§ 2.52 p.m.
THE LORD PRIVY SEAL (EARL JELLICOE)
My Lords, with your Lordships' permission I should like to make a Statement about public service pensions. We have long felt that the arrangements for reviewing public service pensions are inadequate and in need of radical reform. As your Lordships know, during the passage in another place of the Pensions (Increase) Act 1969 commitments were entered into by both the then Government and the then Opposition to review the change in the purchasing power of the pensions covered by the Act as at April 1, 1971. The present Government will honour this undertaking and will set in train such a review next April to establish the appropriate level of increases down to that date for every type of relevant public service pension. We will carry this review through as quickly as possible, aiming to pay the increases with effect from September 1 following. Thereafter, biennial reviews will take place with a view to making increases, if appropriate, in September every other year.
To provide for these new arrangements for increasing public service pensions and to improve both the machinery and the basis for calculating increases, a Bill will be introduced this Session. Full details must await publication of the Bill, but it will include three main features. First, provision will be made to maintain the purchasing power of public service pensions by a system of biennial reviews. The first of these will be in respect of the period from April 1, 1969, to April 1, 1971. Secondly, because the increases awarded under previous Acts have been uneven in their effect, many pensions will require a once-for-all increase to bring them up to an equitable base-line from which the biennial reviews can start. All pensions which began before April 1, 1969, will need to be examined for this purpose, and not merely those which began before 1956. The Bill will provide 929 for this. Thirdly, power will be sought to enable us to reduce, within the lifetime of this Parliament, the minimum age at which pensions may be increased.
The Armed Forces, my Lords, will not be covered by the Bill but my right honourable and noble friend the Secretary of State for Defence will be making similar provision for them by Prerogative Instruments.
§ LORD SHACKLETON
My Lords, I should like to congratulate the Lord Privy Seal, who I know feels strongly on the subject of public service pensions. I think that his Statement, in all except one respect (and he will know at once to what I am referring), is not only satisfactory but identical to what the previous Government had officially communicated both to the Staff Side of the Civil Service and to the Armed Forces, and in particular to the noble Lord, Lord Bourne. But I should like to ask one absolutely vital question. The noble Earl said:Secondly, because the increases … have been uneven"—and I absolutely agree; we are all agreed on the desirability of a more rational system—… many pensions will require a once-for-all increase to bring them up to an equitable base-line.Up to that point the noble Earl is strictly in line with the officially announced policy of the previous Government, approved by Cabinet. But what he does not state is what the base line is.
The noble Earl will know, of course, that I officially communicated all this to the Staff Side, and they will be anxious to know now whether the Government intend to vary the official policy which was laid down by the previous Government on this matter, in which we made it clear that the base line would be designed to bring pensions—that is to say, all pensions—up to their original purchasing power as at April 1, 1969. Curiously enough, it is not with the older pensions but with some of the post-1956 pensions that this is necessary, and where inflation has bitten so deeply. We also undertook to review pensions in April, 1971. I should be grateful if the noble Earl could tell us what the equitable base line is, and whether it is to be that which the previous Government decided.
Is the noble Earl also able to tell us what other improvements are envisaged? 930 He will realise that we were in process of carrying out a major review designed to achieve greater transferability, but this was against the background of Mr. Crossman's pension scheme, which has now been destroyed, and transferability will be less easy. There were proposals for improvements in widows' pensions. If the noble Earl cannot answer that question, I would beg him, as I know he is sympathetic, to press on with these particular improvements. The existing rate of a widow's pension is too low.
§ LORD WADE
My Lords, may I join in thanking the noble Earl for making this Statement? Some years ago, when I was in another place, I introduced a Private Member's Bill to put on the Statute Book precisely this proposal for biennial reviews, but it was rejected by the then Conservative Government. I am glad that this change of heart has taken place. On the second point which the noble Earl made, may I ask him whether this introduces the principle of parity of pension irrespective of the date of retirement? If not, to what extent does it differ from the principle of parity?
