§ 5.53 p.m.
My Lords, I beg to move the Second Reading of this Bill. The main purpose of the Bill is to overhaul the legislative framework of the public service pension schemes. It will give the Minister for the Civil Service power to prescribe pension schemes for the Civil Service in administrative documents. It will also empower the appropriate Secretaries of State to do the same for National Health Service employees, teachers and local government employees, but in statutory instruments subject to the Negative Resolution procedure. It will thus bring to an end the need for repeated Acts of Parliament to amend the public service pension schemes, much as the Pensions (Increase) Act which we passed in the last Session did in its particular sphere. I should make it clear at the outset that this Bill is not concerned with the pension schemes of the Armed Forces, which are made and changed by instruments under the Royal Prerogative.
I welcome the opportunity of reminding the House that the Party opposite and in particular the noble Lord the Leader of the Opposition, my predecessor in day-to-day charge of the Civil Service Department, announced just over two years ago their intention to make broad 228 changes along these lines for the Civil Service. By the same token it was under the auspices of the noble Lord opposite that the reviews of public service pension terms, to which I shall return, were set in train. I happily acknowledge the degree to which putative parenthood can reasonably be attributed to the noble Lord opposite. At the same time I should like to set the Bill in the wider context of what I described, during our Second Reading of the Pensions (Increase) Bill, as the Government's strategy of subjecting to re-examination and reform all aspects of the treatment of retired public servants. Good progress has been made on all the issues I mentioned in July, and this Bill provides much more than an excuse for reporting that progress.
My right honourable friend has explained in his White Paper, Strategy for Pensions, the greatly enhanced role the Government's policy gives to the occupational pension scheme, to build an earnings-related pension for old age on top of the flat rate social security pension. The public service pension schemes have long been doing just that. But the Government intend to set an example both as an employer in the Civil Service and National Health Service and as the coordinator of the other public service pension schemes. A good start has already been made.
May I refer to the "headings", as it were, here? First came the decision last May on improved terms of compensation for Civil Servants retired prematurely for management reasons. We were able to announce last November that these had been agreed with the National Staff Side, and my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs—and I am glad to see that the noble Lord, Lord Gore-Booth, will be taking part in this brief discussion—recently announced that, subject to continuing discussion on one or two points, the Diplomatic Service Staff Side to which I have already referred have also agreed to the new terms. Next came the Pensions (Increase) Act, which for the first time regularised on a fair and predictable basis the arrangements for increasing the pensions of retired public servants. The reforms embodied in that Bill were widely welcomed as they stood. 229 But your Lordships will remember that in December my noble friend Lord Aberdare, while announcing the change to annual upratings of National Insurance pensions, also announced the Government's decision to make further improvements in the pensions increase arrangements.
These improvements will be twofold. First, reviews of public service pensions will become annual rather than two-yearly. Second, the reduction from 60 to 55 in the qualifying age at which increases may be paid, which was already promised for the lifetime of this Parliament and which has a particular significance for uniformed members of the public service, now has a firm date set for it; namely, December 1, 1972. I propose to move at Committee stage the Amendments to the Pensions (Increase) Act that will be required to provide for annual reviews. I hope these changes will be regarded as making better pensions increase arrangements for the public service which already, in my view, are an improvement on what had obtained in the past.
In Committee I should also hope to tie up one or two very minor loose ends in the highly technical provisions of the Pensions (Increase) Act and of this Bill. While on the subject of the complexity of this Bill, which inevitably flows from the need to amend or repeal a great mass of legislation, I should like to pay a very real and sincere tribute to the learned counsel who drafted this Bill and who is about to retire. because, although we "twit" them from time to time, we all owe a great deal to our Parliamentary draftsmen.
The third area of reform was the reviews of the public service pension schemes themselves. These are progressing well, and to illustrate how the powers sought in the Bill will be used I will say something about the review of the Civil Service scheme. But first I must say a word or two about the Bill itself. I hope that your Lordships will forgive me for putting it in the wider setting but the action of this Bill is more comprehensible if we try to set it in this wider context. Why are we seeking the authority of Parliament to reduce the degree of Parliamentary control of these schemes? Why go further for the Civil Service scheme than for the others? Are 230 there any special safeguards for staff? Those I think are the three main questions which occur to anyone looking at the Bill.
