§ 4.43 p.m.
§ LORD SHACKLETON
My Lords, I rise to move the Second Reading of this Bill. This is another in a series of measures which have been introduced from time to time to relieve the burden on public service pensioners and their dependants from rises in the cost of living. It is the seventh major measure of its kind since the war, and much the most substantial both in terms of cost and of numbers covered. When account is taken of retired members of the Armed Forces, who will receive corresponding increases by Instruments issued under the Royal Prerogative, the total cost will be some £34 million a year. This may be compared with £25 million for the 1965 Act so that, when full allowance has been made for the increase in the Index of Retail Prices since that Act came into effect—a matter of some 13 per cent.—the new Bill still represents a substantial increase in real terms in the cost of public service pensions.
The growing numbers of public service pensioners have meant that there is also a substantial increase in the numbers covered. The 1965 Act affected about 710,000 persons. The present Bill and associated Royal Warrants will bring increases to over 786,000 pensioners, including 260,000 from the Civil Service, 141,000 from local government, 98,000 teachers, 63,000 from the National Health Service, 63,000 from the police and fire services, 26,000 from the former India, Pakistan, Burma and other overseas services, and 6,000 from a large number of other public offices; and, in addition, 130,000 from the Armed Forces. The field covered is much the same as before, with a few minor extensions of which perhaps the most important is the inclusion within the scope of pension supplements provided under Regulations made by the Minister of Overseas Development 1231 of former overseas service officers who on retiring remained resident in the territory in which they were serving. Until 1965 these pensioners could qualify for supplements only if they were living in the United Kingdom. The 1965 Act extended eligibility to those resident in a third country and we believe that it is now right—and I am sure your Lordships will agree—to take the final logical step of removing the residential qualification altogether.
The main provisions of the Bill are set out in Clause 1 and Schedules 1 and 2. The increases to be provided are set out in full in Part 1V of Schedule 1. Your Lordships will see that they follow a scale descending from 18 per cent. on all pensions which began not later than July 1, 1955, to 2 per cent. on pensions beginning in the year ended July 1, 1967. This follows the pattern of previous Acts, with two important differences. First, the maximum increase has been set at 18 per cent., as compared with 16 per cent. in the 1965 Act, and 12 per cent. with a flat rate addition not exceeding £20 for the over 70s in the 1962 Act. Secondly, the scale, or "escalator" as it is commonly called, falls by 1 per cent. a year from 18 per cent. to 10 per cent. and then by 2 per cent., whereas in previous Acts the annual movement has been 2 per cent., throughout.
The purpose of the new escalator is to enable us to give the largest possible increase to the pensions of longest standing. This was the wish of the pensioners themselves, and while some understandable regret has been expressed that we have not found it possible to give more substantial increases (a point to which I will revert later), the policy of concentrating as much as possible of the available resources on the oldest pensioners has been generally welcomed. The earlier Acts have done much to protect the smaller pensions of longest standing against rises in the cost of living. Nevertheless, while there are inevitably irregularities in the pattern over so wide a field as the public services, and some examples can be found of pensions of long standing that have already overtaken those of more recent date, it remains generally true that the oldest have fared the worst.
Perhaps I may give some examples which show that the Bill will bring substantial 1232 benefits to these people. A clerical officer who retired at the end of 1948 will have had his pension increased when the Bill takes effect by 123 per cent. as compared with an increase in the cost of living of about 114 per cent. For the postman, the increase will be 139 per cent., as compared with the 114 per cent. Turning to a different field, a male graduate teacher who retired at the end of 1950 will receive an increase of about 104 per cent. in his pension as compared with a rise of 100 per cent. in the cost of living. I must admit, though, that the position is still rather less satisfactory at higher levels. The assistant secretary who retired at the end of 1950 will have had his pension increased by no more than 77 per cent. but the Bill will nevertheless give him an additional £247 a year.
It may be objected that, while the increases for the oldest pensioners are substantial, and rightly so, those who have retired more recently are receiving inadequate compensation for the rise in the cost of living in the last few years. I do not deny that there is something in this point, but I believe that its weight can be over-emphasised. Certainly, if resources were unlimited, the argument that no one should receive less than full compensation for the rise in the cost of living would have few opponents. But the resources are not unlimited and we are compelled to consider carefully what our priorities should be.
This must mean looking at the pensioner's total position. It is fair to have regard to the fact that almost all of those who have retired in recent years also qualify for the National Insurance pension when they reach the prescribed age. With this in mind, let us look at the position of the man who retired at the end of 1964. Here, one might think, is a hard case. He retired a little too late to qualify for any increase under the 1965 Act and he will be eligible for no more than 6 per cent. under the present Bill. And since he retired the cost of living has gone up by 18 per cent. But if he were a clerical officer, his total pension income when the Bill takes effect, taking into account the National Insurance retirement pension at the married rate, will be 76 per cent., over three-quarters, of the current pay for the grade—or 63 per cent. at the single rate of National Insurance pension—and he will 1233 stand to benefit from the review in the National Insurance pension rates which is to take place later this year. The pension income of a man retiring from the Administrative and Professional Grade V in local government service at the end of 1964 will be 63 per cent. of current pay (or 55 per cent. if the single rate of National Insurance pension is assumed), and for the principal in the Civil Service, the figures are 54 per cent. and 50 per cent. respectively. None of these figures takes into account the lump sum payable on retirement. I think we can agree that these are still substantial pensions by any standard, as compared particularly, for the most part, with pensions outside. Of course, many people in fact have no occupational pension at all. While the Bill admittedly falls well short of providing these people with full compensation for increases in the cost of living since they retired, I do not think that it can be said that they are being treated at all harshly.
