended not to harm the Government's case but to cover matters that the Bill does not cover properly.

Many of the problems of service personnel and their families will not go away, and we need a speedier vehicle to deal with them than we have at present. New clause 2 could provide it, and the Minister should welcome the new clause with enthusiasm. I hope that he takes a slightly more open view of it than he took, regrettably, of new clause 1, which he refused to consider. I also hope that the whole House will accept that if we are to live up to the expectation that we all claim to have that our servicemen and women should have proper pension and compensation schemes, it should not take five years to change aspects that are wrong.

A flexible approach should be taken, and issues of cost neutrality should not be the driving force. The hon. Member for Aldershot explained very eloquently that there would be a reduction in the overall cost to the MOD. On what may have been the first occasion on which the Minister was allowed out of the MOD on his own, he addressed the Defence Committee on this issue. He dealt with a complex and difficult case remarkably well for someone who had been in his post for only a short time. He, I hope, recognises that all is not well in the armed forces, that we need to get it right, and that the Government's proposed scheme will give rise to widespread concern and dissatisfaction.

The way in which we are informing service personnel about the proposals is not adequate. I do not think that the leaflet goes anywhere near appreciating the complexity of the issues, and the MOD does not even provide personnel in the scheme with a detailed analysis of how they would benefit if they changed their arrangements. Does the Minister dispute that? I should welcome an intervention from him explaining how people in that position can obtain definitive details of the benefits that they would lose and those that they would gain, but I do not believe that the MOD can provide such details.

The Government's proposals lack clarity. New clause 2 gives us an opportunity to do things properly by allowing the House to examine recommendations submitted to it.

Hugh Robertson (Faversham and Mid-Kent) (Con)

I refer hon. Members to my entry in the Register of Members' Interests.

I support the new clause, although I shall probably speak in its favour much less eloquently than the hon. Member for Dunfermline, West (Rachel Squire)—who, as usual, spoke extremely well—and the two Liberal Democrats.

We should be in no doubt that one overriding factor ought to influence our deliberations. Our armed forces are wholly unlike any other part of society, for a simple reason: they are expected to fight and, occasionally and regrettably, to die for their country. It is perfectly reasonable for them, in return, to expect security in their retirement.

Sadly, we live in an age in which members of the public distrust Government, and I am sorry to say that members of the armed forces distrust the MOD. I do not particularly like that, but it is a fact of life. That is why we need the form of independent governance offered by new clause 2. Although I welcome the Government's proposals, they do not go far enough. I therefore hope that the Minister will accept the new clause.

Mr. Caplin

I was going to begin by congratulating the hon. Member for Aldershot (Mr. Howarth) on his technological skill in being able to access a website. He can explain that to the hon. Member for Mid-Sussex (Mr. Soames) later. But then the hon. Gentleman made a rather poor joke about football, revealing his lack of understanding of the game. Because he is an Aldershot Town supporter, however, I will forgive him. I shall confine myself to congratulating his team on reaching the Nationwide Conference final play-off. My team is in the second division play-offs, which will take place in a couple of weeks. We greatly look forward to them. That was a digression, and may represent the only point of agreement in this exchange. We shall see.

There are a number of issues with which I want to deal in this important debate. I welcomed the comments of the hon. Members for Aldershot, for Faversham and Mid-Kent (Hugh Robertson) and for South-East Cornwall (Mr. Breed) and my hon. Friend the Member for Dunfermline, West (Rachel Squire), who themselves welcomed the announcement that I made to the House last week. What I shall say now constitutes a response to the views of both the Select Committee and the Standing Committee considering the Bill. In the Standing Committee we discussed at length the whole issue of independence, and shared views on the various legal niceties in which we would have to become involved.