The Civil Service was among the pioneers in occupational pension provision. As long ago as 1684 Mr. Martin Horsham, a Customs officer at the Port of London, known as a landwaiter, (with whom, no doubt, Samuel Pepys was acquainted) was certified by his superiors as beingsoe much indisposed by a great malancholye that he is at presens unfitt for business".That in itself shows a humane approach in an age which is often thought brutish and insensitive. But there was more to it. The Lords Commissioners of the Treasury asked the Commissioners of Customs to appoint Mr. G. Scroope, who was recommended by them as a successorin the room and place of the said Martin Horsham with the established allowance of £80 per annum for his salary, out of which "—and this is the point—he is to allow £40 per annum to the said Martin Horsham until we give order to the contrary.Mr. Horsham was thus, as Dr. Raphael points out in his interesting thesis on this subject, established as one of the first pensioners of the British Civil Service.
Fascinating though it would be to take your Lordships through some of these byways of history, I will resist the temptation and pass on to present history. The first general provision for the Civil Service was the Superannuation Act 1810. This was followed by a long list of Acts, ending with the consolidating Superannuation Act 1965 and the Miscellaneous Provisions Act 1967. The other public services developed later on a national basis and so did their pension arrangements, which took various legislative forms. We thus have a hotch-potch of legislative foundations for these schemes, which is untidy in itself and which in many cases requires far too much Parliamentary time for what are often, by current standards of Parliamentary priorities, quite minor changes in conditions of service. Moreover, the need to find Parliamentary time can be damaging to the staff concerned—a point which they have had very much in mind 231 —since it can delay the implementation of favourable changes which both the Staff side and the Official side, to use the jargon, would like to make.
In any case, we believe that the original reasons for spelling the schemes out in Statutes no longer hold good. We do not depend on this in order to prevent abuse or waste of public money: indeed superannuation is the only condition of service still to be treated in this way. Nor is it necessary to make provision in Acts in order to ensure that a particular practice is followed: occupational pension schemes have long been a well-established part of the economic scene, particularly in the public services. Finally, my Lords, the development of the staff associations, and of the vital part they play in representing the interests of staff, makes it no longer necessary to rest this responsibility on Parliament. In the Civil Service, the National Staff Side proposed as long ago as 1955 that the pension scheme should be taken out of Statute.
However, the solution for the Civil Service is not quite appropriate for the other public service schemes. The Bill tidies up and consolidates the legislative framework of these other schemes, but gives power to prescribe their terms not in administrative documents but in Statutory Instruments subject to Negative Resolution procedure. This different approach is what the scheme managers want and is acceptable to the staff. These services are less monolithic than the Civil Service. In the Civil Service there is a single employer and (for non-industrial civil servants) a single body—the National Whitley Council—representing the staff interests. But the other public services have a multiplicity either of employers or of staff interests or both; so that for the sake of greater uniformity and formality it is better, in these services, in our view, to keep pension terms in a statutory form.
My Lords, I turn now to the question of safeguards for staff interests. The Bill contains several very specific ones. First is the requirement, applying to all the public service schemes, that the Minister concerned must consult with the representatives of the staff before making changes in the schemes. Naturally, the 232 value of this provision turns on how one interprets "consult".
In the Civil Service, the National Staff Side wrote to us when they had seen the Bill, and among other points said that they were most concerned that there should be no arbitrary changes made which were clearly against the declared interests of the staff. The Government certainly share that hope and feel confident that it is well founded. And as my Parliamentary Secretary said in another place on Second Reading the Government are both willing and able to give the assurance that the obligation to consult will be honoured in the spirit, not only in the letter: Consultation will mean what it says: it will be real and meaningful. Another safeguard is to be found in the provisions protecting existing pension rights against any retrospective worsening.
This brings me to the actual changes which we hope to introduce under the new powers. Here. I am sure that your Lordships will understand if I confine myself to developments in the Civil Service. The other reviews are less far advanced and it is only here, as the Minister directly responsible, that I would feel justified in going into any detail. But what I say will give an advance reflection of the radical nature of all the reviews which are now in progress.