For similar reasons, we have felt it necessary to retain the concept of a cutoff date before which pensions must have begun if they are to qualify for any increase. Here again, I am well aware, as I am sure other noble Lords are, that the increase of 8 per cent. in the cost of living since the cut-off date of July 1, 1967, is by no means inconsiderable. But the fact remains that those who have retired within the last 18 months or so have pensions that are much closer to current levels than the great majority of the older pensioners and when account is taken of the National Insurance pension their total pension income is in most cases a high fraction of the current pay of the grade from which they retired. It is also fair to point out that by no means all of those who have retired most recently will yet be old enough to qualify for the National Insurance pension. Nevertheless, the general argument remains a valid one and I do not think that it could seriously be suggested that larger increases in this whole context should be provided for those below the National Insurance retirement ages than for their former colleagues of more advanced years.
I have said that the Bill as it stands, together with the corresponding increases for the Armed Forces, will cost £34 million a year. This is a very heavy commitment for the Government and the 1234 country to shoulder at the present time, and it is the Government's judgment that this is as far as we can responsibly go now. Therefore, this can only mean that to do more for those most recently retired would frustrate our aim of giving really worthwhile increases to their fellows who are both older and less well off. I cannot think that that would be right. For the same reason, we have felt unable to accept proposals that the qualifying age for increases in pensions should be reduced from 60 to 55. This would add another £6 million to the cost. But I should make it clear that if a pensioner retired because of ill-health, or has become unfit for regular full-time work since retirement, increase is paid regardless of age. A widow receives increase from age 40; and a widow or woman pensioner with a dependant receives it regardless of age. A reduction of the general qualifying age from 60 to 55 would benefit many who are gainfully and fully employed and are much better able to maintain their living standards than are the older pensioners whose working days are over and who are wholly dependent on their pensions. Equally, I acknowledge that there are some who may have found it difficult to get employment. Here again we have to choose and make the best effort to get the right priorities, and I think we are justified in asking the younger men not to press their claims at the expense of those of more advanced years.
May I turn now to say a few words about the future. I must apologise to the House for taking up some time on this matter, but we are unlikely Ito have a Committee on the Bill; and it is an important Bill and we need to look also to the future. Your Lordships will have noted in the recent White Paper, National Superannuation and Social Insurance, the proposal that under the new State pension scheme the Government will be bound to review the main rates of pensions and other benefits in payment every two years and to provide increases which will at least compensate for any rise in price levels since the previous increase. We have always said that the development of any new system for increasing public service pensions must await completion of the Government's review of the social security system as a whole. Now that we have the White 1235 Paper, we intend to get down to a study of the whole question of pensions increase to see whether we cannot devise more satisfactory arrangements than the present system of ad hoc legislation. I am sure that your Lordships and others who have been concerned with this matter, either in some of the civilian Departments or, indeed, in the Service Departments, will understand that this is a fairly complicated task.
While I do not think it wise at the moment to attempt to prejudge the study in any way, I think it is widely recognised that there are major obstacles to parity; that is, to a system of automatic adjustment that keeps the pension up to the level of pensions currently being awarded for similar service. The cost, at the moment anyway, would be prohibitive: it would add £75 million to the cost of the Bill. I acknowledge, of course, that some of your Lordships support parity—and I well understand the force of, and am sympathetic to, the argument—but I think they are also aware of the difficulties. Nor do I think there is any simple solution to be found by adopting partial parity, but if your Lordships wish I will deal with that in my winding up speech.
There are also some fairly obvious objections to the straightforward adoption for public service pensions of a system parallel to that proposed in the White Paper; namely, that the new State pension scheme would be directly linked with the cost of living and this would mean that present relativities between public service pensions would be frozen. While much has been done through the escalators in successive Acts to bring the oldest pensions into a closer relationship with those of more recent date, I doubt whether anyone would want to argue that the position now reached is entirely satisfactory; that relativities need no further adjustment and that all that remains to be done is to adjust all pensions in step with the cost of living.
My Lords, I think I have said enough to demonstrate that there is no simple solution to this problem. We have to study it in very great depth indeed, and it would be misleading if I were to suggest that we could reach some conclusions within a short period of time. This is a job which must be done very well 1236 indeed, and it is more important that it should be done well than that it should be done quickly. We recognise, however, that there is general dissatisfaction with the present situation in which the Government, while keeping the position of these pensioners under continuous review, have accented no commitment to take any action at any specific time. This is again a matter that has been argued about before, and therefore I am glad to be able to repeat the undertaking given by my right honourable friend and my honourable friends in another place during the earlier stages of the Bill, that we shall review the change in the purchasing power of the pensions to which the Bill applies as at April 1, 1971, and if that purchasing power has been reduced by more than 4 per cent. the Government undertake to make a statement indicating the extent of the reduction in the purchasing power of the pensions and what action they propose to take.
