HL Deb 26 November 1936 vol 103 cc406-20
THE SECRETARY OF STATE FOR INDIA (THE MARQUESS OF ZETLAND)

My Lords, I have to ask your Lordships' approval this afternoon of no fewer than twelve Draft Orders under various provisions of the Government of India Act and the Government of Burma Act. The task, however, is by no means so formidable as at first sight it might appear. These Orders have been considered and reported on by the India and Burma Orders Committee. They have come to the conclusion that in the case of ten of the twelve Orders no question of policy or principle is involved, and they recommend to your Lordships therefore that you may pass these ten Orders without special attention. The other two Orders raise questions of policy and are of some interest, particularly the first of those which appears on the list—namely, the Order which deals with the Family Pensions Funds. This Order deals with a large sum of money in which a large number of people outside your Lordships' House are very closely interested. The total capital sum involved is something like £12,000,000 sterling; the number of subscribers to the four funds to which I will refer in a moment is very nearly 9,000, while the total number of those who are actually drawing pensions from these funds at the present time is not far short of 3,000. We may therefore assume that there are at least 12,000 persons outside your Lordships' House who are very closely interested in our proceedings this afternoon.

May I, by way of explanation, give your Lordships a very short history of the funds? The funds, as I said, are four in number and are at present in India. Two of the funds refer to the Military Services in India and two to the Civil Services. The earlier of the two military funds was formed in 1873, but was brought to a close so far as new entrants were concerned in 1914 and was succeeded by another military fund which came into existence in 1915. Of the two civil funds the earlier, which was formed in 1881, is the Indian Civil Service Fund, and much more recently—namely, in 1928—another fund was formed for the members of the superior Services in India other than the members of the Indian Civil Service. Those, then, are the four funds which exist in India for providing pensions for the widows and children of the military and civil officers. They have been formed by contributions from the members of the Services themselves, and may therefore rightly be said to be the property of the subscribers.

Now you may ask why it is proposed to make any change in the arrangements in connection with these funds. Some few years ago, when it became evident that a considerable advance was to be made along the road of constitutional reform in India, some of the subscribers to the funds expressed a desire that they might be transferred from India to this country. Since it was the desire of my predecessor as far as possible to meet the wishes of the subscribers themselves, he agreed to consider a plan under which the funds would be transferred to this country. Under the earliest proposals a period varying from fifteen to forty years would have been required before the funds would have been transferred in their entirety to this country. That was regarded by those who were interested as far too long a period, and they asked that the period should be reduced. Those of your Lordships who served on the Joint Select Committee will remember that this matter came before that Committee for its consideration, and that the Committee expressed the opinion that provision should be made for the transfer of the funds in the shortest possible space of time, the period mentioned at that time being twelve years. Since the discussions of that Committee it has been found possible to reduce the period of twelve years very considerably, and in the Act of 1935 it was provided that an Order in Council may be made by His Majesty for the transfer of these funds and that the transfer should be made within a period of three years, the three-year period to begin on March 31 subsequent to the date of the passing of the Act—that is to say, March 31, 1936—the transfer to be completed, therefore, by March 31, 1989.

We have done our best to familiarise the subscribers and the beneficiaries of these funds with the conditions under which the transfer can be made. In the first instance we, circularised every one of them in the year 1933—more than three years ago—informing them of the proposal and asking them to let us know whether they desired that it should be proceeded with. It was made clear to them in that circular that the probability was that, if they transferred their funds to this country, the pensions which they would be able to draw would be somewhat lower than the pensions which they are drawing under the existing scheme, since the rate of interest which was obtainable in this country was appreciably lower than the rate of interest available in India. In spite of that knowledge the majority of those who replied to our circular expressed the desire that the funds should be transferred. We proceeded, therefore, with our scheme, and in the spring of this year we drafted the Order which is before your Lordships to-day and laid it upon the Tables of Parliament so that it could become available to the public. At the same time we circularised all the subscribers once more in April last, giving them all the information that it was possible to give them which would enable them to form an estimate of the change which would be effected in the rates of their pensions if the money were transferred to this country. At the same time we invited their comments upon the draft of the Order which we have laid upon the Tables of the two Houses; and in the draft which is now before your Lordships some alterations have been made to meet, so far as possible, the comments and representations made by the subscribers.

