CIVIL SERVICE PAY AND PENSIONS

HL Deb 11 December 1975 vol 366 cc1090-170

4.20 p.m.

Lord ORR-EWING rose to call attention to the formula by which Her Majesty's Government determine the pay, pensions and perquisites of civil servants, and in particular to the comparison between these and the benefits of private sector employees; and to move for Papers. The noble Lord said: I beg leave to move the Motion standing in my name on the Order Paper. As your Lordships will know, the object of this debate is to elucidate more information, more openness, concerning the pay, the pensions, and perquisites of civil servants and see how these compare with similar people in the private sector. I cannot help feeling that too little is known about this problem, and I shall try to pose some queries and make some suggestions. As I understand it, the Lord Privy Seal would welcome the opportunity of making it more open and having a general discussion on this matter. He will be as aware as everybody that this Government were elected on the principle of open Government, and therefore now is an opportunity of making one area which is far from open more obvious to the public and to us.

At the start I wish to make it very clear that I am not challenging the principle of pay comparability. I am not challenging the principle of pension comparability between the private and the public sector and, above all, I am not attacking the civil servants. I think that the Civil Service is growing too fast, but then I was reared as an Admiralty Minister, Parkinson started his law in the Admiralty, and it seems that those basic qualities are spreading far outside the Admiralty today. I do not blame the civil servants for that; I am afraid I have to blame the Government for putting more responsibility on their plates. All I want to see, and I hope this debate will give us the chance of learning more, is fair and more open knowledge on this subject.

It could well be argued—I am sure it will be in the Minister's brief—that this was all started by the Conservative Government which introduced the principles of indexed pensions in 1971/72. Of course, this is true, but while we were working out our pensions in the period of Opposition—Opposition is a time when you do the thinking, as noble Lords opposite will know—the rate of inflation was literally one-fifth of what it is today. Your Lordships will know that under the new arrangement—or this relatively new arrangement—pensions in the public sector are adjusted on a June-to-June basis, and then they come into effect on 1st December. From June 1968 to June 1969 the rate of inflation was 5.3 per cent.; from June 1969 to June 1970 it was 5.9 per cent.; from June 1970 to June 1971 it was 10.3 per cent. So, when the rates of inflation were like that, we were dealing with something with which it was possible to keep up. But I would remind your Lordships that the Tory Government of the 1970/74 period preferred to go out of Office in their efforts to stem inflation rather than give in to the 30 per cent. which eventually became the norm in the year 1974/75.

Nor do I think in these changed circumstances and changed conditions that it is wrong to change your policy. I remember, in my early days in another place, that Mr. Winston Churchill, as he then was, was ragged because he turned a somersault on a previous answer of only six months before. When asked why he changed his mind, he said: The processes of my mind constantly adjust themselves to the movement of outside events". This is exactly what I think we in this House should do in the light of the really serious inflation which could destroy our country if we did not take it seriously. May I say, as a second matter of principle, that I am first and foremost—I think everyone on these Benches would take the same view—in trying to reduce inflation, and each person is expected to make some sacrifice, as we all do; I am sure our civil servants would not wish to be an exception in this matter.

On 22nd April, Mr. Charles Morris, the Minister in another place responsible for the Civil Service, gave the Answer to a Parliamentary Question that he expected the award on 1st December—the adjustment. the indexed proofed pension—to rise by 14.4 per cent. As it turned out this was a terrible underestimate because, in fact, it rose by 26.1 per cent. That affected 360,000 former teachers, 250,000 former civil servants, 180,000 ex-Forces personnel, and 80,000 police, firemen, and many others. This increase cost the Government—cost the nation—£180 million extra on top of the £730 million currently being paid out on public pensions, making an annual cost of £910 million. Surely this is worth considering—and worth considering again—in the light of the solemnity and size of those figures.

Of course there have been dramatic increases for some senior civil servants and these have hit the headlines, but I do not wish to pursue that red herring on this occasion. I want to talk more about the general principles of it and the more average pension. The average pension to a former civil servant—I know that averages can be deceptive—is £14 a week, and the increase given on 31st December was £3.50. This may not sound very much, but this in itself is very much more generous than almost any private firm that I know has been able to give to its former employees.

This consideration started, to some extent, when I put down a Question on 12th November 1975, and in Hansard at column 1793 the Lord Privy Seal replied: Many large and medium-sized companies today have inflation proof pensions. Some of them are in tact better than those available to the Civil Service. I put forward grave doubts as to whether that was an accurate statement, and he was kind enough to follow up with a letter to me, which I think I am free to quote from. He said: …many of the major good employers have nonetheless broadly achieved full inflation-proofing. The sources of my information are confidential; but I can say that two recent private surveys showed that in one case over 50 per cent. and in the other case 75 per cent. of the companies participating in the survey gave increases based on the retail price index movement. I cannot help feeling that the words, "based on the retail price index movement" may be a little deceptive. You can take that into consideration, but I should like to hear much more evidence before I could believe that more than one or perhaps two companies in the whole of the private sector were able to give the 26.1 per cent. fully proofed index. I certainly know of none, and the average would seem to be nearer 3 per cent, or, at very best, a maximum of 5 per cent. In fact, these figures are brought out in an Economistarticle this week on page 78, which many of your Lordships may have seen. Those figures are not from a small sample; they are from 761 private sector scheme companies, and only 30 per cent. of this 700 guaranteed any pension rise at all after retirement. That guarantee, by the way, was limited to 3 per cent., so I submit that my 3 per cent. is more accurate than the figures given by or supplied to the Lord Privy Seal.

I also submit that comparability with the private sector should take into consideration not just similar people of considerable responsibility in large public companies but the millions who work in smaller companies, and particularly the 1½ million to 2 million people who are self-employed; this last category are really in the most desperate position. Since my intention to initiate this debate was announced in the newspapers, I have had a number of really pathetic letters from people employing four, six, eight or a dozen people and who point out that day-after-day, week-after-week, they are having to make considerable contributions in their weekly stamps, double the average, and that they do not get comparable benefits. They appeal to be given fair and equable treatment, with proper tax reliefs, which would allow them, the self-employed, to provide for pensions when they retire. Thus, we seem to have two distinct categories. We have the very large and powerful companies—some of the banks and perhaps some of the oil companies—which may be able to give considerable indexation, and the vast majority of companies which, I maintain, are today not able to do so. I understand that the pay of a civil servant is reduced to a maximum of 7¾ per cent. below the analogue.

The LORD PRIVY SEAL (Lord Shepherd)

Not maximum, my Lords; at current rates, Yes.

Lord ORR-EWING

I withdraw the word "maximum"; reduced to 7¾ per cent. below the private sector equivalent to allow for the fact that the pensions are non-contributory and fully index-proofed. Even if this Government do, as we hope that they will, achieve their target of reducing inflation to 10 per cent. by this time next year, and I have doubts on that issue, I feel that this 7¾ per cent. is a grotesque and gross underestimate of the value of a fully index-proofed pension. Moreover, there are other differences. A civil servant gets one-eightieth of his pension for each year of service, so that after 40 years he gets a 50 per cent. pension. The majority of executives in the private sector may—and, I think, do —get 66 per cent., and on the face of it that would appear to be more generous. However, a civil servant also gets on retirement three-eightieths of his final salary for every year as a gratuity, and for an Executive Officer in the middle rank drawing £5,500 a year, this amounts to a tax-free gratuity of £8,300. I do not think this is generally appreciated and I wonder whether this is taken into account when working out comparability.

Lord SHEPHERD

My Lords, is the noble Lord saying that all civil servants receive £8,000-odd free of tax?

Lord ORR-EWING

No, my Lords; I said they receive three-eightieths of their salary for each year's service as a tax-free gratuity and that in the case of a civil servant of middle grade drawing £5,500 this would amount to £8,300. Of couse, if, with that tax-free gratuity, they wish to buy an annuity, then their pensions would be greater than comparable pensions in private industry. I wonder whether this is taken into account. I am afraid that I must list these points and I am simply giving them as examples in asking whether they are taken into account. Moreover, a civil servant can opt for early retirement—at, say, 56 years of age—and he can then obtain another job and be a useful member of the community in that other job. But while he is in that other job his gratuity is put into cold storage and when he takes it, say, at the age of 65, it is fully index and inflation-proofed, and it could obviously be double the sum at the present rate, or even more. This is an exceptional benefit, too. I do not know whether it is widely known, and I should like to know whether it is taken into account.

Somebody has written to me about his holidays. He points out that after 20 years' service a civil servant of medium rank would get six weeks' paid holiday. That is very rare in industry. Four weeks is more common, and five exceptional. Is this taken into account? Then there is this strange anomaly: if any ordinary citizen decides to emigrate on retirement, his national retirement pension is frozen; it is not adjusted, as other old age pensions are adjusted. But not so for a civil servant. His pension, even if he decides to emigrate and go overseas, is fully inflation-proofed. Is that anomaly taken into account? I will not mention, because it has been mentioned in other ways, the boarding school fees for children of officers serving in the Foreign and Commonwealth Office. I fully acknowledge that disruption in the education of one's children is damaging and I think it right that some special provision should be made. However, it is a quite exceptional and outstanding perquisite if one is given between £6,000 and £10,000 tax free to educate one's children.