I think it is right that we should accept this obligation and I am sure that noble Lords, like the noble Lord, Lord Bourne, who has been so interested and active in this field—and we all recognise the work he has done in relation to officers' pensions—will agree that we must accept the obligation to take the initiative in bringing the matter before Parliament after a reasonable period. We shall be able to take stock of the position if there is a considerable rise in the cost of living. There is no commitment to introduce further legislation in 1971 and I am sure that the Opposition, as they did in another place, will agree that it would be wrong to bind the Government in advance to that extent. But the pensioners now know that Parliament will have an opportunity to consider their position in two years' time without their having to mount the sort of campaign which I know they must have found rather distasteful in the past, and I think it will be generally agreed that this is a useful step forward.
In conclusion, may I say that the people who are covered by this Bill are people who have given long and honourable, and in some cases gallant service to their country during their working lives, who are now dependent on us to see that their standard of living in retirement is not severely eroded by rising prices as the 1237 years go by, and who deserve well of the Government and of Parliament. I do not say that the lot of the pensioners will be entirely satisfactory as from April 1 next, or that if we had unlimited resources at our disposal we should not prefer to go a good deal further. But given the situation as it is, and accepting that it is not just as we should like it to be, I believe that this Bill offers a major improvement in the position of many of our pensioners and, in particular, those who have suffered most from rising prices in the past, and I do not think that at this moment we could have proposed going further in present circumstances. Therefore I commend this Bill confidently to your Lordships. I beg to move.
§ Moved, That the Bill be now read 2ª.—(Lord Shackleton.)
§ 5.5 p.m.
§ LORD BROOKE OF CUMNOR
My Lords, this is a subject of almost impenetrable complexity, as I discovered to my cost when it fell to me to carry through another place what became the Pensions (Increase) Act 1956. When I started on the framing of that Bill I began in the same optimistic spirit which I expect has animated all Ministers in all Governments who have thought of preparing a new Pensions (Increase) Bill. One began with the idea that the sensible thing to do would be to cut away all the old jungle of previous Acts and to start afresh. Like all Ministers concerned, before and since, I discovered that was quite impossible, unless one was to create all kinds of anomalies which would be intolerable in practice. That is part of the difficulty here. One not only has to do justice between different classes of people but also between one individual and another, without the creation of new anomalies. In the 1956 Act I was successful in making two new departures which have been accepted in all subsequent Acts; that is to say, in the first place to extend pension increases right up to the highest pensions, and in the second place to get rid entirely of the means test which was a feature of the early post-war Pensions (Increase) Acts.
We are all grateful to the noble Lord the Leader of the House, no doubt in his capacity as Minister of the Civil Service, for taking the trouble to come down to the House and explain the Bill to us this afternoon, and it seems to me that 1238 his explanation was not a word too long. This is an important Bill for three-quarters of a million people, and it is right that Parliament should take proper cognisance of it. If I may say so, I did not quite understand his argument that because this Bill is going to cost £27 million a year, according to the Financial Memorandum, that proves that it is more than making good the erosion caused by the rise in the cost of living since the last Act. Maybe I have failed to follow the arithmetic; if so, I think he will forgive me, because none of the mathematics of this subject is easy.
The noble Lord also said that this was the seventh Pensions (Increase) Bill since the end of the war. From the figures given in the Explanatory Memorandum, I make it the eighth. There were five Conservative Pensions Increase Bills, and I think he will find that this is the third introduced under a Labour Government. The important fact is that under all Governments it has been customary for the Opposition to help to speed Bills of this nature on to the Statute Book, and I promise him that this will be no exception. This is not certified as a Money Bill but it is all about money. The noble Lord said that there might not be a Committee stage. I would remind him that before now Pensions (Increase) Bills have been amended in your Lordships' House, but of course I accent at once that it would be inappropriate for your Lordships' House to seek to make substantial changes in the financial arrangements. However, if there are minor improvements which should be considered I hope they will be brought forward. The noble Lord also made it clear that this Bill covers only civilian pensions and does not extend to Service pensions. They are dealt with outside the scope of legislation by Royal Warrant, though it is customary that what the Royal Warrant contains shall be in line with the decisions of Parliament on the civilian legislation.
I have a few questions to ask. The increases under the Bill are to be payable on April 1; can we be assured that they will actually reach the pensioners without delay? Are all the necessary preparations being made to get the new and increased pensions in payment from the beginning of April? Most of the pensioners concerned will be waiting eagerly for them, for, as the noble Lord 1239 indicated, there has been a 13 per cent. rise in the cost of living since the last Pensions (Increase) Act took effect on January 1, 1966. One can see that the Bill quite rightly seeks to give greater help to the older pensioners, and the scale set out in the Schedule runs from 18 per cent. for those who retired 14 years ago and more to 2 per cent. for those who retired two years ago.