That brings me up to the present time. There is one feature of the Act upon which I must lay stress, because it affects vitally the interests of the subscribers. It provides that in this period of three years ending on March 31, 1939, these funds shall be transferred to this country unless objection is made by any of the s subscribers, so that it is quite clear that unless objections are made, and received by us by March 31 next, the whole of the funds will be transferred by March 31, 1939. Subscribers, however, have the option of retaining their interest in India, and provided that we receive their objections to transfer by-March 31 next their interests will be retained in India, in accordance with the existing arrangements. Your Lordships will see that it is very essential, in those circumstances, that every subscriber and beneficiary should make a reply to the circular which, if you approve of this Order this afternoon, I propose to send out immediately. In this circular I shall give the subscribers the most up-to-date information that it is possible to give them. I propose to enclose with it a franked and addressed postcard, on which I ask them to acknowledge the receipt of the circular, and further I propose to enclose with it a franked and addressed envelope and a printed form which will make it easy for them to say "Yes" or "No" to the proposal whether or not they desire their interests in the funds to be transferred to this country. Over and above that I propose to advertise in all the better-known newspapers. And so I am taking every precaution, I think, that is possible, to see that every subscriber and beneficiary shall decide and make known to us whether he desires his interest to be transferred to this country or whether he desires his interest in the funds to remain in India.

Your Lordships may ask me to let you know briefly how the subscribers would stand in either case. In the case of those who decide to transfer their interest to this country it is obvious, as has already been made clear to them, that in return for the greater security which they expect to receive, as a result of the transfer of their interests to this country, they will inevitably lose something in the rate of their pensions. It will not be possible to let them know exactly what the change in the rates will be until we know how many propose to transfer their interests, and in fact until the funds in this country are established; but a provisional reduction will be essential, and the provisional reduction proposed is as follows. In the case of the Indian Civil Service Fund the pensions will be reduced provisionally to their present permanent rate.

THE MARQUESS OF SALISBURY

To what rate?

THE MARQUESS OF ZETLAND

To their present permanent rate; and I should perhaps explain to your Lordships that the rates of pension have from time to time varied. During the period of high rates of interest which followed the War pensions were considerably increased. Some part of that increase was described as permanent, but some part of it was described as temporary. How would that work in the case of a typical beneficiary under the Indian Civil Service scheme? At the present moment a widow in respect of a pension of £450 per annum would, if she transferred her interest to this country, provisionally lose the temporary part of that pension—namely, £50—so that in her case for the time being her pension would be reduced from £450 to £400 a year. Let me take one other typical case, the case of a military beneficiary, since the conditions of those funds differ in certain respects.

THE MARQUESS OF SALISBURY

I do not know whether the noble Marquess will allow me to interrupt, but in the case of a widow who elected not to transfer would her pension remain at the equivalent of £450, or would it be reduced to £400?

THE MARQUESS OF ZETLAND

I will come to that in a moment when I deal with those who propose not to transfer. I am dealing now with those who do transfer. In the case of one of the beneficiaries under the military fund the provisional reduction in pension will be 10 per cent. of the original rate of pension. A typical case is that of a widow drawing at the present time a pension of £150 a year. In that case the original pension was not £150 but £100. She, therefore, will be reduced to the extent of 10 per cent. Of £100—namely, by £10—so that her present pension of £150 will provisionally be reduced to £140. So much for those who propose to transfer their interests to this country.

Then I come to those who decide that they would rather retain their interests in India. It is impossible to say, until we know how many persons will transfer their interests, what precisely will be the position of those who remain in India. If a sufficient number keep their interests in India, it is proposed that the funds should be continued on their present basis; in other words, that rules should be made equivalent to the rules which are in force at the present time. It is quite possible, however, that if a. very large number of persons desire to transfer their interests to this country, there will not be a sufficient number left in India to enable self-contained funds to continue. In those circumstances it is proposed that the Government of India should take over the capital, and should guarantee to the subscribers and beneficiaries pensions at a fixed rate for all time—pensions that will not vary one way or the other, and which will be not less than the permanent pensions now as to the three funds which I mentioned, and not less than the present pensions in the fourth fund which I mentioned—namely, the fund created in very recent times and in which, therefore, the pensions have not yet varied.