I wish to draw attention to one other anomaly. In a private pension scheme a pensioner may get two-thirds of his terminal salary, and that is the majority. I am not sure, however, if it is generally realised that from this is subtracted the £1,100 a year which the State pensioner —this is for a married couple—gets from the State. We all, I hope, get this when we retire. However, this is not so with a civil servant. After 40 years he gets his 50 per cent. pension. On top of this he gets the tax-free gratuity about which I have spoken; on top of this he gets the State pension, but, for some strange historical reason, he gets this less a reduction of £67.75—an odd sum which I suppose is buried in the fruits of time. I wonder whether this is taken into account when working out comparability? Further, he retires at 60 instead of 65 and thus has the advantage of a greater chance of finding a new job.

I come to the question of security of tenure. I recently culled from Written Answers in another place on 10th to 12th November the fact that in the past three years, in the 13 main Departments of State, a total of 69 civil servants have been prematurely retired, 39 on the grounds of limited efficiency, 22 on the grounds of discipline and eight on the grounds of inefficiency. Compared with the private sector, this is an incredible state of job security. It is difficult to measure because most salaried people on retiring from or being made redundant in industry seek their own jobs and their own solutions. But it is a fact that in regard to the Professional and Executive Register, which is run by the Ministry of Employment and which I think is the last ditch for many people, 23,000 extra middle-class salaried people have put themselves on that Register in the last year. This is a very substantial number and I think is only a small part of the iceberg of unemployment in that area. I therefore suggest that today a civil servant has very much better job security than has existed for many decades and certainly very much better than in the private sector.

I hope noble Lords will not consider that I have taken up too much of their time in dealing with the question of pensions. I now come to the pay portion of the Motion. The Pay Research Unit has a staff of 61 and is responsible for collecting data and providing it to Her Majesty's Government and the Whitley Council. This is a quasi Civil Service unit and I believe that the public are disturbed by the suspicion that, though it may be independent and of high integrity, it may, as it is within the Civil Service, be too much judge and jury in its own cause. I feel that the time has come to look at the structure of the Pay Research Unit. Perhaps half the people employed in that unit should be from the private sector. Also, I should certainly wish to see some management consultants or "head hunters" recruited and their knowledge made use of, because they have a very detailed knowledge of just how much a person needs to be paid for a job and of exactly what other rewards should be given him. I make the constructive suggestion that it is time to look at the make-up of the Pay Research Unit.

I should also like to ask the Government whether they are dedicated for all time to the non-contributory side of these pensions. This has come up before. The Tomlin Report in the 1930s recommended that pensions should be contributory rather than non-contributory and the Plowden Report came out with the same recommendation, but in both instances the Government of the day turned down the proposal. I cannot help feeling that it would be easier to compare conditions if pensions in the public sector were contributory as they are in the private sector.

If I may now speak from personal experience in industry, we increasingly find that Government, quasi-Government and nationalised industries such as the British Steel Corporation are able to pay higher salaries and to offer greater security and far better index-linked pensions than British industry is able to do. Comparability seems to have got out of line. In the electrodes industry, with which I have long been connected, we arc certainly losing skilled inspectors, wire-men and the like to the Post Office, which is offering very much better terms. One has only to look at its accounts to realise that it really cannot afford to do so. Yet the Government came out very forcefully at the Chequers meeting, saying that priority must from now on go to British industry and to investment in British industry. I hope, therefore, that they will look most carefully to see that industry is getting fair and open comparability with the public sector.

I hope to end as I began, and to say that it has not been my concern in any way to undermine the principle of comparability. I hope that by initiating the debate I shall have given the opportunity for an open and broad discussion on conditions in the public and private sectors. Let us be told on exactly what basis these pay, pensions and perquisites are calculated. My Lords, I beg to move for Papers.

4.45 p.m.

Lord SHEPHERD

My Lords, I very much welcome this debate. In one sense it is opportune and in another it is long overdue. The noble Lord, Lord Orr-Ewing, has introduced it in a restrained way when one considers the barrage of criticism to which the Civil Service has been subjected in recent weeks in the Press and the other media. As noble Lords may have observed, the headline writers have not lacked colour, or imagination in their descriptions of civil servants and their conditions of service. We have read of "Whitehall's happy laughing boys", of the Government as an employer being guilty of, "Gilding the golden bowler" or allowing, "Over-privileged public service pensioners" to feed at the," Public trough". The Civil Service is certainly not above criticism, and it is right and proper that it should be subject to continuing public scrutiny, but I am bound to say that much of what I have read recently has been ill-informed and in some ways downright malicious. This House has an obligation to the public and the Civil Service to examine and establish the facts and to separate the reality from the myth.

I am very glad, therefore, to have this opportunity to set the record right, and I am indeed grateful to the noble Lord, Lord Orr-Ewing, not only for having initiated the debate but for the way in which he has approached it and for the depth of his research. Some of the points he made I intend to deal with in the course of my speech because I, too, believe in open Government and there is nothing to hide here. However, I shall deal with the more detailed points when, with the permission of the House, I wind up at the end of the debate.

At the outset of this debate, I should like to make two main points. First, Civil Service pay and conditions are decided by Ministers. There is no question of civil servants being judge and jury in their own cause, as the noble Lord suggested. Speaking for myself, I recognise that I am a rather awkward sort of person and that I need to be fully convinced of the merits of a case before passing it on to my colleagues. They in their turn also need to be convinced, and they, too, can be very awkward. I say that because I have had some responsibility for the Civil Service during the past 14 months.

My second main point is this. After those 14 months as Minister in day-to-day charge of the Civil Service, my view is that we in this country have a Civil Service of which we can justly be proud. Almost without exception, our civil servants are loyal, dedicated and hardworking, often in the most trying circumstances and under great pressures. I was very grateful to see that Mr. Peter Walker had himself expressed this view quite recently. The work that they do is vital to the just and efficient administration of a civilised society which seeks to provide a high level of welfare, security at home and abroad, and a decent standard of living for all its members. I have had the privilege of visiting a wide range of Government offices and establishments—Social Security offices, dockyards, Customs, Inland Revenue and—quite recently in Aberdeen—the research laboratories concerned with future supplies of our fish.

I can assure your Lordships that the cartoonists have got the Civil Service quite wrong. The caricature of the civil servant as middle-aged, male, Whitehall-based, pin-striped and bowler-hatted is far from reality. Fortunately, the average civil servant is more likely to be young, female and in the Provinces. There are about 719,000 civil servants, 3 per cent. of the working population; 179,000 are industrial and a slightly larger number are in the clerical grades. Only a tiny proportion are in Whitehall. Seven out of 10 do not even work in London. About one in 700 are in the most senior grades of Under-Secretary and above. The average earnings of non-industrial civil servants are £54 a week, which is far removed from the millionaire and Croesus-like image which some of the Press is attempting to portray.

Civil servants are not a class of people set apart—they are members of the ordinary working community. But the accusation is made—and the noble Lord, Lord Orr-Ewing, touched upon it—that there are too many of them and that some of them—the noble Lord himself did not refer to this—are non-productive. To the first accusation, I would say only this. Although I am myself concerned about the size of the Civil Service, the fact of the matter is that the Civil Service is only as big as it needs to be to do the work required of it by Government and by Parliament to the standards which we lay down. Its manpower and expenditure are closely scrutinised by Ministers and by its own stringent monitoring of staff and work. To make large savings—and here I stress the word "large"—in Civil Service manpower, therefore, we must either cut out many tasks or accept lower standards.

Well, my Lords, I am always willing to listen to suggestions for work which need not be done. But it is my experience, and I am sure that of many others, that as soon as the suggestion is made up pops another lobby to argue that the work is essential and vital. But if we lower standards, people will have to put up with rougher justice; to accept that their problems will not necessarily be handled with the same care as other people's. Is this really what we want? How long would it be acceptable to the public or the media?

To the second accusation that is made, although not here today, that civil servants are non-productive I would simply say that they do the work we give them to do. Some. indeed, are factory workers in the Mint, Ordnance factories, and dockyards. More than 60 per cent. of the non-industrials work in jobs providing direct service to the community; for example, paying out pensions and other benefits, collecting taxes and finding people jobs. Surely, my Lords, it is productive to provide services for the wellbeing of the community?

So, I do not question the right of criticism of the Civil Service, but I do object to the character of some recent criticism. It affects the morale of the Civil Service. But what concerns me most is that the bitterness and viciousness of the attacks create new strains, unnecessary strains, between civil servants and the public they serve. What in many cases arc difficult tasks only become more difficult. It is all too characteristic of our period that only complaints, justified or otherwise, are reported and highlighted. Rarely, if ever, do we hear about the many cases where people have gone out of their way to be particularly helpful.