One notices that the Government have gone back entirely to the percentage increases, whereas the Conservative Act of 1962 introduced what I thought was a good new idea of granting as well as percentage increase a flat-rate addition of £20 to all the older pensioners; I mean not those who had retired the longest, but those over 70 years of age. Would it not have been a good plan to extend that idea and give special help to the older pensioners by increasing that flat-rate £20 to £30 or £40 to everyone over 70? Why is it that the fiat-rate addition has not been followed up in subsequent Bills?
I, for my part, am not going to advocate parity; that is to say, bringing all pensions up to the pension which the pensioner would receive if he retired now. I suppose I know too much about its complications. My experience is that when one looks into that one finds it impossible to apply, and in so far as it was possible it would create fresh anomalies between one pensioner and another. That is unfortunate, because it is the simple solution which commends itself at first sight as the fair thing to do.
I think the Government should try to do still more for the people who retired many years ago. The noble Lord gave examples of some smaller pensioners who retired 20 years ago and have received relatively good compensation for the erosion of their pensions by the rise in cost of living. But he was very frank and honest with the House, as one would expect, and he admitted that there were others who were not so fortunate. It is the older pensioners who have been hit tragically hard by the rise in cost of living. In addition they can see their successors in similar posts drawing far higher pay now than they ever did and thereby qualifying for much higher pensions when they retire.
1240 The second class of pensioner I want to mention are some of the most recent. I think the last Pensions (Increase) Act awarded no increase to anyone who retired after April 1, 1964. These pensioners will have received no increase at all in their public service pension, until this new Bill comes into operation and it is increased from April, 1969. Since April, 1964, I think the noble Lord will agree, the cost of living has risen by over 21 per cent., so the pensioners who retired in 1964, at any rate those who retired after April 1, 1964, have already had the purchasing power of their public service pensions eroded to that extent. Yet this Bill offers them at best only an 8 per cent. increase.
Those who retired in July, 1967, have, as the noble Lord frankly admitted, already suffered considerable loss of purchasing power through inflation, and this Bill will do nothing for them at all. An Amendment to ameliorate that by altering the cut-off date from July, 1967, to July, 1968, was moved by the Opposition in another place, but it was rejected on a Division, and as it is a money matter I think it would be useless to reopen it here. I would ask that future Pensions (Increase) Acts will realise the hardships liable to be suffered by those retiring just after the cut-off date, and will therefore bring the cut-off date nearer still to the date of introduction of the new Bill.
I should like to ask why July 1 is taken each time as the critical date. Surely among public service pensioners the month of July is the commonest date for retirement. It must be the commonest date for teachers, who, as the noble Lord said, represent a very substantial percentage of those who stand to benefit. When next a Bill is in preparation—or whatever may take its place under the new thinking—I wonder whether October 1 might be considered as a better time of year than July 1 for what I have called the critical date. That might be a simple way of somewhat lessening the hardship to which I have referred.
I am not proposing to table Amendments for the Committee stage. The Bill was very thoroughly worked over in another place, and I should like to pay tribute to the exemplary manner in which 1241 Mr. Patrick Jenkin, leading for the Opposition there, did his work. I know the Government spokesmen themselves, for their part, took great trouble to deal with the points raised in Committee. I have read it all, and it seems to me to have been a very thorough examination of the Bill. That being so, it would be inappropriate to repeat the same examination here. One welcomes the Bill for what it does, and yet one cannot help noting how far it falls short of the hopes which the Prime Minister himself raised in the minds of public service pensioners during the 1964 Election campaign as to what a Labour Government would do. He said then in a letter to a public service pensioners' organisation:We have also called for public service pensions to he linked to some economic indicator, so that the pensioners are not only compensated for rising prices, but also receive their full and fair share in rising national prosperity.Not only have they not received their full and fair share of rising national prosperity, if any, but the figures quoted show that the majority will not have been compensated for rising prices, even when this Bill takes effect, the second Increase Bill which the Government have introduced.
I have one other question. Can the Government say whether it is the intention of the nationalised industries to follow up this Bill by producing similar increases in their own pensions? Will the Government encourage them to do that? I ask this with feeling, especially for the railway superannuitants. It so happens that I am one of the few surviving ex-directors of the pre-nationalisation main line railway companies, and therefore I am specially anxious to see the older railwaymen fairly and generously treated in present days.
Finally, let me say how glad I am that the Government, in response to Opposition pressure in another place, have agreed that there should be another review in April, 1971, if the cost of living has risen by 4 per cent. or more by then. That was the pledge to which the noble Lord drew attention at the end of his speech. By April, 1971, there will be a new Government in power, which I am certain will fulfil its predecessor's undertaking, and the Conservative Party has 1242 indeed pledged itself to carry out further reviews every two years.