I think, my Lords, that covers the ground broadly. There is little that I need say with regard to the actual clauses of the draft. Clauses 2 and 3 really deal with accountancy matters. Clause 4 lays down that there shall be a body of Commissioners to whom the capital shall be transferred. Clause 5 says that each of these bodies—that is to say, the Commissioners who will be in charge of the four separate funds—shall consist of five Commissioners, of whom one shall be the Public Trustee, and that the Secretary of State shall appoint the other four, but in such a way that two of them are, or have been, subscribers to the funds. The next clause of any interest to your Lordships is Clause 10, which deals with the time limits, which I have already explained; and then there is Clause 12, which sets out the range of investments in which the Commissioners shall be entitled to invest the moneys. It has been pointed out that if the funds were restricted to what are strictly trustee investments the present return of interest on the funds would be a very low one, and, in order to some extent to meet that case, we have set forth in Clause 12 the various classes of securities in which the Commissioners shall be entitled to invest the funds.

LORD LAMINGTON

Would the noble Marquess state the respective amounts contributed by the pensioners themselves or their families? I think he said the total gross capital was about £12,000,000.

THE MARQUESS OF ZETLAND

In the case of these funds, as I think the noble Lord knows, the money has been entirely contributed by the subscribers themselves, except to the extent to which interest is paid upon the accumulated funds by Government. Interest is paid by Government on the funds as they accumulate, otherwise the contributions are made entirely by the subscribers themselves. Then I come to Clause 17, and here I have to suggest for your Lordships' consideration an Amendment. Clause 17 enables the Secretary of State to make the reductions in the rates of pension to which I have referred. In response to a request by my honourable friend Sir Reginald Craddock in another place on behalf of the subscribers, I agreed to accept an Amendment to this clause which would have the effect of laying upon the Secretary of State a statutory obligation that, in exercising the powers conferred upon him by Clause 17, modifying the amount of the pensions hitherto payable, he should act on the advice given to him by an ac[...]uary.

Of course that really is only carrying on the present practice. It is quite obvious that the Secretary of State would net himself try to assess the value of these funds; he naturally would obtain the advice of an actuary. But I am quite willing to insert that provision in the Order itself, so that the Secretary of State is under statutory obligation to seek the advice of an actuary. If, in addition, the present practice of also employing an actuary to advise the subscribers is continued, as it will be, it will be necessary to insert after Clause 17 a short additional clause to enable that actuary to be paid out of the funds, as is done at present. I think that that really covers the whole of the ground so far as the Pensions Order is concerned, and I beg to move that the Order be taken into consideration.

Moved, That the Draft Order, as presented to Parliament on the 3rd instant, and reported from the India and Burma Orders Committee on Thursday last, be now considered.—(The Marquess of Zetland.)

THE MARQUESS OF SALISBURY

My Lords, no one can feel more than myself my inadequacy in dealing with these most intricate financial points, and it only occurs to me to say on that head that if it is a subject which is extremely difficult for, I will not say myself to understand, but for many of your Lordships to understand, how much worse must it appear to the unfortunate beneficiaries who have to grasp the exact bearing of these financial points, and have to decide what will affect their whole financial future. I hope they will read the speech of my noble friend the Secretary of State because it must be admitted that he was extremely lucid, in so far as the subject permits of lucidity; and if they read him with care and take very expert advice they may arrive at a conclusion as to what is likely to happen.