I now turn to that part of the noble Lord's Motion which draws attention to the formula by which the Government determine Civil Service pay. I am glad to see the recognition that it is the Government who determine pay. To read many of the Press comments one would think that civil servants just help themselves from the till. This is of course not the case. As I have said, it is Ministers who decide Civil Service rates of pay. To assist them in this, there is a rigorous and fully-considered pay system which operates in the Civil Service—the system of fair comparisons. The basic principle of fair comparisons is to pay a civil servant what others are paid for similar work elsewhere, after taking account of other conditions of service. This system was recommended by the Priestley Royal Commission in 1955, which argued that the Government should not take the lead but should pay rates broadly comparable to those paid by good employers outside. It thought this would be fair to the taxpayer and fair to the civil servants themselves. Successive Governments have accepted this principle over the last 20 years.

How, then, do fair comparisons work? The basic facts are found by the Pay Research Unit which looks at a wide range of Civil Service jobs actually being done in a given grade, and then identifies—also by inspection on the ground—a wide range of similar jobs outside. To avoid any freak results, a wide range of comparisons is used. For example, the pay of a clerical officer is derived from 340 rates of pay covering tens of thousands of people in 42 organisations. To ensure that the comparison is complete and fair to both sides, the pay research procedure also takes account of other conditions of service, such as differences in hours and leave, and pension contributions and benefits. The result is a range of pay for grades in the Civil Service genuinely equivalent to that being paid to those doing comparable work elsewhere. The Pay Research Unit does not determine or recommend the final levels of Civil Service pay. It provides the factual basis. Although there is some room for negotiation with the unions over some of the adjustments, the pay research process is largely mechanistic.

I should emphasise that the final pay levels are neither the best nor the worst of those being paid outside; they are specifically pitched in the middle of the range. At any one time, therefore, it is possible to find people who are better paid, and others who are worse paid, than their Civil Service equivalent. No single example can be conclusive; it is the broad picture which matters. That is the system. It is calculated to ensure that civil servants are paid fairly, but not more than fairly. But does it in fact achieve that result? Let us look at the most recent pay settlement where I have personally been accused of having "taken my colleagues to the cleaners".

The average pay increase nationally for males in non-manual occupations during the year ending 1st April 1975 was 27.5 per cent. What did civil servants get at the same date?: an average increase equivalent to an annual rate of 26 per cent. My Lords, I do not think that there is any evidence here of unfair discrimination in favour of the Civil Service. Since 1964, national average earnings have increased by 221 per cent. Over the same period, average Civil Service earnings have risen by just under 200 per cent. Again I have to ask: is there evidence of unfair discrimination in favour of the Civil Service?

The system of fair comparisons means what it says. Since it was introduced, civil servants have, on average, been treated neither better nor worse than their counterparts outside. My Lords, let me repeat—the pay of civil servants is settled by Ministers; and anyone who wishes to press the charge that civil servants, by their advice, lead Ministers into unjustified high settlements had better produce his evidence to that effect. Certainly, the figures I have quoted, and the figures into which I have researched, lend no support to any of these charges.

Finally on pay, my Lords, I should like to make it clear that the Civil Service, like everyone else, will be bound by the Government's pay policy. The Government have made it clear that the pay limits must apply to everyone without exception, and it is our firm intention that civil servants shall be treated neither more nor less favourably than the rest of the community. For the duration of the policy, therefore, the operation of Pay Research has been suspended.

Great attention has been paid to those in the Higher Civil Service, and I hope I may be allowed to say a few words about them. My Lords, their pay is determined by the Government on the basis of recommendations, not by Pay Research but by the Top Salaries Review Body, under the chairmanship of the noble Lord, Lord Boyle; and here I should like to express, as my predecessors have done, a special word of appreciation to the noble Lord, Lord Boyle, and his colleagues on the Review Body for all the effort and dedication they put into their work. My Lords, in case there is any question of patronage or "pull" here, may I put it on record that the work of the Review Body is voluntary and unpaid.

As your Lordships will know, the Government decided to stage the increases recommended by the TSRB for both Permanent Secretaries and Deputy Secretaries. These grades are therefore being paid substantially less than the levels recommended by the Review Body after a full and exhaustive study, and this despite the fact that the Review Body's recommendations reflected their view that pay in the public service should not attempt to match the highest salaries that can be obtained for jobs of comparable weight in the private sector. The top salary in the Home Civil Service, which is paid to only three people, now stands at £20,175, instead of the £23,000 recommended by the Review Body. The pay of Permanent Secretaries—the official heads of the major Departments of State, with all the heavy responsibilities they bear—has increased, before tax, by a mere 18½ per cent. since 1st January 1972, over a time when prices alone have increased by more than twice as much.

The clear fact is that senior civil servants have not been favoured at the expense of others. They are not featherbedded or privileged. Their standard of living has been dropping for many years. This is going to continue, for, like the rest of those earning more than 8,500 a year, they will receive no increases whatsoever during the current year—not even the second stage of the increase necesary to bring them up to the pay levels recommended by the Review Body. I recognise that now, during the recession, the job security of a senior civil servant may be greater than that of some of his counterparts in the private sector. The noble Lord, Lord Orr-Ewing, himself touched upon this. But the Review Body—the noble Lord, Lord Boyle, and his colleagues—specifically took this into account in recommending the pay levels that they did, and again I see no justification for the accusation that these people have been cushioned from economic reality or have looked after themselves at the expense of others.

I shall now say a few words about pensions, where I believe the greatest misunderstanding arises. To describe Civil Service pensions as "non-contributory" is really a misnomer. In the first place, civil servants make a full employee's contribution of 1.5 per cent. of pay for widows' and family benefits. In the second place, the civil servant does not get his own pension for free. This is because, under the Pay Research system, where a person outside pays a contribution from his salary for his pen- sion, that contribution is deducted before his pay rate is used as a comparison. For example, if the rate of contribution is 6 per cent. and if the outside person's salary is £3,000 a year, then the rate used to provide the comparable Civil Service salary is £2,820.

In the third place, a comparison is made of pension benefits and a further deduction is made from Civil Service pay rates to reflect the differences between the Civil Service pension scheme and outside schemes as a whole. Under the 1974 pay agreement this deduction was 1.75 per cent.—a figure which is based on calculations made by the Government's Actuary's Department and subject to review each year. That is why I raised the point when the noble Lord, Lord Orr-Ewing, made it. This is not a firm figure; it can vary from year to year. It must therefore be obvious, from these figures, that civil servants pay for their pension benefits just as other workers do. The only difference is that their contributions are deducted before their final salaries are determined rather than being deducted from the salaries themselves.

The noble Lord, Lord On-Ewing, asked whether the Government's mind was completely closed to the question of having a contributory scheme as opposed to the present one. My Lords, I know of a number of my colleagues within the Civil Service who, for various reasons, think that this might be a wise decision; but the reason why successive Governments have not adopted it, despite various recommendations, is that to the National Exchequer, the national purse, the cost would in fact be greater than that of the present system. But, my Lords, without doubt it has been the inflation-proofing element in Civil Service pension arrangements which has caused most criticism and has given rise to accusations of civil servants being in a privileged position. In many ways, I suppose, it is inevitable, and in many ways right, that at a time of very high inflation these arrangements should be brought into question. It is understandable that those who do not have such protection—and, indeed, the taxpayer in general—should question whether it is fitting that public service pensioners should be insulated in this way.

I fully understand the reasons for the anxieties and the comments which have been expressed, but I would ask your Lordships to consider the following. First, this month's 26 per cent. pensions increase covers the rise in the cost of living during the twelve months ended 30th June 1975—a period during which earnings went up by a similar amount. If the pensioners could have been given their increase before 1st August I do not think we should be having the criticism we are having today. But that was not administratively possible. To have denied the pensioner his full increase after the wage and salary earners had just recently received their pay increases would have been, in my view, no sort of justice at all. Pensioners should not be made to pay for other people's pay increases.

Secondly, before 1971 increases in public service pensions were determined in what I can only describe as a haphazard way. As a result, many who had given a lifetime of service suffered considerable hardship in their declining years. It was the previous Administration which in 1971—and here may I say that I applaud their decision—put these ad hocarrangements on to a formal basis by providing that public service pensions should increase in line with the cost of living.

Perhaps I might quote, because I think it is right to do so, the words of the then Financial Secretary to the Treasury, Mr. Patrick Jenkin, who said in his Second Reading speech: Our citizens will gladly shoulder the cost of meeting this obligation to those whose lives have been given to the public service. Justice, long delayed, is now round the corner. This Bill represents a major milestone in the long and chequered history of public service pensions. It was the noble Earl, Lord Jellicoe, who introduced the Bill in this place and he expressed a very warm welcome to the Bill itself and to the principle. I know that all noble Lords will agree with me when I say how delighted we are that he is taking part in the debate today in the light of his responsibilities at the time as Minister for the Civil Service.