Meanwhile the Government, as the noble Lord has said, are pressing forward with a fresh inquiry to see whether these matters can be dealt with in any other and simpler way. I expect he has in mind that there might be some device other than repeating ad hoc legislation that has to be taken through Parliament, to ameliorate the situation for public service pensioners affected by the rising cost of living. As I said, all this up to now has been done by common consent between Governments and Oppositions, and I am sure that if this Government go out of office before that inquiry is completed the work done on it will become available for their successors. I am not altogether hopeful that we can bring about, any of us, a radical simplification here, but I entirely agree that it is well worth making yet another effort to try to reach that desirable end. I believe that there are only two ways to set limits to the hardship suffered by these public service pensioners. One is to bring inflation to a complete stop. The other is to ensure the upward adjustment of public service pensions at closer intervals than has been the case up until now, and that is declared Conservative policy.
§ 5.23 p.m.
§ LORD BOURNE
My Lords, I will try not to cover the same ground as has already been covered by the noble Lord the Leader of the House and by the noble Lord, Lord Brooke of Cumnor. At the outset I have to declare an interest, in that I am a public service pensioner and also Chairman of the Officers' Pensions Society, which has 33,000 retired members of the Armed Forces, including 4,000 widows.
I will try to bring out two or three points. The first is parity; the second is regular reviews; and the third is cases of real hardship and unfairness. Lastly, I will make some suggestions. I will not re-define "parity" because we all know what it is. The reason it takes care of these awful anomalies which have been mentioned, and which were described in the very thorough debate in the other place (I agree with the noble Lord, Lord Brooke, that the Members of another place devoted great attention, great care and considerable skill to this 1243 highly complicated subject) is that it is designed to take care of erosion of pensions by rises in prices and to provide also for a rise in living standards as reflected in the pay of the rank and file of the day.
I need not remind your Lordships that the Prime Minister said exactly as he was quoted, but he pointed to these two things before the Labour Party came into power. Consequently, I was very glad, when reading the recently published White Paper, National Superannuation and Social Insurance to see that these two elements were specifically mentioned in paragraph 101. I think perhaps I ought to quote what it says, because it is very much to the point. First:The increases, which will always come into operation in the autumn, will compensate for any rise in price levels since the previous increase.And lower down:Pensioners and other beneficiaries will also continue to share in the nation's rising living standards.My Lords, it could not be better expressed, and I am thankful to see that parity is coming at last in the national earnings-related scheme.
I think it would be unfair on public service pensioners not to mention that seven of our allies—West Germany, France, Italy, Luxembourg, Belgium, Holland and the United States of America—are able to afford parity: not exactly, but for all practical purposes. We are told that we are in a period of economic distress and cannot afford it; that we have to understand that and must put up with these anomalies. I have been told many times, when I have pressed the Government, that when one takes account of National Insurance as well as the public service pension our pensioners are equally well off. It does not happen to be true. What defeats me is why the Government should provide a system of National Insurance based on parity, and something quite different for the public service and the Armed Forces. I have never been able to understand that. I should like to have it explained.
Now I come to regular reviews—and at last, after eleven years, we look as if we are going to get them. Ever since the Grigg Report was adopted and endorsed by Parliament for biennial reviews of serving pay (incidentally the Civil Service, 1244 I think, have their pay reviewed every year; the Armed Forces every two years), we have asked for similar treatment for retired officers and their widows; but we have not got it. Now, it is to be statutorily obligatory, under the new earnings-related scheme—which will presumably pass into law pretty soon. I will not quote the right honourable lady, the Paymaster General, on this point because she has already been quoted, but I should like to quote what she said a little later on in the debate in the other place. She expressed the hope thatthe work now going on … will ensure that we can avoid having to come to the House from time to time, whichever Party be in power, with a Bill of this kind. We want to replace that system with something much better, with something which guarantees to the public service pensioner regular increases when he ought to have thern."—[OFFICIAT REPORT, Commons, 17/2/69, col. 136.]I think the noble Lord the Leader of the House mentioned this point, but I give your Lordships exactly what the Paymaster General said in another place because it is very much what we have been waiting for. I sincerely hope that the promised review on April 1, 1971, will develop into regular reviews for retirement pay.
I think at this point I ought to mention the lost three and a half months, which have not been mentioned. Previous Pensions (Increase) Acts have become operative on January 1: this one becomes operative on April 1, and is based on index figures for the middle of December, 1968. If we do not catch up, either now or when the next review takes place, the three and a half months which are not provided for at the moment, we shall have lost this for ever. It will be at least 1.5 per cent.—probably a little more.
The noble Lord the Leader of the House gave some examples of how pensions are, in many cases, keeping pace with the cost-of-living increases. Of course, I accept that. But as the system is highly complicated, and absolutely bristles wih anomalies, may I give a few examples in the opposite direction? Amendment No. 4, which was brought in in another place on Third Reading, was designed to level pensions, and had the following rates of increase—and it will be seen that whereas the rates in the Bill go steadily downwards, in that Amendment they increase: 25 per cent., 18 per cent., 14 per cent., 20 per cent., 10 per cent., 5 1245 per cent. In other words, there is a jump in the middle to take account of anomalies which unfortunately exist and which, historically, are not our fault.