I hope your Lordships will realise what is involved, and what I think arises out of the figures which my noble friend has been good enough to explain to the House. He took the case of the widow who at present enjoys the equivalent of £450 a year, and he said that if she transfers to this country, at any rate to begin with, she will be reduced to £400 a year. I do not know how those figures affect your Lordships, but to me it seems that the widow has a very formidable choice to make. She has to balance the yield of her investment—for it is an investment in fact—against its security, and it may be every halfpenny that she possesses. She has to decide by March 31 next year, for better or worse, whether she will be content with the loss of a ninth of her whole income. I am sure the Secretary of State has the greatest sympathy with her difficulties; indeed I ought to say at once that in matters of this kind I have always found him, in the negotiations which it has been my duty to engage upon with him, most considerate. But I am sure any member of your Lordships' House would feel this great difficulty of the beneficiaries. They have to decide by this very early date.

Now my noble friend in his speech said that they had their first notice in 1933. 1933! Why, that was before the India Act passed. They had no reason to assume then that Parliament would agree to the provisions of the Act, much less to the minute financial arrangements which were going to follow on the Act. I expect they all said to themselves: "Well, we had better just wait to see what Parliament decides before we try to master the difficulties of this problem." And I really honestly think, without prejudice to anything else which may be said, that you cannot take any date before the passing of the Act. Until that happened the matter was res integra. Nothing had occurred except the prophecies of His Majesty's Government, which are not always fulfilled, and the expectation of the Government of India. This is not a big point, because I admit there has been a considerable interval since the passing of the Act itself, but still you must at any rate reduce it by that amount, and they have to arrive at this conclusion.

Now the first question that must occur to any of your Lordships to ask is: Why must they necessarily decide by March 31 of next year? My noble friend has given the answer. He says, in effect, that it was so provided under the Act. Is that not so?

THE MARQUESS OF ZETLAND

Yes, it is provided under the Act that the transfer of the Fund must be made between March 31, 1936, and March 31, 1939—that is, in three years.

THE MARQUESS OF SALISBURY

Perhaps I should put it in the form of a question to my noble friend. Is there anything in the Act of Parliament which makes it essential that these beneficiaries should decide before April 1 next year because, if there is not anything in the Act of Parliament, then I venture to think that the matter is still within the competence of His Majesty's Government—even without fresh legislation, which is always possible in case of necessity—to reconsider the point. I think it would be only fair that they should consider the point again. There was another observation which arose in my mind from the speech of my noble friend. He said he could not decide—I think it was in the case of the beneficiaries who elect to have their money left in India—how much they would be entitled to until he knew the number of those who were going to transfer their pensions to England. Is that fair?

THE MARQUESS OF ZETLAND

May I interrupt the noble Marquess? That was not what I said.

THE MARQUESS OF SALISBURY

I beg pardon.

THE MARQUESS OF ZETLAND

I said that until we knew how many were going to transfer their interests to England we could not tell whether we should continue to maintain funds in India or whether the Government of India would have to guarantee the pensions out of the revenues of India.

THE MARQUESS OF SALISBURY

I hope I shall be at once corrected, but I understand that it would follow that if, in the event, there were so few left with their pensions payable in India that the Government of India had to fall back on the other method—namely, a fixed pension—that would, or might, easily involve a loss of income to those who keep their pensions in India. That is what I understand. Whereas if there were a large number who did not transfer, and in consequence it might be actuarially possible to give higher pensions to those who elect to keep their pensions in India, yet, because other people with whom they have nothing whatever to do transfer their pensions to this country, therefore they must be content to receive something less than they otherwise would receive. That is unfair. I think it is very hard that, because certain people transfer their pensions to England, other persons, totally different persons, who keep their pensions in India are to suffer for it.