The review of the Civil Service superannuation scheme is being conducted by the Joint Superannuation Committee of the National Whitley Council, a committee representing both employer and also employee; and I should like to pay tribute to the work they have been doing in this very important sphere for all the staff. I have its report and so does the National Staff Side, who are due to consider it within the next two or three weeks. Our expectation is that the National Staff Side will wish to refer it to the Staff Association Conferences which are held in May. I must emphasise, therefore, that the Committee's proposals are still subject to agreement with the National Staff Side. I hope that that can be achieved as quickly as possible after the May conferences. When it is. we want to get on with bringing the changes into effect as soon as practicable. Nevertheless, the Committee itself has completed its immediate task and I do 233 not believe—I have considered this matter carefully—that it will prejudice either the Official or the Staff Sides' interests if I inform your Lordships about the main proposals it has put forward.
The Government have already declared their commitment to the principle that people should not lose their accrued pension rights when they change jobs. Moreover, the Government as employer are determined to set a good example. This applies particularly to the preservation of pensions—the arrangement whereby a man who leaves employment prematurely has his pension rights preserved or frozen to come into payment at the retirement age. It is now a firm proposal that all those who leave the Civil Service early, and who have passed the qualifying period for pension, should be entitled—if your Lordships will excuse me the quaint phrase—to preservation.
Preservation in the Civil Service will be introduced in a way which will conform with the proposed legal requirements of my right honourable friend the Secretary of State for Social Services. A consequence is that the qualifying period in the scheme, both for a preserved pension and thus for other pension benefits, will be reduced from 10 to 5 years. For someone changing jobs, the alternative to preserving. his pension is to transfer it to his new scheme. In some ways this is the better solution; but—as anyone who has studied this matter, and I know many of your Lordships have, will know—it is also more complex. For practical reasons, the Government will not be making transferability compulsory. But this does not prevent the Government as employer from forging ahead with their plan to widen the scope of transfers. The Committee's report urges this. It proposes that the existing arrangements for transfer provisions between public sector bodies should be retained, and that transferability should be extended as far as possible to cover moves to and from the private sector. This means that the Government would be prepared to pay transfer values to any private sector scheme prepared to accept them; and conversely would accept them from any private sector scheme willing to pay them. The importance of this development cannot be over-stressed. I personally attach very great importance for a whole host 234 of reasons, to this principle of pension transferability.
My Lords, the next main recommendation of the Committee is that all unestablished, that is, temporary staff, should be admitted into the pension scheme. This applies both to full-time unestablished staff and also to part-time staff working more than 18 hours a week.
Turning to the changes proposed in the benefits themselves, I also very much applaud the Committee's approach, the main strategic approach which they have followed. Resources here, as elsewhere, are inevitably limited and the Committee, like all of us, have had to assess priorities. Their view was that the emphasis should go on providing extra help where it was particularly needed; that is, to those who are injured on duty and who retire because of ill-health, and to civil servants' widows and dependants. Because they were selective, the Commitee were able to produce a package of improvements here which I think will be found to he attractive. The following are its main features: First, injury benefits will be radically overhauled and improved. The main changes include an extension of the injury scheme to manual workers, more liberal conditions of eligibility and substantial improvements in the benefits themselves.
Ill-health retirement benefits are also down for big improvements. "Enhancement" (that is, calculating the pension on more years than those actually served) will be built in for the generality of staff retiring on ill-health, and not only, as is the case at present, for those who have between 10 and 20 years' service. For example, a man aged 50 with 20 years' service would have his ill-health pension raised by the Committee's proposals from one-quarter to one-third of his pensionable pay.
Next for attention comes the all-important widows' and children's scheme. This was introduced soon after the war, when the widow's pension was fixed at one-third of that of the deceased officer. At that time, it was one of the best schemes in the field. Even though many schemes still do not provide widows' pensions, others have caught us up and some have overtaken us—"us" being the public sector; above all, the Civil Service. Accordingly, the Committee propose that civil servants should earn a 235 contingent widow's pension of one-half, rather than one-third, of their own pension. This again is a matter to which those who represent the interests of the staff have attached—quite understandably —great importance.