I hope that the House will accept that, given that it is only seven days since I made the announcement, some details are still being worked out. My officials are in discussions with the chairman of the pay review body as we speak on the details of how we will conduct the reviews. I understand why the House is so interested in the discussions so, when they are complete, I undertake to make a further statement to the House in the usual way to keep Members advised of progress. I make that undertaking because we are talking about the new scheme and the first review might not take place until 2010, so that the scheme has time to settle down.

The hon. Member for Aldershot and my hon. Friend the Member for Dunfermline, West have asked why we chose the period of five years. A number of pension schemes choose a period of five years to look at the way in which things have changed, if at all, in that period. I was a trustee of a pension scheme before coming to the House and my experience is that there were sometimes very small changes over a long period in the nature of pensions in the wider economy. Considering the changes is one of the remits that the AFPRB will naturally have. Five years is about the right time. It will allow the scheme to come in and allow the body to take stock of it in order to prepare a report for 2010.

Hugh Robertson

I take what the Minister says at face value. However, like him, I worked in the pensions industry for a while, albeit on the other side, before coming to Parliament. We were reviewed every three years, and almost every commercial firm is engaged in rolling three-year reviews. That is standard in the commercial world. The time period could be appreciably shorter than five years.

Mr. Caplin

I accept that entirely. Triennial valuations are not uncommon in pension funds. However, in this case, we are not valuing a fund, and that might be the difference. We are asking the AFPRB to review the scheme as a whole and its conduct as the main armed forces pension scheme.

I want to say a few words about the work of the Select Committee. As my hon. Friend the Member for Dunfermline, West knows, I very much value the work that she and her Committee undertook on this issue. As Members will recall, we made sure that the response to the Select Committee was published in time for Second Reading. It was published in record time as opposed to the normal period of eight working weeks that we could have taken if we had wanted to. We did that because I believe that the Select Committee plays an important part in maintaining a watching brief on many of the issues relating to the armed forces. I hope that it will continue with its brief, and one or two interesting inquiries are under way at present. We all wish the Committee an interesting time whenever it gets to interview those people whom they invited last night to appear before it.

I turn to the issue of choice. I have used the word "choice" constantly throughout our debates, because the armed forces will have a choice when we get to the period after 6 April 2005 provided, as the hon. Member for Aldershot reminded me, the Bill gets through both Houses. I should have added that proviso earlier.

It might help Members if I remind the House of what I said at 4.45 pm in a sitting of the Standing Committee. I pointed out: New clause 13"— which was tabled by the hon. Member for Aldershot and his colleagues— would require the Ministry of Defence to provide each service person eligible to transfer with a comparative benefit statement. I have already indicated that we intend to do that, and I recognise the importance of ensuring that our current service personnel have the information they need to make an informed decision on which pension scheme will meet their personal needs."—[Official Report, Standing Committee B, 24 February 2004; c. 218.] The view that I expressed then has not changed at all, except that we are progressing our work on how that advice should be offered.

2.45 pm

We are in discussion with a consortium of independent financial advisers on the services that they might be able to provide and the terms under which the services might be provided. I make it clear from the Dispatch Box on behalf of the Government that the Ministry of Defence and the chain of command are not licensed to give such advice. Therefore, in the transfer period window—it will not be April 2005, but could be a period of more than two years—people will get an individual pension benefit statement and they will then choose whether they wish to move to the new scheme. They will have the opportunity to seek independent financial advice to help them to make their decision. That will help us to avoid the problems of pension misselling that the hon. Member for South-East Cornwall reminded us about. That took place in the 1980s, and I know quite a lot about it.

I fully expect the arrangements that I have described to be in place in good time to enable the transfer arrangements to take place. Hon. Members who served on the Standing Committee will know that I am reluctant to suggest dates for the introduction of computer system technology, and they have accepted that it might be wise of me not to do so.

I come now to the new clause. We have taken an important step forward in inviting the AFPRB to carry out work for us in a professional way and on a quinquennial basis. As I have said, if the body feels in any of its annual reviews that it wants to make recommendations about parts of the terms and conditions, it will be free to do so. However, completely separate from that—I emphasise that this is applicable only to the pension scheme—there will be a piece of work to deal with the pension scheme itself.