When the 1971 Act was introduced, it was criticised as being too mean. Yes, too mean—not too generous—because it denied the pensioner, however long he might live, any share in the growing prosperity of the nation as a whole; because the pension was related to prices and not to the growth of incomes. And, let us be in no doubt about this, over any reasonable period of years, the national wealth will continue to grow. But at least the 1971 Act has ensured that the pensioner does not get progressively poorer, while those in employment get progressively better off.

To my mind, the principle of inflation-proofing is a sound one which should command general support. It is the cornerstone of the additional component in the new State pensions scheme, and it is the least that other major European countries do for their public service pensioners. Many of them—France, Germany and Japan, for instance—go further and link public service pensions with pay. I suspect that the reason for the general clamour against the inflation-proofing arrangements is that this year will be an abnormal one in that we can expect prices to increase faster than earnings. For a brief period, therefore, pensioners will be doing better than the working population.

But, my Lords, where pension matters are concerned, we must take a long-term view. It is not necessarily right to make a sudden change because of one year's unprecedented inflation. Future conditions, rather than the present, are what need to be taken into account. Obviously. we will keep the inflation-proofing principle under review and look at it in the context of the economic situation next year, by the end of which we intend to reduce the rate of inflation to single figures. Therein, my Lords, lies the answer to the present difficulties. Nevertheless, I am bound to say that we should be very wary of interfering abruptly and frequently with long-term pension arrangements because of short-term changes in our economic situation.

Thirdly, my Lords, full inflation proofing does not apply to the Civil Service alone. It covers such groups as retired policemen, nurses, teachers, soldiers, Servicemen, dustmen and postmen Indeed, it also applies to Ministers and MPs, and also to some chairmen of statutory boards.

Furthermore, inflation-proofing is by no means unknown in the private sector. I accept—I think that this was the burden of the speech of the noble Lord, Lord Orr-Ewing—that it is difficult for many firms, particularly the smaller ones, to protect their retired employees fully against increases in the cost of living. Nevertheless, there are several major employers who have broadly achieved full inflation-proofing; although understandably—I stress "understandably"—they cannot commit themselves to being able to continue to do so.

Finally, I suggest that we should keep this matter in perspective. There arc about 1 million public service pensioners who received increases this month. They include some 260,000 retired civil servants, of whom only about 70 now have pensions of £8,500 a year or more. Even after this increase of 26 per cent., the average pension is no more than £17.50 per week.

And what, my Lords, is the cost of this "crippling burden on the taxpayer" as it has been described? The estimated cost of Civil Service pensions in 1975–76 is some £260 million.

That may sound a large sum, but it is no more than about 10.5 per cent. of the total salary bill. And that includes all pension benefits and the full cost of inflation-proofing, even at present rates.

I have already pointed out that a civil servant has already made a full contribution of about 7 per cent. by way of pay forgone and direct contribution towards this cost. On that calculation the cost of these pensions to the salary bill is approximately 3.5 per cent. so far as this year is concerned. The Government's contribution under the present "pay as you go" arrangements is there for a modestone—certainly much less than the contribution an employer has to make to a funded scheme. I know that that is because funding is highly desirable in private sector schemes. But it is unnecessary for the Civil Service. My point remains. So far from costing the taxpayer exorbitant sums, out of all proportion to the cost of private sector pensions, Civil Service pensions are quite remarkably economical.

My Lords, a lot of silly statements are being made about the cost of Civil Service pensions. For example, I think it was said in this House, but certainly it has been said in the Press, that it was estimated that Civil Service pensions are worth £410,000 per person. These esti- mates are absurd because they are based on one assumption which is false and another which is ludicrous. The false assumption is that the average Civil Service pension is £9,000 a year: in fact it is £900. But that is nothing compared with the second assumption that inflation will continue at 20 per cent. over the next 30 or 40 years. My Lords, the prophet who makes that assumption will believe anything. But it will not happen and, if it does, the effect on the Pensions (Increase) Act will be the least of our worries.

Finally, my Lords, the noble Lord's Motion refers to perquisites, or "perks". I can deal with this matter very briefly, because there is very little indeed in the way of "perks" in the Home Civil Service. There are no subsidised mortgages; there is no free life insurance; there are no individual expense accounts; there are no share option schemes. All travel and subsistence allowances are laid down and closely monitored to relate solely to expenses incurred on official duty. So far as cars are concerned, not a single one is provided for a civil servant's private or domestic use. Indeed, even for official purposes, only some 50 out of 700,000 civil servants have cars allotted to them for uses which may include journeys to and from work.

In conclusion, my Lords, may I repeat briefly the main points. I apologise for speaking at length but this subject has raised a great deal of public interest. Civil Service pay is fairly determined and can be demonstrated not to have got out of step with the rest of the community's. They have good pension terms. This I recognise, but they meet a large part of the cost themselves and the burden on the taxpayer, as a proportion of the salary bill, is in fact remarkably low. They are not padded out with perks. In the light of what I have said and of their own experience, I have no doubt that those Members of this House who have had close connections with the Civil Service will resent, as I do, the biased and ill-informed nature of much recent Press comment. I conclude by saying this. I do not believe that, in the matter of pay and pensions, the civil servant receives privileged treatment. Previous Governments have aimed to be a fair employer, no less and no more. That remains the intention of this Government.

5.21 p.m.

Earl JELLICOE

My Lords, if anything is more destructive of human tran-quality than to make a maiden speech in your Lordships' House, it is breaking a matronly silence. Nevertheless, this "matron" is glad that his noble friend has put down this Motion, and is grateful to him for his extremely well informed speech. I ant glad especially if this debate helps in any way to dispel the doubts and suspicions about the arrangements that we make for the Civil Service and, indeed, for the public service as a whole. The facts which the noble Lord the Leader of the House has adduced will help in that respect.

I felt impelled to speak—admittedly under the curling lash of Lord St. Aldwyn's Whip—in view of the responsibilities for the Civil Service which I held for the best part of three years, following the noble Lord, Lord Shackle-ton, preceding my noble friend Lord Windlesham and the noble Lord the Leader of the House. Indeed, if something in the state of the Civil Service is rotten this House must bear its share of responsibility for this sad state of affairs. For myself, I remain a firm believer in a separate Department, the Civil Service Department, to supervise the workings of the Civil Service, and it is no bad thing that the Minister in day-to-day charge of that Department should be in this House; although, to employ my noble friend's phraseology, it would be wrong if it were to be an exclusive perquisite of this House.

I want now to turn to the heart of the matter, the principles on which the pay and pensions of the Civil Service are normally based. I should like to state baldly and at the outset, so far as pay is concerned, that I believe the twin principles of fair comparisons and pay research are right, and that so far as public service pensions are concerned, we are right to protect them against the erosion of inflation. I shall say briefly why I believe that fair comparisons represents the right approach.

I believe this for two reasons: first fairness to the taxpayer. The civil servant should be remunerated no better than his equivalent outside. The taxpayer has a guarantee therefore that he is not paying over the odds. By the same token, the civil servant's remuneration should not be less than his equivalent outside. The taxpayer thus has a guarantee that the Civil Service will be able to attract its due quota of talented people. The second reason is that fair comparison insulates civil servants' pay from transient and political pressures. It is therefore a safeguard of the Service's efficiency, its essential impartiality and, indeed, its incorruptibility. We would be unwise in today's rather rickety society to ignore this last consideration. In any event, I should hate to think of the results of a free-for-all in civil servants' pay.

So far as the pensions are concerned, the, present arrangements which have been so widely if recently criticised stem, as the noble Lord the Leader of the House rightly pointed out, from the Pensions (Increase) Act 1971. I introduced this Act in your Lordships' House four and a half years ago. I was glad to do so. I remain glad that I did so. I should like to make three not particularly original points on that. The first is that the Act discharged a commitment to inflation-proofing made by both the main Parties before the 1970 Election. It was embodied in our own Conservative Election Manifesto A Better Tomorrow. That is a phrase which has a certain nostalgic ring about it today—our less good today. The commitment was specific. And I gladly acknowledge that a great deal of work along these lines had been done in the Civil Service Department under the noble Lord, Lord Shackleton, when I came into that Department.

Secondly, there was a general welcome for this Act in both Houses of Parliament and, indeed, a virtually unanimous welcome in your Lordships' House. Such criticism as I had to fend off— and if it came from anywhere it came from the noble and gallant Lord, Lord Bourne—sitting there on his lofty montagne—was that it fell short of the principle of parity. The fact that this Act received bipartisan, indeed tripartisan support, does not confer any title of bastardy upon it. The third point I should like to dwell on for a second is that the umbrella of this Act enfolds far more than just the Civil Service. One million or so pensioners already derive pensions benefits from it, and behind them stands an army of some 6 million employees in the public sector whose pensions benefits will derive from this Act.