There are many other improvements proposed in this part of the scheme. When an officer dies in service, his widow's pension is based on his notional ill-health pension and so will automatically benefit from the improvement in ill-health pensions I have described. It is proposed that children's pensions should be raised substantially. I will not spell out the details. But, to take an example, the new rates will double the amount of pension payable to a widow with two children, quite apart from the various other improvements which would help her. It is also proposed to help the widow in that difficult period of adjustment after her husband's death, by paying her for three months at his rate of salary, if he dies in service, or at his rate of pension if he dies after retirement.
Under this head I should also single out the death gratuity. Bearing in mind that a widow's pension is also payable and will be improved as I have just sketched, the Civil Service death gratuity is good by outside standards (it is never less than one year's pay), but there is a qualifying period of five years' service. The Committee propose that this qualifying period should be waived and that civil servants should have immediate death cover on entry into the scheme.
I think I can claim that these proposals bear out what I said about the Committee's emphasis on selective improvements directed at the points of greatest need. But there is one area where they concluded that there should be a general improvement which would benefit all members of the scheme. At present pension benefits are based on what is called pensionable pay, which has for long been defined as the average salary over the last three years' service. The Pensions (Increase) Act, particularly when amended to provide for annual reviews, will guarantee that pensions do not suffer any significant loss of purchasing power after award. The Committee see a clear need to complement this by relating pension to the final year's salary, or where this would be better, to the best of the last three 236 years. This will improve all pension benefits, including lump sums, widows' and children's pensions, gratuities, compensation payments, and so on. The Committee also wish to abandon the rule that only completed years of service can count for pension and propose that service should he reckoned by completed days.
I should also mention a proposal, which I know will be popular—since I have received a great deal of correspondence on the subject, as I am sure my predecessor did—to ease the rule which limits the amount of pension plus pay a civil servant may draw if he retires on pension and is re-engaged in the Service. The proposal would allow him to benefit from ordinary pay increases as well as from pension increases. However, I should add that the Committee are not proposing that this system of abatement should be brought to an end altogether. The Government believe it right that when a public servant drawing a pension continues to be employed in his service, the pension should be adjusted in recognition of the pay he is drawing. It is wrong that he should receive both pay and pension in full at the same time and from the same employer, especially since public servants re-employed after the retirement age can continue to earn further pension rights.
My Lords, I have felt it right—and I hope that I have not taken too much of your Lordships' time—to single out the main proposals in the Committee's Report. But there will soon be an opportunity for noble Lords interested to have a further look at this. I understand that the Staff Side of the Committee are making summaries of the recommendations available to their constituent associations to-day. Subject to National Staff Side approval, the full Report will be printed and made widely available to staff and departments and others who wish to have copies in the next few weeks. I will ensure that copies are available for use and study in both Houses of Parliament.
I hope that I have said enough to convince your Lordships that major reforms are now just round the corner, in an important field affecting the careers and prospects of hundreds and thousands of our fellow countrymen and countrywomen. In the case of the Civil Service, this should be the most significant reform of the pension scheme this century. 237 The Bill aims to provide timely powers with which to carry through changes promptly, efficiently and with due regard both to the appropriate degree of Parliamentary involvement and to the interests of staff representatives. I have confidence in recommending it to your Lordships. My Lords, I beg to move that the Bill be now read a second time.
§ Moved, That the Bill be now read 2a. —(Earl Jellicoe.)
§ 6.15 p.m.
§ LORD SHACKLETON
My Lords, the noble Earl, Lord Jellicoe, has covered a great deal of material in his speech, and I for one am grateful for the amount of fresh information he has given. I am grateful, too, for his kind remarks at the beginning. Whether I am the putative father or not, I think this is the Bill I should have hoped to introduce; but, as he and I well know, there are certain secret begetters in his Ministry who play a vital part and do much of the thinking. I am bound to say that there are certain things in the Bill which may not have been in any Bill I would have introduced, but I cannot identify anything that is not as good as anything I might have proposed. Some things are possibly even better. Therefore, I pay a really grateful tribute to the noble Earl personally. It is always rather embarrassing to say that someone has done well because he is doing exactly what you would have done, but the important thing—and I must be allowed to make one or two passing remarks—is that in certain areas this Government have quite unnecessarily gone and torn up something and then found that there was nothing much better to put in its place. There has been no hesitation on the part of the noble Earl and of the Government with regard to reforms which the previous Government had initiated in other areas, and for the most part they have pressed on with them with a vigour which satisfies me very much indeed, and I am truly grateful, as I am sure is the Civil Service as a whole, to the noble Earl.