May I say upon this whole subject that I sometimes think that the Government of India, and I suppose His Majesty's Government, approach this subject from the wrong point of view? I should have said that in a case of this kind, as is generally the practice in this country where there is any doubt, the doubt should be resolved in favour of the individual beneficiaries. When you are making a vast change—I think my noble friend called it a modification or some such very respectful and gentle phrase—and it follows as a consequence that certain individuals are financially worse off, then this great country might put its hand into its pocket and make good the difference. That, I should have said, would have been the ordinary practice in almost every conjuncture when we are dealing as between the State and the individuals. Where the individuals complain that they are hardly treated, then the State should say: "Oh, well, we admit there is a hardship, and of course we will make it good to you." I should suggest that that is the more becoming attitude to adopt. I know quite well, of course, that my noble friend is responsible for the finances of India just as the Chancellor of the Exchequer is responsible for the finances of this country, and he cannot play fast and loose with them as if they were his own. He is obliged to consider the interests of the taxpayer in every case. But I come back to my point that by our practice, when an issue lies between the State and an individual, it is usual for the State to say: "As there is a doubt about it, or as there is extreme hardship, we make it good." That would have been the better way to approach this subject.

Beyond that I have no criticism to make, but I want to ask a question. I understand that when this part of the fund is by the wish of the beneficiaries transferred to this country, then it is vested in the hands of certain Commissioners, and these Commissioners, I suppose, themselves invest it in one of the list of securities contained in the Order. Does that mean that all the pensioners are to rise or fall together? That is to say, if the Commissioners make a rather better bargain in England, does that mean a rise in pensions all round, and if they make a worse bargain that the pensions will be lowered? If that is the case, then is there a vista of varying pensions? As the money market varies in this country, as the Commissioners make better or worse use of the fund, will the pensions vary? Is that how it will work? I hope my noble friend will for give me for most inadequately putting these questions. If that follows then the further question arises: Upon what principle has the list of investments been drawn within which the Commissioners are confined? My noble friend said in his speech that they were ordinary trust investments.

THE MARQUESS OF ZETLAND

No.

THE MARQUESS OF SALISBURY

I we s quite sure that I had misheard him.

THE MARQUESS OF ZETLAND

That is precisely what I did not say. I said that if the Commissioners were restricted to the rigid trustee stocks the rate of interest would obviously be very low, and it was for that reason that the Commissioners had been given greater liberty in their investments.

THE MARQUESS OF SALISBURY

So that they may use the money considerably outside the ordinary limitations of trustee investments? Is that so?

THE MARQUESS OF ZETLAND

Yes.

THE MARQUESS OF SALISBURY

I am very much obliged to my noble friend. That is very satisfactory. We may trust the Commissioners to be very careful in what they do. While they are allowed to act outside the ordinary limits of trustee investments, we may be satisfied that they will not risk the money. But supposing there was a loss then the rate of pensions over the whole number of pensioners would thereby be reduced—is that. not so?—but not, I think my noble friend said, below a certain minimum, which he called the permanent pension standard. I hope I have not imposed upon your Lordships too much with these figures, but I think I have said enough to show your Lordships what a very intricate and complicated subject this is. To revert to my original point, that it is a little difficult to expect the unfortunate widow to find her way through these intricacies, if my noble friend will assure us that he will do his very utmost to see that these unfortunate people are treated as well as possible, why then there will be nothing more to be said.

Without desiring to be in the least aggressive, I may say that they did not ask Parliament to pass the Government of India Act. They were quite content in the old days. They were paid by the Indian Exchequer, it is quite true, at this higher rate, but it was quite certain that there would be no default from the Indian Exchequer. They knew it was in the hands and under the shield of the British Government. Now they do not know that. They are apprehensive; let us, in order to be quite fair, perhaps say quite unduly apprehensive; but they are apprehensive and they say to your Lordships: "May we not have a little longer time to decide this difficulty? If you are not absolutely controlled by the Act of Parliament, may we not have a little imager time in which to come to this decision which may involve us in the loss perhaps of one-ninth of our whole income? "I think your Lordships at any rate will receive their plea with consideration and indeed with sympathy.

THE MARQUESS OF ZETLAND

My Lords, may I express my thanks to the noble Marquess for what he has said with regard to this matter. I know that ho feels very strongly the difficulty of the position of these persons, and he has put to me one or two questions. Let me take the last of his questions first, which was, on what principle were the Commissioners to deal with these funds which had to be transferred to their custody? The Commissioners will deal with these funds on precisely the same principles that any trustee does with any funds of which he is a trustee except that in this case, as I pointed out and as the noble Marquess will find in Clause 12 of the Order, they are given a rather wider range of investment than is the case in some of the more restricted trustee deeds.