We are dealing therefore with a matter which intimately affects the lives of many millions of our fellow citizens, both working and retired. I say again that I believe that both Houses of Parliament were right in the judgment they made in 1971. The confusing, arbitrary, often harsh and often unjust legacy of eleven previous Pensions(Increase) Acts badly needed tidying up. I believe it is right that the Government of the day, if humanly possible, should ensure that their retired employees are able to buy the same goods and services next year as in the current year. To use the noble Lord's phrase, no more but no less. A declining and erratic standard of living in the late evening of one's life is a sad thing to wish upon one's fellow citizens.

What then has gone wrong, and why all this fuss? What has gone wrong is crystal clear: it is that successive Governments hitherto have been unable or unwilling to rein in the wild horses of inflation, to drive out this enemy of inflation which is now within our gates. Civil Service pay and pensions have been lifted, as it were, on a side wind by this great gale of inflation blowing through our economy. That is why the Civil Service pay settlement in April was 26 per cent., and that is why the pensions increases which came into effect ten days ago were 26.1 per cent. That is a figure, I must confess, four and a half years ago I should never have dreamed of in the wildest of Latin American nightmares.

At this moment, therefore, of growing unemployment it is only natural that envious eyes should be turned towards the relative—only relative—security of Civil Service employment. It is understandable in a period when most pension funds in the private sector are backed up against the wall, and when the majority of companies in the private sector are finding it impossible to inflation-proof, that many should look askance at these provisions for the public service. Standing, as I now do, on the private sector side of the fence. I know how very deeply this disparity is felt. I do not think that my noble friend Lord Orr-Ewing was in any way exaggerating in what he said in that respect.

What, in these circumstances, are we to do? The obvious answer is, of course, that we have to hit inflation hard on the head. But that is a matter I am content to leave to wiser heads and, possibly, to wiser Governments. So far as the subject of this debate is concerned—that is, pay, pensions and, if I may use the expression, "perks"—we have to ensure that the arrangements are not only right and reasonable in themselves but that they are seen to be right and reasonable, and seen to be so by the man in the street. I believe that the arrangements are right and reasonable.

So far as pay is concerned, the noble Lord the Leader of the House has given us the figures and I think it is true to say that the long-term and consistent effect of pay research over the 20 years or so in which it has been in operation has been to increase a given civil servant's salary somewhat less than the increase over the same period in national earnings or wages or salaries. That is the long-term effect.

Regarding pensions, again, the noble Lord the Leader of the House has given the figures and I should like just to dwell briefly on the range of the spectrum here. At the lower end, it is not unusual for a civil servant to retire with a salary of as little as £30 a week. With 20 years' service, that civil servant's pension would be less than £8 a week and the pension of his widow less than £4 a week. Thus, 26.1 per cent. for her represents about £1. At the other end of the scale there are those much maligned Permanent Secretaries, one or two of whom I see lurking around. They happen to have worked rather hard before they take a breather in our House. After 40 years of service—and that is a lot: I think perhaps more than any of them have put in—a Permanent Secretary would now receive a lump sum of £31,500 and a pension of £10,500 a year. The latter, however, is not a very munificent amount after Mr. Healey has got at it.

But although these arrangements for pay and pensions may be right and reasonable, there is little doubt that they do not so appear at the present time to a great many people outside the public service. In my judgment, rightly or wrongly, the malaise over this matter goes very deep and it will not be dispelled just by sitting tight and hoping that the tide of inflation will ebb. I would not dream of suggesting in detail to the noble Lord the Lord Privy Seal how to suck this rather indigestable egg, but I would suggest it is time for a further hard look at the whole system. It could not be a better time in one way: pay research is suspended for the time being and pensions will not come under review until next summer. I would myself hate to see the Government of the day backtrack. Thousands of people from Cornwall to Caithness have made their dispositions for retirement on the assumption that the Government of the day will not walk back from the principles embedded in the 1971 Act. True, if we allow inflation to run on at anything like the present pace we may not be able to hold the position. But clearly, if the horse bolts down the Weimar course, if I may so express it, inflation-proofing, and much else besides, will go out of the window.

In the circumstances, therefore, I should like to suggest—the noble Lord has said that this matter will be held under review —that such a review could go rather wider and further. I should like the Government, without delay, to establish an inquiry so that there could be a further look at the whole set-up; that is, both the system as a whole and its operation. Recommendations could be made as to whether or not any future publio service pensions should be fully contributory. If —Heaven forfend!—we cannot bring inflation within reasonable limits, and if the disparity between the public and the private sectors becomes too great so far as pensions are concerned, then such an inquiry could recommend whether some ceiling or temporary limitation should be placedon Civil Service pensions. It could also recommend whether any such limitation should be general or should apply only to the larger pensions. Above all, such a body could probe whether due account is being taken in today's circumstances—when salaries in the public sector are being fixed—of the benefits there of relative security of employment and of inflation proofing in the various inflationary conditions that we have today. It could take account of the detailed points which were raised by my noble friend Lord Orr-Ewing.

If such an inquiry were undertaken, I would hold four things to be important. It is important that pay and pensions should be looked at together: they are umbilically linked. It is important that the inquiry should cover the whole area of public service and not only the civil servants. It is important that the inquiry should be sufficiently "high level" and independent so that it would not come under even the breath of a suspicion that the Civil Service is preserving a particularly succulent dish for itself under wraps.

A difficulty—and this was touched on by my noble friend—about the arrangements for pay and research is that although the Pay Research Unit does its work with admirable fairness and thoroughness, its operations, due to the need which is felt for confidentiality, are too cloistered, too mysterious and too far removed from the public gaze. Clearly, some officials would need to be associated with, and would have a very real contribution to make to, any such inquiry as I am suggesting. But so, too, would the trade unions and the representatives of the employers' side, in both the public and private sectors.

Finally, the Report of such an inquiry should be published in full. My hope would be that, if such an inquiry were set up, it would recommend a more open system of pay research in the future and the establishment outside Whitehall of some free-standing body—a development of the Pay Research Unit—to review pay and pensions, subject to the overall direction of the Government of the day.

I have one penultimate word to say and, as I have two-and-a-half years of speeches up my sleeve, I hope I might be allowed two minutes more. I have directed my remarks so far to the subject of this debate; that is, pay and pensions. But in the whole public sector there is something which worries me much more; and that is numbers. It really is essential, if public expenditure growth is to be checked and real resources freed for paying our way in this rough world, that we should be economical in all things, including manpower.

So far as civil service manpower is concerned, we—that is, the Conservative Government of 1970–74—managed, just, to check its growth during those years. We managed to put the brake on; but I cannot pretend, despite a hard and honest effort, that we did more than that. The signs are that the brake has now been released and that the ranks of the non-industrial Civil Service are once again beginning to swell. The real mistake of those four years, as I see it, was to concentrate most of our attention in this field on Central Government manpower. We tended to overlook, as did most people, the growth in local government manpower. It has been quite staggering. From 1,326,000 in 1954, it grew a decade later to 1,750,000 and now, a decade further on, it must be approaching 2,500,000. I am quite certain that this is a burden of over-government which this country cannot continue to bear; and, of course, we are alt in the first line of responsibility here, because the main reason for that growth is the cascade of legislation which pours from the spout of Parliament.

That is all I wish to say, save in summary. To summarise, I believe that it would be a great mistake to put the clock back; that we should not abandon the principles which have governed pay in the Civil Service and pensions in the public sector because of temporary difficulties. However, the circumstances of today are very special. Behind all the muckraking about the privileged position of civil servants lies a deep and serious concern. If that concern cannot be allayed I fear that, as one of the results of inflation, we shall witness another great schism opening up within our society—that between those who do their work in the public sector and those who do their work in the private sector.

That is why my plea to the noble Lord the Lord Privy Seal and to the Government is to take this disquiet very seriously, as I am sure they are doing, if only in the interests of those who serve the public and to adopt a policy of the greatest possible openness and the greatest possible willingness to open all the books. That is the reason which lies behind the suggestion which I have ventured to make to the Government today.

5.42 p.m.

Lord BEAUMONT of WHITLEY

My Lords, like other noble Lords who have spoken in this debate, and, I imagine, like all those who are about to speak, I do not intend to indulge in any Civil Service bashing. We live in a highly complicated society in a highly compli- cated world, and that demands a great deal of administration. It demands a great deal of bureaucracy and, within limits, bureaucracy is no bad thing. However, we must be quite clear that there is a limit to the amount of resources which can go into the administration of our society, and one of the factors which we must deplore is the tendency of this Government, by such measures as the Community Land Act, vastly to increase the numbers of civil servants who will be needed for administration, whose effects in other fields will not be demonstrably beneficial and may even be harmful.

Civil servants do a very good job on our behalf and they certainly need good pay and good security. Nevertheless, the job of Parliament is to keep a watchful eye on their conditions of pay, pensions and perquisites. The noble Lord the Lord Privy Seal has told us that Ministers are responsible for deciding on levels of pay, and it is absolutely right that that should be so. But it follows from that that Ministers are responsible to Parliament, and that Parliament should keep a strong and steady eye on the situation.