There is one area in his wide-ranging review where I do not feel competent to speak. We suddenly find ourselves in those rarefied strategy discussions of which this Government are so fond. We do not hear quite so much about the new style of government, but find ourselves seeing this in the context of the occupa- 238 tional scheme, Strategy for Pensions, a Paper which I have read carefully and which is clearly expressed. But we have not debated it in this House and I hope that my noble friend Lady Phillips, who knows much more about general public pensions than I, will have an opportunity of doing so. This sector is significantly different in various ways from the Civil Service side. It may not be so satisfactory as the scheme which my right honourable friend Mr. Crossman had sought to introduce. If anything, it accentuates the advantages of the Civil Service scheme. Personally I do not complain of this. It may well be that it fits more neatly with it. But we certainly reserve our position with regard to the Government's system of State and occupational pensions until we have had an opportunity of debating them. I am glad to hear that the Diplomatic Staff Association (or whatever it is called) are now satisfied with some of the arrangements in a very difficult area that the Civil Service Department and the noble Earl have been able to make. I am glad that the noble Lord, Lord Gore-Booth, is here to confirm their attitude in a matter of some difficulty.
A number of points were raised in another place, but I do not propose to pursue them further here. I understand from my noble friend Lord Garnsworthy that some of the anxieties of a local government union have now been resolved and, as a result of Amendments which have been made in another place, it is no longer necessary for us to concern ourselves with them. There was anxiety as to the meaning of the word "representative". When the noble Earl comes to reply, it might be valuable if he repeated certain assurances which, while entirely satisfactory to the Civil Service Unions, who have had much more experience of dealing directly with the Central Department, have caused anxiety elsewhere. It is noteworthy that the Civil Service Unions, who obviously have worked very hard with the officials of the Department in the admirable Whitley machinery, have a good deal to be pleased with. None the less, on the point of consultation we had an assurance that the word "representative" is not some tricky device to avoid talking to the right unions, but is a device really in order to meet a situation which might give rise 239 even to the encouragement of small break-away unions.
It is interesting that the Government are now going in for the annual review. I do not need to stress the efforts that we made to persuade the Government to have annual reviews of public service pensions. I have already teased the noble Earl on this matter and I will not do so again. I appreciate that the fact that this is happening in the public schemes, as opposed to the public service schemes, may have made it a bit easier. This is certainly desirable, though presumably, if ever we get to a stage where the cost of living is held steady, a time might come when annual reviews will not be necessary. Far be it from me to move an Amendment in this matter, but I take it that if ever that, as it seems, impossible event happens it would be possible, after consultation, to discontinue the annual review. I certainly would not ask the noble Earl to assume that I am advocating anything of the kind until the implications have been thought out. That is just a passing thought, but it might have validity in the future.
The noble Earl spoke about transfer and preservation. In this respect, of course, the Civil Service, who certainly have been far in the lead in this matter, will find that they will be more easily able to transfer once there is a proper control over occupational schemes in the private sector. Whereas we reserve our position on the Government's general scheme on occupational pensions, there is no doubt that the fact that there is to be proper supervision of them, and the State reserve scheme in addition, will make it easier to broaden the arrangements for transferability. As we said, and as the Government now say, it is right that, if possible, pensions should be transferable. But what so many people who have advocated transferability have failed to realise is that it is impossible to transfer them unless there is something satisfactory to transfer them to. We hope that if there is a real development in occupational schemes, and they are properly supervised, the amount of transferability will be increased. There is already a considerable amount that has been initiated by the Civil Service in previous years.
240 There is one question that I should like to put to the noble Earl. Paragraph 66 of Strategy for Pensions says:When an employee leaves a recognised occupational scheme after serving for less than five years, unless his pensions rights are preserved or transferred, his employer will be required to pay into the reserve scheme the total contributions.It is possible, I suppose, that they will be transferred to the State reserve scheme, but I wonder a little about the de minimis rule. It has always been my view that all work that is done, other than the shortest temporary work, should qualify for pension purposes. One of the matters with which I was concerned was the extent to which people who have been working for many years in the public service as temporaries never become established and thus acquire no pension rights, although they may get a gratuity. I am sure the general principle should be that, ideally, all work (with some, of course, it is difficult, especially if it is casual work) should contribute towards the ultimate pension.