My Lords, I should like to thank the two noble Lords who have just spoken for the general welcome which they have given to my Statement. I should like to echo what the noble Lord, Lord Shackleton, has said very kindly in my regard. I am very well aware, within the bounds of constitutional propriety, of his own interest in this matter, and of the contribution which he made here. But he did say, I think, that, broadly speaking, our proposals followed not too unclosely those which the previous Government had in mind. I should like merely to remind him that in one respect they differ from those proposals, in that we propose to reduce the qualifying age for public service pension increases, which was not the intention of the previous Government so far as I know, from 60 to 55 years in the course of this Parliament. This is an important and, indeed, quite costly change. I shall come back, or try to, to the points which the noble Lord, Lord Shackleton, made. But in answer to the noble Lord, Lord Wade, I should like to say quite flatly that this does not introduce the principle of parity, as to which both major Parties in this country, so far as I know, have said that although this is something which 931 in an ideal world they might like to see, they are not able to admit as a principle.
In answer to the main point put to me by the noble Lord, Lord Shackleton—that is, as to the proposed base line—I should like to make it perfectly clear that our proposal is that the base line is 1969, but that we recognise that special measures may be necessary for bringing up to date the very oldest pensions. I think I must ask the noble Lord to await the details in the Bill in that respect, but we recognise that this is the case. The general intention is that pensioners, whether they retired before or after 1956, will have the original purchasing power of their pensions restored to April 1, 1969, subject, of course, to the biennial review, which will bite as from that date.
§ LORD SHACKLETON
My Lords, I think it is a pity that this undertaking is not in the Statement. Perhaps the noble Earl was keeping it up his sleeve. The previous Government did give a formal undertaking; and I take it from what the noble Earl has now said that he is adopting that part of the previous Government's proposals. Let me say that I welcome the additional proposals on minimum age. We were in negotiation on a number of these points; but I make no Party point out of that. I agree with him that neither Party has been prepared to consider parity at this stage. Will the noble Earl now say categorically that this will be "inflation-proofing"?—because if ever anything is relevant in this day it is "inflation proofing". This was the important change; the base line was to be 1969 and then in due course 1971. I take it that that is the case.
My Lords, I can give that categorical undertaking to the noble Lord; although again I say that he must await the details of the Bill. Our proposals are not in all respects the same as those of the previous Government. Indeed, we consider them in a number of technical respects to be quite considerably better. That is quite apart from the proposal to reduce the age from 60 to 55.
§ LORD SHACKLETON
My Lords, the noble Earl does not know what our detailed proposals were. We had not produced the Bill.
Well, my Lords, the noble Lord went into considerable detail in his letter of June 3—a significant date—to Dr. Barnes of the Public Services Pensioners Council. Therefore I am fairly well aware of the details which were in the Government's mind just before the Election.
§ LORD SHACKLETON
My Lords, I must say that I hope that the noble Earl does not think that June 3 was a significant date. He knows that these proposals had been "cooking" for a long while and would have come out in due course.
§ LORD ROBBINS
My Lords, may I ask the noble Earl whether the Statement he has just made implies acceptance of the general principle that pensions in general should be adjusted pari passu with changes in the cost of living?
§ LORD ROBBINS
My Lords, following that question, may I ask the noble Earl if he would elucidate what is to happen to pensioners in the two-year interval between reviews?
My Lords, here again I think that the noble Lord should await the details of the Bill. I do not think that we should go into any great detail at this stage.
§ LORD BYERS
My Lords, reverting to the question put by my noble friend Lord Wade, may I ask what roughly is the cost of the Government's proposals and how much more would it cost to get parity?
My Lords, at the present time I cannot say what the cost will be as from April 1, 1971. A 1 per cent. increase in the price index means something like an additional £3 million a year. The present cost of these proposals (excluding the proposal to reduce the age) is in the neighbourhood of £50 million a year. The reduction in age would cost about £7 million. To move to full parity would cost a great deal more. by a factor of two.
§ LORD POPPLEWELL
My Lords, could the noble Earl say whether railway superannuates and pensioners will come under this review. Previously when such reviews have taken place this section of the public service has been neglected and 933 it has taken a long time to bring them into any increase schemes.
No, my Lords. Pensioners of the nationalised industries have always been outside the scope of the Pensions Increase Acts. But the nationalised industries are being informed very shortly of the Government's detailed proposals so that they may take them into account in deciding their own course of action.