I believe that there is still reason to think that perhaps at the present time Civil Service pay, pensions and perquisites are a little out of line. I entirely agree with the principle that they should be in line—I believe that the principle of comparability is an extremely good one—but there is reason to believe that they may not be in line at this moment. I do not think it is any answer to say—as has been said in the past—that this merely makes up for some times in the past when civil servants lost out. That may be so, but it is our business here to see that equality, parity, fairness are achieved at the present time and in the immediate future.

In commenting on this aspect, I want to make only two points. First, I want to take up the question which all noble Lords have so far taken up; that is, the indexing of pensions, inflation-proofing. There is a very considerable case for inflation-proofing as much as one can when inflation is not very great, but when there is considerable inflation there is very great danger in indexing. If there is a considerable amount of indexing but no great effort to get inflation down, then the indexing is itself inflationary and it adds to the problem. It is true that if you index at the same time as you are making a really head-on attack against inflation, you can do a very great deal of good. It can be an interim measure which can reassure people while you are tackling the problem of inflation. Brazil did this rather successfully. But at a time when inflation is rampant and is allowed to continue being rampant, indexing can be extremely damaging particularly if it is applied almost entirely to government service. We know that it is not entirely applied to government service but, despite what has been said, I still believe that only a very small proportion of people outside government service have their pensions indexed.

I do not share the optimism of the noble Lord the Lord Privy Seal and the Government about the attack on inflation at the present time. The noble Lord has said that in the future we can look forward to long periods when the wealth of this country is increasing. I hope that he is right; I do not see much evidence of it. We are told that the period of inflation which we have been through was an exceptional one. I hope that he is right; I rather doubt it. My impression is that the present Government will get inflation down to 7 or 8 per cent., which is not really tolerable in itself, but that that will not then become the maximum. It will be the start of another round of inflation, and I am not nearly so optimistic as the present Government about the future economic affairs of this country. However, I realise that that is a different subject from that which we are debating today, and I do not expect the noble Lord the Lord Privy Seal to deal with that point, except that he will no doubt rap me sharply over the knuckles because of my pessimism about this matter. I merely make that point about indexing. I was most interested in the remarks of the noble Earl, Lord Jellicoe, and in his suggestions as to what steps might be taken if inflation continues to be rampant.

The other point which I want to take up, which I do not think has so far been sufficiently explored, is that of salary levels. We know that the principle is one of comparability, and we also know that very detailed studies are made. But something seems to go wrong when one looks at what people are paid inside the Civil Service and outside it. It is not just that, as the noble Lord the Lord Privy Seal said, when one takes an average some people are bound to be paid more and some are bound to be paid less. Without being at all professional, and without digging very deep, one can find whole areas where there is obviously no comparability.

I recently asked a Question in this House about the salaries of people starting to be chartered surveyors. I studied the Answer of the noble Lord the Lord Privy Seal and I looked at my figures—which, incidentally, are not recommended figures; they are figures of recent appointments in both the public service and the private service—and there is no doubt that for people between the ages of 18 and 30 pay is 20 per cent. higher in the public service than it is for comparable jobs outside. I have consulted academics and past academics—not just those who are being paid at the moment who I thought would have an axe to grind—and the general impression (I admit that it is only a general impression) is that pay in the public service is about 50 per cent. above what it is in comparable academic jobs. It is a pity that the noble Lord, Lord Balogh, is not here to comment on that point.

The noble Lord the Lord Privy Seal will have had his attention drawn to what I think is the third annual report of the Central Services Unit which is reported in today's Times. Although I have not had time to give the noble Lord warning of this question, I hope he will feel able to comment upon it when he winds up. The Times report says: The public sector is paying graduates starting salaries between £500 and £1,000 a year higher than those generally offered in private industry, according to university and college careers officers. …Mr. Brian Putt, the unit's director, said in London that industry was offering graduates starting salaries last September averaging £2,500 to £2,600 a year. …Mr. Norman Lloyd, chairman of the Standing Conference of University Appointment Services, said local authorities and the public service were paying starting salaries for graduates of between £3,300 and £3,600. Some were paying much more. These may be exceptions, and I hope that the noble Lord the Lord Privy Seal can reassure us that they are. However, these figures have come to light in the last few days without, as I say, very deep and detailed research and I think that we in this Parliament are entitled to ask what the position really is.

One of the reasons why I have not done more detailed research is that there are not very many sources from which to obtain information. I have talked to the Civil Service Pay Research Unit and they say that they do not know of any published comparison between the public service and the world outside. If there is none, it means that the only ones in existence are those which the Pay Research Unit have produced and which the Government use as their salary basis. Since we know that these comparisons exist and since they are the only ones, Parliament is entitled to see them. I do not think that the explanation that confidentiality is absolutely necessary to their preparation is a real defence. I cannot believe that it is impossible to provide comparability studies without giving away the identity of the various outside bodies and firms which have co-operated with the Pay Research Unit in preparing them. I should have thought that it was quite easy to publish the bare outlines of these studies and I think that this is essential if your Lordships' House, in common with another place, is to do its proper job. We want more open government and this applies to everything that the Government do.

To recapitulate, the Civil Service does a very fine job. We need a large Civil Service and civil servants are entitled to good pay, pensions and perquisites. However, it is very important that how this is arrived at should be inspected publicly and should be made known to the public and to their representatives in Parliament so that it can be seen to be fair. May I suggest very strongly that the present Government should take steps to ensure that this happens.

5.54 p.m.

Lord HELSBY

My Lords, the Civil Service has never been immune from criticism—nor should it be, nor would civil servants wish it to be. In recent weeks and months, however, criticism has grown to a pitch which leaves one very uneasy because much of it has been ignorant, and all too much of it has been openly abusive. I confess that when I, as a former head of the Civil Service, first saw the Motion which had been put down by the noble Lord, Lord Orr-Ewing, I wondered whether this was going to ease matters. In the light of today's debate and of the meticulously dispassionate way in which the noble Lord, Lord Orr-Ewing, raised his issues, I am convinced that it is likely to do good and I welcome this opportunity of clearing the air.

The principles of settling pay in the Civil Service were defined in detail 20 years ago by the Priestley Royal Commission. The general principles, which Priestley did much to confirm and to define more clearly, went back even further than that. In principle, comparability has been the general basis for settling Civil Service pay for many a long year, but in the early days it worked fairly erratically. There was no systematic basis for making comparisons, nor was there any very satisfactory timetable for carrying out reviews in an orderly fashion. There has been a very great improvement in that respect in recent years.

The noble Lord the Lord Privy Seal has given details of the way in which the Pay Research Unit works. From my own knowledge of these matters, I am able to say that the job is now done as fairly, dispassionately and accurately as is humanly possible. I admit, however, that it is a job that is done by civil servants and that it may be that there is a case for considering whether or not the process would appear better to the public eye if independent consultants, or whoever was thought suitable, were associated with it. I think that that may help.

Not only has the work of the Pay Research Unit been speeded up, but the operations of the Review Body which deals with the higher Civil Service have been systematised and made more regular. In the old days, such reviews operated about five years in arrears and very often the recommendations made stated expressly that they were not designed to achieve full comparability. One remembers that a published report of the Banks Committee about 12 years ago said precisely that they would have recommended more had they felt that the situation warranted it. It is of great value both in general and in particular to the Civil Service that these maters have been systematised, and the more that can be made known about the precise and meticulous way in which the operation is worked the better it will be.

I turn to pensions. I am unable to say a great deal about the subject because the noble Lord, Lord Shepherd, and the noble Earl dealt with the subject offixing pensions in a way which I could not hope to do. However, I should like to emphasise that much recent public comment on Civil Service pensions has based itself on the assumption that everybody who retires has a claim to half pay—that is to say, that he has done 40 years' service and that his pay will be fully up to date at the point when he retires.

These assumptions, even if they are coming to be more nearly true, as regards the "up-to-dateness" of pay when the man retires, have never been generally true and are probably becoming less true as regards the 40-year assumption. In many parts of the private sector now, as the House will be aware, a period of 20 years has become the standard and there are many civil servants who, in one way or another, do not serve for much over 20 years. There are many members of the professional, scientific and medical side of the Civil Service who come in with outside experience and who have some maturity when they come in, and who certainly would not serve for 40 years. Nor does a Permanent Secretary serve for 40 years in the ordinary course of events, although there have been some who did.