The noble Earl gave us an interesting account of the Whitley Committee that has been looking at such matters as interest benefit, ill-health, widows' and death cover. Again, I am most interested. I think there are some real improvements here, and nowhere is it more necessary than in regard to widows.
There is one other matter about which I should like to ask the noble Earl. Some concern has been expressed with regard to the universities, who of course operate under a different scheme. They are not covered by the provisions of the Superannuation Bill, which relate to a large number of people in the public services, including school teachers, health services personnel and the police. University teachers are outside this. This is a matter, I presume, for the university authorities or the University Grants Committee, but I feel that the Government ought to keep an eye on it. I think that many of them would have liked to he brought fully into the public service regulations. Perhaps the noble Earl will comment on this when he replies.
The other point I should like to mention is this. It is worth noting that Government control over the pension arrangements of the nationalised industries has 241 now been disposed of; there will be no Government control. I think this is right. But equally I think it right that the Departments concerned, and indeed the Civil Service Department, who after all have o general responsibility, even though it may be remote, over the level at least of top pay in the nationalised industries, should at least keep an eye on this, because there are considerable differences between the levels in the various nationalised industries. They are certainly not free under this Government and I must confess that they were not entirely free under the previous Government in certain matters in which traditionally nationalised industries, acording to the textbook, ought to be free. One would be very sorry to see the Government pursuing a rather arbitrary pricing policy, seeing that it was not possible to pay the right sort of pensions; indeed, there is room for improvement in pensions in certain of the nationalised industries. But, having said that, I shall not, as I feel at present, seek to make any further amendments to the Bill. It is right that control over pensions now should be in the much more flexible form that the Bill now introduces. I therefore give it an unreserved welcome.
§ 6.31 p.m.
§ LORD GORE-BOOTH
My Lords, when I saw from to-day's list of speakers that I was the only person who was not as personally or politically eminent as the other two noble Lords, I felt an inclination to take Civil Service action and write a minute saying "I agree", and sit down. But I cannot let your Lordships off quite as lightly as that. It is a particular pleasure to be able to greet this draft Bill, in the light of the further information that the noble Earl was good enough to give us this afternoon. In the particular capacity in which I speak, I say once again what I said in the case of the Pensions (Increase) Act, that I would certainly like to acknowledge the origins of this Bill in the thoughts and initiatives of the noble Lord. Lord Shackleton, as well as its completion by the noble Earl, Lord Jellicoe, and his Department.
I cannot speak with any authority, because in all fairness I must make it clear that I am not speaking "on behalf of" the Civil Service in any way or "on behalf of" the Diplomatic Service Asso- 242 ciation, though from what I know I would concur with the noble Lord, Lord Shackleton, in saying that there is a general atmosphere of satisfaction in the Association in what has been proposed. What I think I can perhaps do, which is only a small service to the Bill, is to make one or two comments in the light of really difficult experiences I had in trying to operate under the old arrangements. I shall not raise these matters at any length because they are, I hope, all about to die. But they do show how very urgent and necessary these changes are.
If I may first make a very brief allusion to the preservation and transfer of pensions, this will certainly lead to a desirable form of flexibility which many people, both civil servants and others, have been seeking for many years. It is perhaps not for me to say so but I have no doubt that the noble Earl's Department will arrange it all with just half an eye to the necessary caution, which is of course that the arrangements should be beneficial but not to the extent that transferring might become a game which extremely clever people can make profitable as a game. But I am sure this will not happen. Now if I may make brief comments in respect of three things: first, the basing of the pension, particularly for the Diplomatic Service, on the last year of service; then on the matter of the widow's pension; and thirdly, on the general principle which the noble Earl explained and defended, that this sphere should be taken out of the area of Parliament and dealt with administratively with proper safeguards.