§ LORD ROBBINS
My Lords, may I ask the noble Earl whether he does not admit that at a time when inflation is taking place at the rate of, perhaps, to put it mildly, 9 per cent. per annum, intervals of two years may put those v/ho enjoy pensions fixed at the early period to considerable hardship?
My Lords, I would make only two remarks about that: first, it is the Government's intention to bring inflation under control; and, secondly, a move to biennial reviews is a very considerable advance indeed on the present position.
§ LORD BOURNE
My Lords, as one who is very much interested in Armed Forces pensions, may I unreservedly welcome the main provisions of the Statement made by the noble Earl; that is to say, the maintenance of purchasing power, the base line and the biennial reviews. May I ask two questions, the first, in regard to timing? It will be very nearly two and a half years before many people who are really quite hard up and who feel the effect of inflation very much indeed will receive their increases. I can quite understand the mechanical difficulties of reviewing and then not being able to pay until one knows, on April 1, 1971, the cost-of-living increase. But the fact remains that many people who are hard up will have to wait another 10 months to receive any increases. The question I should like to ask is whether the Government, in view of this difficult situation, would be prepared to pay an interim increase on account on January 1, 1971. I think, myself, that a 10 per cent. increase on account would not only be well received but would fall well within the increase in the cost of living. Secondly, I should like to welcome the possibility which the noble Earl mentioned of reducing the pension increase age from 60 to 55. The 934 Statement says, "within the lifetime of this Parliament". May I ask how quickly that is estimated to be? Lastly, may I (and I should have said this at the beginning) thank the noble Lord, Lord Shackleton, for initiating the discussions for these examinations?
My Lords, I acknowledge the noble and gallant Lord's deep interest in this matter which is also known to the noble Lord, the Leader of the Opposition. I cannot, I am afraid, hold out much hope that the first suggestion that he put to me will commend itself to Her Majesty's Government. It is not for me to speculate on the lifetime of this particular Parliament. All I would say is that the powers to be sought in the Bill will enable us to reduce the qualifying age at any time by Statutory Instrument. We certainly intend—and I repeat here what is in the Statement—to exercise these powers"during the lifetime of this Parliament." We are committed in our Election Manifesto so to do; and like out other commitments, this one will be discharged.
BARONESS WOOTTONOF ABINGER
My Lords, did I hear the noble Earl, Lord Jellicoe, correctly when he referred to the Government's declared intention to "bring inflation under control"? How does he square this with the speech by the Prime Minister at the Mansion House banquet in which he categorically denied any such intention, relying instead on responsible behaviour on the part of the public?
The noble Baroness is enlarging the area of our debate on this Statement. Perhaps we shall have a minute or two to discuss that particular question in the next two days.
§ LORD LEATHERLAND
My Lords, coming back to the question under discussion, may I ask whether the noble Earl will agree with my expression of agreement with the decision of the Government to follow up the steps initiated by the last Government and to increase public service pensions? Secondly, does he agree that it is not desirable to create two nations in this country; and, therefore, thirdly, will he take some action to persuade industrial and commercial pension schemes to increase the pensions which are at present paid to their former employees, which 935 employees are at present suffering severely from the effects of inflation?
My Lords, I take careful note of what the noble Lord, Lord Leatherland, has said, but I believe that he is extending the area of debate on the Statement which is confined to public service pensions. Therefore I do not wish to follow him down the paths along which he is so invitingly trying to entice me.
§ LORD PARGITER
My Lords, in view of the Statement about public service pensions, may I ask whether the Government will have any Statement to make soon about old-age pensioners?
My Lords, that is another question which should be more properly addressed to my right honourable friend the Secretary of State for Social Services, who lives in another place.
§ LORD SHACKLETON
My Lords, the noble Earl will be aware that Ministers sitting on the Government Front Bench speak on behalf of the Government and not their Department.
§ LORD GORE-BOOTH
My Lords, may I, as a former public servant, ask the noble Lord whether he is aware that while public servants, past and present, will examine the Bill with the thoroughness which is their metier, they will warmly welcome the general direction of his Statement?