Perhaps I may take a personal example as the clearest way of making my point: I myself was a civil servant for about 22 years. I had undertaken other work before that, but I was not unusual in that respect. I was unusual in that even in those circumstances I ended up as head of the Service. When I came to be pensioned I was entitled to about-one-quarter pay, on a salary which had been partially adjusted under the Franks Committee and had been waiting for four to five years for more complete adjustment. The result was that my quarter pay was calculated on a salary which is a good deal less than half of what my successor today is receiving. I mention that example, not out of any sense, of grievance—I was very well treated throughout my Civil Service career—but because there is a general impression abroad that in the Civil Service that sort of thing is never allowed to occur. If I may say so, the probabilities are on the other side: it is much more likely that in the private sector anybody who worked up over 20 years to be head of a major organisation would not be allowed to retire on that basis.

None the less, the principle of indexing pensions has raised a new issue in the last few years over which there is genuine public concern, and I think it is fair to say that that concern extends to some, at least, senior retired civil servants, one or two of whom begin to wonder whether they may be receiving a little more than is wholly appropriate in the present exceptional conditions. I think that anxiety would be valid only if one were to assume that inflation was going to continue unabated for some considerable time to come. Personally, at the present time I am not prepared to make that assumption. None the less, if it were thought that some such inquiry should be made as that suggested by the noble Earl, Lord Jellicoe, by way of allaying anxiety, I should certainly not wish to stand out against it.

But let us be clear that criticism of Civil Service pay and pensions—not in this House, but outside—is surely only a symptom of a general malaise. The Civil Service goes through phases when it is more than usually subject to criticism and more than usually unpopular, and undoubtedly in the last two or three years it has been going through some such phase. This is partly a matter of the growing size of the Service, to which reference has already been made. Perhaps these are different aspects of the same thing, but at least equally it is due to the ever-widening nature of the business which the Civil Service has to transact.

At present the public expenditure in the sense of expenditure controlled by central and local government has risen to about 56 per cent. of national income. This is an extraordinarily high figure: it is rising steadily, sometimes a little faster, sometimes a little slower, but it goes on rising whichever Party is in power. It is not a matter of Party politics. Also, it is not just a financial matter. The proportion of the national income which is spent under Government control is simply a manifestation of the range of the Government machine, the extent to which that machine is penetrating into the life of the country, and that penetration is only possible because the Civil Service is there to undertake it on the instructions of the Government. As the noble Lord, Lord Shepherd, said, the Civil Service only does what it is told to do. But it is told to do a great deal, and this very high proportion of national income that is controlled under the auspices of Government is the measure of the extent of the task of the Civil Service. This surely accounts for a great deal of the unpopularity of the Service. They are asked to interfere in the business of other people and other firms, corporate business as well as private business, and undoubtedly there is a certain resentment.

But so long as we are to run our country in this way, so long as we are to have a highly developed Welfare State, something of this sort is necessary, and surely it is the more necessary that our Civil Service should undertake this work at the very highest possible standard. Let us not think that we could improve our situation in any way by allowing the standard of the Civil Service to be run down. Sometimes nowadays we are a little cautious about what we say of the Civil Service, lest it be thought that we want them to he an élite. In some other countries they are rather proud of having a Civil Service which they think represents the cream, as it were. This is not fashionable now in this country and I can see good reasons why that may be so. But let us make no mistake: unless we can continue to draw into the Civil Service a proper quota of the most able persons of the highest integrity, our lot as a country which is so thoroughly managed from the centre will be very unhappy indeed.

6.9 p.m.

Lord HOUGHTON of SOWERBY

My Lords. I listened to the noble Lord, Lord Orr-Ewing, with great care in the hope that he would make some suggestions about the information that he gave to the House upon which we could consider future action. I was not clear at the end of his speech what conclusions he expected the House to draw. If the purpose of his speech was to illustrate facts, many of which he himself gave to the House, then I think his Motion has been successful, because we have heard a great deal of the facts of the Civil Service, its pay and pension arrangements, and different points of view upon them are now being laid before the House.

On the question of pay, the noble Lord, Lord Orr-Ewing, referred to the Pay Research Unit and the need, perhaps, to have outside representation upon it, so that any fears that it was a Civil Service body operating in the interests of the Civil Service alone could be dispelled, and that their comparisons could be seen to be fair. I was the chairman of the Staff Side of the Civil Service Whitley Council at the time of the negotiations on the Report of the Priestley Commission. The noble Lord, Lord Geddes of Epsom, as General Secretary of the Union of Post Office Workers at the time, shared with me the responsibility of deciding on behalf of the Civil Service what our attitude would be towards this new system of applying a new principle in affixing Civil Service pay. I am bound to warn the House that any disturbance of the fundamental principle of fair comparability would be received with grave unrest in the Civil Service.

My Lords, I was Secretary of the Inland Revenue Staff Federation for 38 years. I went from the 1920s to the 1960s, and saw all that happened. Not until 1955, when the Priestley Commission made a report to end the uncertainty, the strife, the disruption, the arbitration, the frustration which was felt by the Civil Service on the previous principle which was applied, that of the good employer, had we really any firm basis of comparison with anybody. The National Whitley Council Agreement of 1920 reorganising the Civil Service referred to the principle of pay in the Civil Service as being, a reflection of the conditions of employment of the good employer. We do not know who he was: we do not know where to find him, and we do not know what conditions of employment existed under him. He was a non-person. When we tried to quote a good employer at hearings of the Arbitration Tribunal, criticism was levelled at the informaion we presented on the ground that it was biased, inadequate, probably conveyed a misleading impression, and all the rest of it; we had no scientific basis of comparison. The Priestley recommendation was a refreshing change in the whole history of fixing pay in the Civil Service.

If the principle of fixing pay in the Civil Service had been accompanied by as clear a set of principles as those for fixing pay in the nationalised industries and the public sector generally, we should have had far less industrial unrest in the last 10 or 15 years. Where have all the strikes occurred?—in the public sector, outside the scope of the fixing of the principle of fair comparability which we have in the Civil Service, and the machinery for implementing it. I stress very strongly indeed the importance that the Civil Service attaches to the principle of fair comparability, and to the existence of the work of the Pay Research Unit, which is a necessary means of applying that principle. Let there be no mistake whatever about that!

What about the Pay Research Unit? This was a novelty. We were asking private industry to open its doors to roaming investigators who would go in and inspect jobs, see what people were doing, compare other jobs outside with Civil Service jobs inside; look at their conditions of employment; examine their standards of recruitment; consider whether they got free holidays, or whether their bus fares were paid: whether an allowance was given for their children, or whether at the disposition of the company concerned, they got other perquisites not heard of in the Civil Service. All these many quite delicate things once had to be elucidated in order to provide material on which to make fair comparisons. As my noble friend the Leader of the House explained, there is a weighing of the outside evidence with inside conditions, with pluses or minuses; tangible differences and intangible differences all have to be weighed and valued. Before it was possible to launch the Pay Research Unit, the Prime Minister of the day, Mr. Anthony Eden as he then was, had to circularise the industry to plead for the opportunity for investigators to go into private industry to seek the necessary information for fair comparisons.

When the noble Lord, Lord Beaumont of Whitley, who is no longer in his seat— there is nothing like making a speech and going out!—pleaded for more open information coming from the Pay Research Unit, he probably little understood the difficulty there was in getting the information even on a confidential basis. But the Civil Service has nothing to fear from more open information about fair comparability. It was not a condition of the Civil Service that this information should be confidential; it was a condition of the companies and employers from whom the information was sought. They laid down the rule about confidentiality, and if that could be lifted, there would be no difficulty whatever in regard to the material upon which negotiations take place being made available for public information.

I must stress that before we had the principle of fair comparability, we had a whole string of cases going to the Civil Service Arbitration Tribunal because of failure to reach agreement on what was a fair rate of comparison with conditions generally. Since the application of the principle of fair comparability, the need to go to arbitration has been enormously reduced. May I say in parenthesis that when the Stall Side has gone to the Arbitration Tribunal because of a dispute on the interpretation of the fair comparisons available, in the majority of cases the Staff Side has won its case; so I do not think the House need fear that there has been a lack of scrutiny or a lack of honest appraisal of the information obtained under the Pay Research Unit arrangement.

Lord ORR-EWING

My Lords, if the noble Lord, Lord Houghton of Sowerby, will allow me to interrupt, surely he would think there is some merit in broadening the manning of the Pay Research Unit to include some people from the private sector, such as management consultants and others—who, incidentally, find jobs for civil servants as well as for the private sector—who have a great knowledge of all this, and might contribute something to the overall knowledge?

Lord HOUGHTON of SOWERBY

My Lords, I have no particular observation to make on that, except to say that for reasons on which I will not dwell, the staff of the Civil Service Pay Research Unit is frequently changing. Their tour of duty with the Pay Research Unit is of limited duration. If people from outside were to come in to share in that work, it would be expected that their period of service with that Unit would be equally short. But that does not disqualify the idea in any sense whatever. I am merely saying it is not a job for life; it is not a job for a long time because of the circulation of people, with fresh minds being brought to bear on statistical information, and the inspection of jobs which this Unit has to undertake.