First, on the matter of the last year, in diplomatic terms this is a great advance. The practical problem of administering the Diplomatic Service on the basis that an official's pension should be based on the average of the last three years was this: that when you are moving people round the world at public expense, you have a great many considerations to take care of. You do not want to waste public money on unnecessary journeys and transfers; you want to be fair to the official whom you are moving about and make sure that in the last three years he is in the grade which attracts the pension he ought to get; but at the same time, because of the limited I number of people in a grade, you could 243 not always make these three considerations fit with each other. So the business of working out the movement of an official in an unpredictable world—and I mean totally unpredictable—consistent with what he ought to get, was sometimes very complicated indeed. Now under the new proposals to base the pension on the last year of service, this will become immensely simpler administratively as well as more humane to the official concerned, because, however difficult it might be to arrange that an official spends his last three years in the right grade, it must surely be clear that in his last year of all he will be in the grade attracting the pension that he ought to get. So from both points of view, this is a most important advance.
Then on the question of widows, if I may for a moment reminisce, it is only just over thirty years ago that I can recall one particular case in which very suddenly one of the diplomatic wives became a widow. She did not get even an old halfpenny from the public services, from the Government, from the Treasury; and literally the Service had to club together and help her out. I only mention that case in passing. We have come a long way from then, only a short time ago. Clearly it is immensely desirable that the one-third should be increased, and it is a very welcome change that the widow's pension shall now amount to a half. I would just make this reflection, that in this particular sphere perhaps the Diplomatic Service has a rather special interest in the sense that the person who is widowed may be widowed in a country which is neither her own country nor her country of adoption. If she is a foreign wife, she can be quite suddenly widowed in some remote country far from either of her countries, if I may put it that way, and the sense of forlornness in such cases is very hard to describe. I hope that the Minister will have the flexibility to be able to look and see after some time whether a half in such cases is enough or whether he has some discretion to give help to people with particular needs where something more would be really right in the family's circumstances.
Finally, I should like to say a word about the new procedure by which legislation to change the superannuation arrangements will no longer be necessary. 244 When I had the privilege of being responsible for the administration of superannuation arrangements, the Diplomatic Service had benefited somewhat from the foresight of the noble Earl, Lord Avon, and his advisers in 1943. The 1943 Act provided that people could be retired on the basis of what was called politely "limited efficiency". It meant that if somebody had, so to speak, "run down in the Service", there was a procedure for retiring him without stigma. This was reinforced in the Act passed by Mr. Attlee's Government, which allowed officials to retire earlier with due pension benefits if they had served in particular posts, which imposed great strain on health or constitution. This Act also became to some extent an instrument of management. Your Lordships will readily see that with the passage of time both instruments became very blunt. The 1943 Act became something of a stigma after all, and the 1949 Act, if applied by management—which it had to be for structural reasons—was to some extent not a question of what you had done but where you had been, and this was no fair test.
The Acts were consolidated, as your Lordships know, in the Act of 1965. It is no criticism of the previous Government to say that that meant that Parliament could not within the next few weeks be expected to devote Parliamentary time to a further revision. This could not be done. That was the general malady from which the whole scheme suffered: Ministers and officials alike know that the system was unfair and was not working properly, but there seemed no way to change it. I am absolutely sure that both the previous Government and the present Government are right in feeling that this inflexibility is not in the public interest and that, provided the proper safeguards can be observed for seeing that the Executive do not do anything drastically unfair or capricious, it is infinitely better to assimilate the superannuation procedure to the other administrative procedures which are carried out by the Executive. For this reason I am quite sure that my own successors, and Sir William Armstrong and his successors, will find the business of regulating superannuation infinitely more fair and simple under the new Bill if and when it comes into force.
245 May I end by saying that we owe a great deal to many people in the improvement which has been brought about, notably to the noble Lord, Lord Fulton, and his Committee who first codified what was wanted, and, as I have said already, to the two noble Lords who have done so much personally to bring about a situation whereby when this Bill becomes an Act this whole business will be dealt with in a manner infinitely more practical, fair and humane than it was before.
§ 6.42 p.m.