I should like to give three examples in the opposite direction. The noble Lord, Lord Gridley, is to speak after me so I shall not give examples of overseas pensioners, with whom no doubt he will be dealing. I shall give examples as they affect members of the Armed Forces, and in many cases they are paralleled by civil servants. A major who retired pre-Second World War with a pension of £407 per annum has received an increase of 125 per cent., which brings his pension to £917 per annum. During this time the cost of living has risen by no less than 223 per cent. Unless he has private means, he will therefore have had to lower his standard of living by about 50 per cent. And, incidentally, he would not be entitled to the National Insurance pension. On the other hand, the man who retired twenty years later will receive increases which approximately keep his pension in line with the cost of living. To make matters worse, under this Bill, he will on April 1, 1969, be getting an increase of £4 more than the pensioner whom I have just quoted. What possible justice can there be in this? Why must the Government continue to penalise pre-war pensioners and their widows, most of whom are over 70?
A captain in the Army, a junior officer, under the 1919 Code (which covers some 6,000 pensioners and their widows) after the 1962 Pensions (Increase) Bill was £99 behind an equivalent officer on the 1956 Code. To-day, after the new increase provided for in this Bill he is £130 behind, and so the gap has widened. This unfairness applies to most officers and their widows on the 1919 Code. It relates to people who retired pre-war. In the case of a major-general there is a widening gap of some £29, and he is getting further and further behind. To take a different example, that of a provincial commissioner in Tanganyika, an example which was given in Committee in another place, he is now drawing a pension of £1,740, compared with the man who retired in 1960, some 15 years later, who is drawing £3,354—almost double. I think that I have given enough examples to prove that the anomalies go deep. Although I accept Lord Shackleton's 1246 contention that many people are keeping pace with the cost of living, the men and women I have mentioned who retired pre-war are not. If they do not catch up now, they never will.
I should like to mention two special categories of widows who are hardly treated. First of all, there are the widows who did not marry until after their husbands retired, and who get nothing. Then there are the widows who were married to serving officers and were widowed, who then married again and were widowed a second time. They get nothing unless they go through a means test. The noble Lord, Lord Brooke of Cumnor, said that the means test had been abolished, so those widows must be in an exceptional category. One is always told that a widow can draw supplementary benefit, but it is hardly fair that the widow of a lieutenant colonel who was killed in World War I has to draw supplementary benefit in order to live.
I suggest that there is only one fair way of treating these older men and women. Although they are very elderly, and, therefore, most of them do not draw National Insurance pensions or get the terminal grant which was introduced much later, they are not dead yet, and we ought to help them by a levelling up based on stages, which will be called partial parity. I know that there are objections to this suggestion, bat the fact remains that a levelling up would remove the anomalies up to 1956, if not afterwards. I suggest that Parliament should remove these unfairnesses. I accept the generous intention of the Government in spending £34 million per annum, of which £7 million goes to the Armed Forces, and that the Government have taken a great deal of trouble over this new Bill. Nevertheless, it still leaves unresolved the unfair matters which I have mentioned.
I suggest that the Government should level up public service pensions to 1956. I believe that they have carefully considered this matter, and they no doubt have good reasons for rejecting it, but the chief consideration has been that of cost. It will cost about £1¼ million, probably more, for the Services, which is not a great deal of money. If it cannot be done because of the expense, then the next best thing is to level up to 1945, thereby removing all anomalies up to that date. Involved in this bracket are about 40,000 1247 civilians and 55,000 members of the Armed Forces. That would cost only £300,000 for the Armed Forces. It is chiefly the officers who are hard hit.
If these two suggestions are impossible because this is a money Bill and we are not able to make this kind of Amendment, or because the Government are unable to spend money on that scale, I am inclined to agree with the noble Lord, Lord Brooke, that we ought to increase the fiat rate grant by £20 for the older people who are quite defenceless in this matter and deserve our sympathy. It is nearly the last chance to help these elderly people. It is getting late, but we ought to take this chance. I have suggested these figures to relieve the hardship, if the levelling up is impossible.
§ 5.38 p.m.
§ LORD GRIDLEY
My Lords, as the noble Lord, Lord Bourne, has said, it is customary in your Lordships' House to declare one's interest in any subject of debate. I have an interest to declare as a former Colonial civil servant now drawing pension. I am also a member of the Council of Her Majesty's Overseas Services Pensioners Association, and we come into contact with the problems of pensions on varying matters.
I was interested to hear the tribute paid by the noble Lord the Leader of the House to the people who are affected by this Bill and I shall not repeat what other noble Lords have said. There is great force in what the noble Lord, Lord Bourne, said about the position of pensioners who started drawing their pensions in 1945 and who are not affected by the present proposals. There is no doubt that a great number of persons in that category are suffering very much to-day.
I went into pensionable service in 1928 or 1930, and people who elected to serve in the Colonial Service, in the Armed Forces, in the postal service in England or in the police force, elected to go into service of that kind expecting not to run the risks which they might have to face if they tried to attract a larger salary in industry. As a corollary of that, they accepted a lower wage or salary with the security of a pension. What I am most concerned about in this post-war age is that since 1945 it has been customary to look at the conditions of people in this country, not necessarily those in 1248 Government service or similar employment, who were never considered for a pension 25 or 30 years ago. I sometimes think that, in spite of the humanitarian ways in which we look at these matters, we overlook the conditions under which people first took up service in this country or abroad.