Then the noble Marquess suggested that as a result of this scheme those who decided to retain their interest in India might lose. Let me take this opportunity at once of correcting that impression. It is not so at all. If the number who retain their interest in India is large enough to continue these funds on a self-contained basis, the funds will continue under precisely the same rules as are administered at the present time and the position, therefore, in those circumstances of the subscribers and beneficiaries will be neither better nor worse than it is now. Even at the present time if rates of interest in India go down the pensions vary, just as the pensions have gone up when the rates of interest have gone up. What I did say, and this surely is a guarantee to those who decide to retain their interest in India, was this, that if the number who decided to retain their interest in India was not sufficient to enable us to continue the funds as self-contained funds, then the Government of India themselves would guarantee the pensions and that the rate at which they would be guaranteed would be not less than the rate of permanent pensions in India at the present time. I hope I have made that point clear.

THE MARQUESS OF SALISBURY

What I did say was that this permanent basis might be lower than the rate they may have got had they been lucky enough to persuade the other beneficiaries to keep their funds in India.

THE MARQUESS OF ZETLAND

That is where the noble Marquess, if I may say so again, is incorrect. The number that will transfer from India to this country will have no effect upon the position in India. Then the noble Marquess pleaded for further time for these persons to decide, and he asked how these unfortunate people were to master the figures with which we have been dealing this afternoon. I can reassure the noble Marquess that in this circular which I propose to send to every subscriber there will be a detailed table setting out in each case, as far as it is possible without knowing precisely what the future holds in store for us in the way of rates of interest, what their position is likely to be either in the case of their retaining their interest in India or in the case of their transferring it to this country.

Moreover, those figures provisionally were sent to every subscriber in April, 1936, so that far from their having to decide, as the noble Marquess said, in a few months, they really will have had the whole case, as far as it is possible to put it before them before the actual transfer is made, in front of them for a year, and surely if they are not prepared to come to a decision in a year what reason have we to suppose they would come to a decision in eighteen months? There are a good many persons who are pressing us and have pressed us all the time very strongly to reduce the period during which the transfer of the funds is to be made to the shortest time possible, and it really is in response to their desires that the three years was decided on in the Act. I think that covers the point raised by the noble Marquess. I appreciate how strongly he feels on behalf of these people, but I can assure him that both my predecessor and I feel for them just as much. All that we have been trying to do to the best of our ability is, so far as it is possible to do so, to meet the wishes which they themselves have expressed.

On Question, Motion agreed to.

THE MARQUESS OF ZETLAND

My Lords, I beg to move the first Amendment on the Paper.

Amendment moved— In paragraph 17, page 5, lines 28 to 30, leave out ("from time to time make such alterations in any pension payable out of the said funds as may in his opinion be reasonably necessary in consequence of the transfers") and insert ("having obtained from an actuary a report on any of the funds, make such alterations in any pensions payable out of that fund as may appear to him after consideration of the report to be reasonably necessary in consequence of the transfer of that fund").(The Marquess of Zetland.)

On Question, Amendment agreed to.

THE MARQUESS OF ZETLAND

My Lords, I beg to move that the next Amendment on the Paper be agreed to.

Amendment moved—

Page 5, line 35, after paragraph 17, insert the following new paragraph (with a consequential renumbering of the succeeding paragraphs)— ("18. The fees of an actuary appointed as any time with the approval of the Secretary of State to make a report to the subscribers to, or beneficiaries under, any fund with respect to the position of that fund may to such extent as the Secretary of State deems proper be paid out of that fund)."—(The Marquess of Zetland.)

Oh Question, Amendment agreed to.

THE MARQUESS OF ZETLAND

My Lords, I beg to move that the Draft Order, as amended, be approved.

Moved, That the Draft Order, as presented to Parliament on the 3rd instant a id reported from the India and Burma Orders Committee on Thursday last, be approved as amended.—(The Marquess Of Zetland.)

On Question, Motion agreed to.