The new clause seeks to establish a much wider role for the AFPRB. In my statement last week, I tried to set out the basis of the discussions and agreements that I have reached with the body and its chairman to bring about the change. The role that I have announced deals directly with the concerns that were expressed in Standing Committee and on many other occasions about the need for external and independent validation of the armed forces pension scheme.

The AFPRB will compare pension scheme arrangements with practice elsewhere in the wider economy and consider the extent to which those arrangements meet the recruitment and retention needs of our armed forces. It will publish the observations in an annual report after the completion of the first five years of the scheme in 2010, and the Government are committed to responding publicly to that report.

The work that I have asked the AFPRB to undertake is clearly focused on the armed forces pension scheme and the current pension arrangements that we are discussing in the context of recruitment and retention. It would not be appropriate for the body to consider as part of its remit any of the legacy issues that the hon. Member for Aldershot and others have raised.

Mr. Gerald Howarth

Why not?

Mr. Caplin

For the reasons that I have set out. The AFPRB is being asked to look at the new pension scheme and to report on that and its conduct in relation to a quinquennial review. It is not being asked to look back on the legacy issues that the hon. Gentleman has already accepted occurred primarily under the Conservative Government.

Mr. Hancock

I am delighted that the Minister has given way—he is being extraordinarily generous. I understand his reply to a certain extent, but if the AFPRB is not the appropriate vehicle through which to decide legacy issues, who will decide on such issues? Who will take proper account of the plight of servicemen who have been denied pensions so far, or of those who have problems with their pensions? What about widows and other groups such as the Gurkhas?

Mr. Caplin

The AFPRB is clearly not the right vehicle. Since I have been in this post, I have always been happy to debate issues such as reserves and cadets with Members, and if the hon. Gentleman wants to debate this issue further, he can do so. I do not believe that the AFPRB, which will deal with the recruitment and retention of our armed forces, is the right vehicle for examining the so-called legacy issues raised by the Forces Pension Society, among others.

I cannot see why the AFPRB should get involved in the transfer arrangements for existing personnel; that would certainly be the wrong way to go. I have described the way in which we anticipate that the transfer procedure will be conducted. A pension statement will be provided, and it will be possible to seek independent financial advice. We certainly have not discussed the idea that the AFPRB should get involved in decisions on transfer arrangements.

I cannot support new clause 2, and if it is pressed to a Division I shall urge my hon. Friends to resist it. My reasons for not supporting it are simple. We have made progress in the past three months in terms of external validation of the pension scheme. That is a big and important step for this House in the scrutiny of armed forces pensions, and it constitutes a new validation of the pension scheme itself. That is the right way to go about matters. The AFPRB has the right skills and ability for the task, and working on a quinquennial basis will benefit the new armed forces pension scheme in the long term. I shall therefore resist the new clause if it is pushed to a vote.

Mr. Gerald Howarth

I want to start on two notes of agreement: the prospects for Brighton and Hove Albion, and for Aldershot's return, hopefully, to the Football League. I thank the Minister for his good wishes, and I convey my fraternal greetings to Brighton and Hove Albion. On a serious note, I welcome the Minister's recognition that an improvement could be made, and his having made it. I am extremely grateful to my hon. Friend the Member for Faversham and Mid-Kent (Hugh Robertson), and to the hon. Members for Dunfermline, West (Rachel Squire) and for Portsmouth, South (Mr. Hancock), for their support for new clause 2.

In his closing remarks on new clause 2, the Minister seemed to acknowledge its merits and to accede to the extension of the AFPRB's remit to one or two other areas that were not envisaged. He said that in his view, the AFPRB is exactly the right body to conduct the review of the pension arrangements. I of course agree, but it is also the ideal body to examine legacy issues and transitional arrangements.