As the noble Lord the Leader of the House said so kindly just now, there have always been very high conditions of service to be followed. Pensionable status is never automatic. If a person is in the police force, he may be on probation for a certain number of years and in every way has to be worthy of his pension. He has to be recommended for pensionable service and has to satisfy his authority that he is the right type of person to draw a pension. It is that kind of person whom we are considering under this Pensions (Increase) Bill. I welcome what the Government are doing. I agree with the remarks made by the noble Lord, Lord Bourne, and I appreciate the observations of my noble friend Lord Brooke of Cumnor. We accept this Pensions (Increase) Bill, and we are grateful for the assurance that there will be further reviews of the cost of living position in 1971.
§ 5.44 p.m.
§ LORD SHACKLETON
My Lords, I am much obliged to noble Lords for the reception which they have given to this Bill and for the helpful and constructive remarks that have been made. Running through all the speeches was the feeling that, whatever we may have done for some—and I think we all agree that some are fully compensated—there are others about whom we should feel a good deal easier in our minds if we had done more. I should like to pick up a number of the points that have been made. First of all, I appreciate what the noble Lord, Lord Brooke of Cumnor, had to say about myself and the fact that I have come down to the House to present my own Bill. It is happy that I have this double-hatted role. I also appreciate the tribute which he paid to my right honourable and honourable friends in another place. It was unusual for them to find themselves in the position, with which we are so familiar here, of having to steer somebody else's Bill through the other place, which they did extremely well.
1249 While I am paying tributes, it would not be wrong, relevant to the remarks of the noble Lord, Lord Brooke, about whether the necessary arrangements will be made, for me to pay a tribute to those who have the responsibility of working out these schemes—a most onerous job. I am very conscious that my own officials who have been involved do a really brilliant job of steering a way through the utmost complexities. Nearly all the arguments which have been advanced to-day require some sort of decision, and this very difficult area of decision and of then applying it as a result of inter-departmental discussion—because everybody is fighting to do the best he can—calls for great skill and perseverance.
As a former Paymaster General, it was interesting to me to visit the Crawley headquarters of the Paymaster General's Department. Much of the burden is thrown on the people there, but how extraordinarily efficiently they cope with it!I have always wanted to pay a tribute, since I saw that rather unusual group of men working with their own computer. When I say "their own computer", I do not suggest that they built it themselves, but they certainly had to learn how to operate it. It is a very skilled task to make all these payments, conscious that it must be done in time and that people must receive them. Generally, the public service, both there and elsewhere, renders a very real service. We are apt to grumble about the fourpenny post and that sort of thing, but here is an area where pensioners and others get paid despite the complexities. The position is very much better now. During the War, when I was promoted my pay stopped altogether, but thing go smoothly now.
§ LORD BROOKE OF CUMNOR
My Lords, may I, too, be allowed to join in this tribute, because I am also a former Paymaster General?
§ LORD SHACKLETON
My Lords, I rather thought the noble Lord was. He probably did not, however, have the opportunity to visit the Department in their new home, to which they have recently moved.
There are a number of interesting points and I shall try to answer as many as I can, but if I leave any unanswered I shall, it necessary, reply in writing. First 1250 of all, I said that this would be the seventh major Act. The noble Lord has made me confused, but I think I said it was the seventh. The Act of 1954 was a very minor amending Bill so, technically, I defend my position. Let me now deal briefly with the question of flat rate additions. This also ties in a little with the position of very old pensioners of long standing. The truth of the matter is that the flat rate additions can produce some very awkward anomalies, and the pensioners themselves did not like the flat rate addition in 1962. Indeed, the Opposition in the Commons argued against special increases to give extra assistance to specified groups of pensioners. One can argue about every system but, on balance, I am convinced that percentage increases are the fairest system.
The noble Lord, Lord Brooke, asked why July 1 should be the date chosen for steps in the escalator. I have some very full reasons which are essentially technical, but if the noble Lord wishes I will provide them. Basically, however, the date is determined by the interval that it is necessary to interpose between the effective date, April 1, and the cut-off date, 21 months earlier. There is also advantage in moving from the April date in the previous Acts, since those who retire just after April will on this occasion fall the right side of the line. When the noble Lord has studied what I have said, and when I have re-studied it, I think we shall understand the reasons for this date.
On the subject of nationalised industries, I appreciate the noble Lord's concern. This is a matter for the Boards themselves, and they have to reach their own decisions. They will no doubt note the increases provided by the Bill. It would be wrong for the Government to issue directions to the Boards in this matter, but the Boards will no doubt have noted what the noble Lord and others have said. The noble Lord referred to the hopes expressed by my right honourable friend the Prime Minister. Let me say two things on that point. Reestablishing a new and comprehensive system of pensions in the national field is a very complex task, and I am sure nobody knows that more than the noble Lord, Lord Brooke. It is necessary to produce a scheme for public service pensions which will be in harmony with 1251 this; and although one would have liked to see an advance to the comprehensive scheme earlier, I am afraid it is necessary that we first get published the major reorganisation which I mentioned and which is contained in the White Paper issued by my right honourable friend Mr. Crossman, and then work on adapting this particular scheme, like other occupational schemes, to the new system.