My Lords, I am very grateful to the noble Lord the Leader of the Opposition, and to the noble Lord, Lord Gore-Booth, for the very generous welcome which they have extended to this Bill. On that general point I can only agree with what they have said, except for the nice things which the noble Lord, Lord Shackleton, said about me, with which I do not entirely agree. I am also particularly grateful to the noble Lord, Lord Gore-Booth, for pointing out that one advantage of the move from three-year averaging to basing the pension on the last year's salary is not only an advantage where we should all wish it to be, from the point of view of humanity, but it also can greatly contribute towards good management, not least in the Diplomatic Service.
I have been asked a number of specific questions, and perhaps I should come straight to them. In the first place, I was asked by the noble Lord, Lord Shackle-ton, if by any chance we get out of an inflationary cycle—and there are signs that the inflationary spiral may be not rising so fast as it has been, although it is still rising far too fast—whether this could lead to abandoning annual reviews. I do not think that this would be necessary since the Act provides for reviews and not increases. There is a point which I should spell out: at present the Act provides for increases at a two-yearly review period if the cost of living has risen by at least 4 per cent. in that two-year period. This is the Pensions (Increase) Act. When we move to annual reviews we must consider whether this 4 per cent. trigger is still right. We have had representations made to us by the Public Service Pensioners Council and we are considering those representations at the present time. It is probable that I shall be bringing forward my proposals 246 in the form of Amendments at the Committee stage.
The noble Lord, Lord Shackleton, also referred to paragraph 66 of the pensions White Paper. To the two questions that he put to me in that respect, the answers are as follows: all who served for five years will qualify for pension. If they leave before 60 years of age their pensions will be transferred to other occupational schemes or preserved for payment at 60 as each individual may prefer. On the de minimis point which he put to me in this context, for those who leave before completing five years there will be gratuities for all, and we shall bring them into the State reserve scheme in respect of these short periods of service. The noble Lord, Lord Shackleton, also asked me why the university staffs—
§ LORD SHACKLETON
My Lords, may I interrupt? It may be that I am pressing the noble Earl too far, but under the public scheme the employer is required, if the period is less than five years, to pay into the reserve scheme the total contribution which, but for exemption, would have been due for the period concerned. It may be that I am not understanding it either. I am assuming that the public service pensions will at least provide as good a protection for those who have served for less than five years. The Government in their pensions White Paper set their faces very much against the proposals which the previous Government had (of which I personally was not entirely in favour) of paying out cash on these short terms. The last thing I would want to do is remove the gratuity, but it is fundamental that these monies should be paid in. No doubt this is a matter which the staff side are talking about.
My Lords, I should prefer to leave the matter there, because if I were to walk further into this particular maze I might find myself not emerging from it with any great ease. I should be glad to revert to this, either in correspondence with the noble Lord or as a point that we can raise on Committee stage. I will certainly look into the matter between now and then.
If I may refer to universities, a point that the noble Lord, Lord Shackleton put to me, he asked why university staffs are 247 not covered in this Bill, as are other teachers. The answer is that there is no need for this. As the noble Lord doubtless knows, university staffs have a scheme which is known as F.S.S.U., the Federated Superannuation Scheme for Universities, which is an insurance policy based scheme. This Bill is concerned only with powers, and the F.S.S.U. is a non-statutory scheme which those concerned can alter or replace without a Bill. I can confirm what I think was also in the mind of the noble Lord, that discussions are taking place between those concerned about the future form of pensions provision for university staff. There may be changes here, but I do not think I can anticipate the discussions which are already taking place.
Those were the main, specific questions which the noble Lord, Lord Shackleton, put to me. There was a special plea which the noble Lord, Lord Gore-Booth, put to me about widows: whether in certain exceptional cases the one-half could not be adjusted upwards to meet certain specific difficulties. I am afraid that I cannot give the noble Lord any commitment on this point. It would be very difficult to vary so basic and standard a feature of the scheme for particular circumstances. I am quite certain it would be wrong for me to hold out a hope, certainly in the context of this Bill and in this discussion of it, that we could move towards meeting the noble Lord on this particular point. But I have noted what he said in this regard.
My Lords, perhaps we have devoted not undue time to a matter of extreme importance to a great many people, but we have had quite a look at the Bill at this stage. I will be moving certain Amendments, some of which I have foreshadowed, at Committee stage. If there are points then which have not been met in this debate I shall be very glad to have an opportunity of reverting to them.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.