Mr. Caplin

The hon. Gentleman is probably not surprised at my rising to reply. The term "pension arrangements"—if I did indeed use it—is one to which the industry is well accustomed. It uses that term to describe a new pension scheme, as many Members will testify. Which pension legacy issues does the hon. Gentleman think should be dealt with under the terms of new clause 2(12)?

Mr. Howarth

In fairness, most of them. The Minister is as familiar as I am with the arguments concerning post-retirement widows. There is also the "trough" issue, which has exercised us all. These are difficult issues, and I am not suggesting that the Minister is uniquely to blame in this regard. I have tried to facilitate a sensible debate in this place, which is what the public want, rather than the trench warfare that we sometimes engage in. That said, they seem to like a bit of that as well, particularly on a Wednesday and in the light of the new leader of the Conservative party.

We all have constituents who are very exercised about these issues, and who write to us about them. I genuinely felt that the new clause was a means by which I could offer not just the Minister but all of us a forum through which these issues could be resolved. Those who are concerned and feel hard done by would respect a decision taken by the AFPRB; however, I suspect that they are less respectful of the decisions of Ministers. The approach seemed a sensible one, and I would not want to put a limit on the legacy issues to which new clause 2(12) refers.

My hon. Friend the Member for Faversham and Mid-Kent raised the question of a three-year or a five-year review. Frankly, I am not fussed, so long as the AFPRB's remit enables it to address issues of concern as they arise. My hon. Friend made an extremely useful point by way of reference to the pensions industry, but as long as the AFPRB has the power to consider such issues at any time, my concerns will be met.

The Minister mentioned individual benefit tables, which are extremely important to all our constituents and to those who serve in the armed forces. He said in Committee that he was working on a plan to ensure that they are provided, but it would help if he were kind enough to tell us how matters are progressing. Given that the 6 April 2005 deadline is approaching, the fact that the plan is not yet in place is a cause for concern. The Minister suggested that for those who continue to serve and who straddle the 6 April 2005 date, there will be a two-year window of opportunity for them to make up their minds. If he cannot provide individual benefit tables, will he undertake to ensure that the two-year period is a rolling window of opportunity? We do not want to discover that, 12 months after the date of introduction of the new scheme, people have only a year in which to make up their minds.

Mr. Caplin

I understand the hon. Gentleman's point, and it is important that we get the pension benefit entitlement statements out to serving members of the armed forces. I assure him and the House that I shall make a careful review of the progress that we are making towards achieving that. We will try to ensure that we meet the timetable. We have followed the good example of a civil service scheme, which we briefly discussed in Committee. That scheme also used, I think, a two-year window. If that were to change, I would come back to the House to explain why.

3 pm

Mr. Howarth

That is excellent. What we all want to know is that the Minister will keep us informed of progress on a regular basis. The Minister also suggested that the transitional arrangements were not appropriate matters for the pay review body to consider. Again. I believe that they should be and that failure to include them is a lost opportunity.

I do not, however, intend to press the new clause to the vote, notwithstanding the splendid support that I have received across the Chamber, for which I am extremely grateful. I have two reasons. First, the Minister has already acceded to some of our requests, so it would be churlish to kick him in the teeth and tell him to go away and do better. We would like him to do that, but, secondly, he has explained that he is still working on the details. In fairness, I am bound to give him the opportunity to conclude those details.

Hawks in the other place will be watching our proceedings closely, among whose number are certain gentlemen of a greater rank than the Minister or myself, who stand by to protect the interests of those who were once under their command. The pressure will be on the Minister to work out the details in time for them to be considered in the other place. As I said, I shall not press new clause 2 to a Division, but I hope that it will have been noted in the other place that the remit of the pay review body could readily be extended to cover issues that are of concern to many people.

For reasons that I have explained, I believe that it would be sensible to withdraw the new clause and I sense the feeling of the House that that is right. I would not stand in the way of any other hon. Member who wanted to press the new clause, but I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.