I do not think it is quite fair to blame the present Government for not making good all the earlier erosion. I would say just this to the noble Lord, Lord Bourne—and this is not to diminish the force of his arguments. Since October, 1964, the cost of living has gone up by 19 per cent. Since that same date, 1919 Code pensioners had an increase of 16 per cent. in 1965 and will have an 18 per cent. increase under this Bill. Although this does not restore the position—I acknowledge what the noble Lord has said—it improves it relatively.
The noble Lord, Lord Bourne, spoke about parity, and even argued in favour of partial parity. I would only say to the noble Lord that there are powerful arguments against it. I do not believe it would be a simple solution, as I am sure he does not, and I can well understand his trying to find some method. But if we adopted some such date as 1956, we should get an even more absurd pattern as a result. We have already noted the variation in the pattern of pensions that is to be found over the public services as a whole, and there is no one year in the past which offers a logical base line free from anomalies. In fact, the anomalies would become more serious and more acute than at the present.
For example, with the enactment of this Bill and its parallel—I take a civilian example—clerical officers who retired between 1939 and 1948 will already have pensions at about the 1956 level; and even at the executive officer level (which is roughly equivalent to a captain in the Army) the gap is quite small—only a matter of 2 per cent. or so. I am not suggesting that their pensions are the same, because, of course, retirement ages are different, but it is widest at the highest level—and these are the pensions which would stand to gain the most. I do not think that would matter in the context 1252 of full parity, and I accept the arguments which the noble Lord, Lord Bourne, made on this point. Does the noble Lord wish to interrupt?
§ LORD SHACKLETON
But so long as resources are restricted, many of the small pensions must still remain some way behind current levels. It seems doubtful whether it would be right to concentrate this proportionately large increase on pensions, many of which are substantial by most standards and very substantial by some of the examples which the noble Lord himself mentioned.
My Lords, I have here a number of figures which I could quote comparing the different rates and showing how some people are better off in relation to the increase in the cost of living. I have particular examples which show that even those who retired on, say, December 31, 1956, are in fact better off than they were in relation to the cost of living. But it would not help any of us very much if I merely tried to show that some people are as well off or are better off, when we know that in fact there are those who are not better off. I would therefore say to noble Lords that we have considered very carefully what is right. We acknowledge the anomalies in the system; and I have noted again the position of overseas pensioners. The noble Lord, Lord Gridley, did not make any particular points beyond stressing the fundamental principle.
I would only say, therefore, to all noble Lords, that we all wish that more could be done. We all hope that the review, which is a very complex one, will be conducted as quickly as possible and that in the future Governments and the public as a whole will recognise their responsibilities in this area. I will not branch off into the field of incomes policy and some of these difficulties, but it is important, of course, not only that Governments should recognise this and do something but that other citizens should not just support it in the abstract but genuinely recognise that they have obligations in this area. But that leads me into a field where we are seeking more social justice—
§ LORD BOURNE
My Lords, I hope the noble Lord the Leader of the House will forgive me, but he is getting very 1253 near the end of his speech and I wanted to say something before he finally wound up the debate. May I go ahead?
§ LORD BOURNE
The noble Lord the Leader of the House quite rightly mentioned that my suggestion for partial parity, levelling to 1956 or levelling to 1945, which would be a cheap operation, would introduce still more anomalies than we already have—and, of course, that is a disadvantage. It is a matter of opinion whether there are numerous anomalies or not, and I have to accept the Government's ruling on that. But I should like to make the point that this is the last chance to help these people before they are wrapped up and slightly forgotten in the new pensions earnings-related scheme. It does not affect them, and they are very liable to be forgotten. In their interest, I would suggest that it does not matter about introducing quite a number more of anomalies between now and April, 1967. I would put up with the anomalies, because we have been living with them for goodness knows how long and I think that a few more would be very acceptable if it were in their interests. I like the suggestion of a flat-rate increase very much—perhaps another £30.
§ LORD SHACKLETON
My Lords, we could obviously discuss this matter at very great length, but, basically, if it were possible to do more for them there are other ways in which I think it could be done more effectively. It might well be better to increase or vary the amount of the escalator rather than to do something which further increases the anomalies and disposes of some of the limited resources in directions where it would not be of as much value. I accept the noble Lord's concern for those for whom, as he points out, it may be too late to do anything, and I will certainly consider what the noble Lord has said. He is very active in representing his views to the Government, and I know that the Government listen, and listen sympathetically. People do not just say, "What a nuisance—here he comes round again"; they recognise his concern. I can only say to the noble Lord that I have certainly taken a note of what he has said, and I hope that the proposals which are contained in this Bill will go some way 1254 towards ameliorating the lot of those whose need is very great.
§ On Question, Bill read 2ª, and committed to a Committee of the Whole House.