The noble Lord, Lord Beaumont, ventured the general opinion that perhaps pay in the Civil Service was now out of line, and he instanced one or two examples where prima facie it might be thought that the entering salary, at any rate of graduates and others, was considerably higher than the salaries given to people of comparable academic qualifications going into industry. This, my Lords, was an aspect that I went into with the utmost care and the greatest possible depth when I was conducting an inquiry into teachers' pay. This indeed was one of the substantial clues to what was fair in the teaching profession, to find out what graduates of similar academic qualifications to those coming into the teaching profession would get elsewhere. But I would say to the noble Lord, Lord Beaumont, that the comparison is by no means fair if you take into account only the entering salary or salary in the early years of service, because what we noticed was that in industry the graduate's rise to the glittering prizes of industry was far more rapid and spectacular than was ever possible in the teaching profession or in the Civil Service.

Moreover, the noble Lord, Lord Beaumont, referred to chartered surveyors, but what he did not say was that a large number of chartered surveyors are in private practice. You might just as well compare the pay of a solicitor in the Civil Service and of a solicitor being employed by another solicitor and think that is a fair comparison, without taking into account the fact that solicitors on the whole are in private practice; and chartered surveyors on the whole are in private practice. Indeed, review bodies have had to seek information from the Inland Revenue about the level of professional profits in a number of vocations in order to bring to bear some degree of fair comparison with the position of the salaried officer.

To give another example, the Inland Revenue is the biggest employer of professional valuers anywhere. They employ far more people than anybody else. Does one merely look at salaried valuers in partnerships elsewhere, or does one look at what partners themselves are making as professional valuers and compare that in terms of the career expectation of professional recruits or academics in the public sector? These are the things that have to be taken into account. It is not enough to say that generally they may be out of line and quote one or two examples where prima facie there seems to be a disparity. Let us look at the same people five or 10 years from now and see where they are on the scale in private industry as compared with public service.

When it comes to perquisites, the noble Lord, Lord Orr-Ewing, and I are both on the Salmon Commission on standards of conduct in public life. We are in a specially favourable position at the present moment to look at perquisites and see the straitlaced integrity of rules imposed on public servants, even at Christmas time when turkeys are on offer, and when there is no inhibition in industry in accepting them, but in the Civil Service there is. Let us be honest about this. If we are going to talk about perquisites, I can draw up a scale of perquisites in private industry which would make the civil servant green with envy. So these things have to be brought into perspective.

I would say to the noble Earl, Lord Jellicoe—and I listened to his speech with the closest interest and welcomed his intervention in this debate—that he must be careful in suggesting that the principle of fair comparability goes again to independent investigation, when it has had so much already and when the Pay Research Unit has been there for 20 years and has done its job admirably to the peace and contentment of the Civil Service. He must be very careful in making the suggestion that it should be put out to the laundry again to see what a private independent investigating body would make of it, because this is so fundamental to peace in the Civil Service.

One of the reasons why it has been desirable to provide conditions which lead to a contented and loyal Civil Service is to avoid the infection of disruption and militancy and industrial action in the Civil Service which is so widespread elsewhere. What would the public say if the Civil Service, in different Departments and sections, were on strike every other month, downing tools here, walking out there, striking first and arguing later? The public has the spectacle of seeing the Civil Service at its work. The only time when the civil servant goes militant is when the Government interfere with the normal rhythm and cycle of the Pay Research Unit. Trouble has happened when that has been done.

Now we have the £6 pay limit, which applies to the Civil Service as to everybody else. The Pay Research Unit has been suspended. The normal cycle of reviews under those arrangements has been suspended, and the Civil Service has accepted that because it has confidence in the resumption of the normal machinery and the well-established principles fixing Civil Service pay. It is content to agree to this, along with everybody else, as a contribution to the fight against inflation. Do not strain that too far, because it would be a grievous day for Britain if one had a Civil Service which could not do its job, properly and contentedly, serving the public well, if it worked off its grievances against its clientele. We do not want people in the Civil Service brushing off their discontent against the public, nor indeed do we want the public brushing off their discontent against the Civil Service. This balance has to be struck and maintained all the time.

I will say a word or two about pensions. The noble Lord, Lord Orr-Ewing, asked whether the Government had closed their minds to the idea of the contributory pension. My noble friend the Leader of the House made one comment on that. I would add two. One is that the widows and orphans element in the Civil Service superannuation scheme is already contributory. That is an important factor. The second is that, although the idea of a contributory scheme has been looked at time and again since the Tomlin Commission recommended it in 1931, I think one of the great difficulties has been funding. A contributory scheme employs some degree of funding, and this in the public sector is obviously a very difficult proposition. I was at one time an advocate of the contributory scheme because I believed that it was the only way of estab- lishing the right to pension. So vulnerable were the Civil Service pension arrangements at that time, so much at the hazard of pensions increase Bills and of the varying degree of compensation which Governments of the day would give, that I thought only by having a contributory scheme could one nail it to the wall.

The history of pensions increase Bills going back over the last 25 or 30 years is a grievous one. We have had it all; we have had means tests for improvement in pensions; we have had ceilings imposed on improvement of pensions; we have had a combination of the two. We have had tapering arrangements so that the higher pensions would get proportionately less than the lower pensions. We have had it all in Pensions Increase Acts since 1945, and I must have spoken on nearly every one in another place. None of them gave satisfaction; all of them created anomalies. Fancy a civil servant on pension having to declare his wife's income in order to qualify for an addition to his Civil Service pension on grounds of hardship! The humiliations which were heaped on the civil servant in those days would be unbearable today.

Again I must warn the noble Earl, Lord Jellicoe, not to be too free with the suggestion that all this can be put out to the wash for somebody else to have a look at and come back with the answers. That is the escape of the troubled mind. It is the escape of weak government. I welcome the steadying influence of the speech given by my noble friend the Leader of the House. That was the speech to make today. It does not of course commit any Government not to look at the situation as it may develop (and we hope for the better and not for the worse) in the next year or two. A Government would be foolish to say that there it is and there it sticks, because it might make the Civil Service unpopular and might give a sense of grievance to the public which, as the noble Earl, Lord Jellicoe, said, it would be difficult to hold. But do not let us at this stage suggest that all this can go out to further investigation when we have had a Royal Commission approximately every 10 years and when all this has been threshed out in such great detail before.

I would say to my noble friend Lord Orr-Ewing—I call him my "friend" because we are working together very closely in our public work—superannuation schemes in the Civil Service are well over 100 years old. There was superannuation in the Civil Service long before pension schemes were common in industry, and there has been a systematic improvement of the superannuation arrangements in the Civil Service over many years. Indeed, it was the Conservative Government in 1970 which decided to scrap the idea of the Crossman scheme which was going to graft the public sector pensions on to the State scheme. The Conservative Government decided to separate the two absolutely and clearly, and they then set about improving the Civil Service superannuation scheme, followed by similar improvements in other parts of the public sector, in order to show the way to private industry to the kind of superannuation scheme that they should adopt.

This was an example deliberately, purposely thrown out for industry to copy, and now we are beginning to criticise it because industry has not copied it, or is finding it difficult to keep up with it. Those difficulties are admitted, and let us be frank about that, and I am not committing myself beyond the immediate future on this matter. But why have we got a pension scheme in the Civil Service? Why have we had one all this time? It had its roots in the standard of recruitment, in the degree of loyalty and devotion to a lifetime vocation. That was the origin of the pension scheme; to keep people in the public service and to avoid frequent changes. It may not have quite the same validity today. Nevertheless, there is still something in the Civil Service pension scheme of great value to the efficiency and integrity of the public service.

Those are a few considerations which I suggest have to be borne in mind. I mention one further thing, and that is that under the Social Security Act 1975 it is provided that from 1978 Civil Service pensions should be linked with whatever changes are made in what is called the additional component of the new State scheme. There is to be a link there between the Civil Service and public sector superannuation scheme and the State scheme.

Finally, a word on the matter raised by the noble Lord, Lord Helsby. He was chairman of the official side of the National Whitley Council; I was chairman of the staff side of the National Whitley Council, but never the twain did meet. We held our respective offices at different times. I was in the Government when he was Permanent Secretary to the Treasury and Head of the Civil Service. He referred to the fact that not everybody who goes on Civil Service pension draws the full amount that people assume he or she does. I must remind the House that there is still a very big grievance existing in the Civil Service on the disallowance of substantial periods of temporary or unestablished service for the purpose of calculating pensions. Those of us who were in the House of Commons and are now on a House of Commons' pension know what that was. We did not get all our Parliamentary service to count for a House of Commons pension. I lost five years out of 25. A lot of civil servants have been similarly deprived of a period of service in calculating their ultimate reckonable service.

My final word is that, notwithstanding the recent increase that has been given in Civil Service pensions, we still have the disparity between the pension of an officer currently retiring and the pension of an officer of comparable grade and service who retired two, three, five or 10 years ago. The pension of an executive officer who retired 10 years ago is still 16 per cent. below the pension currently being granted to an officer of the same grade and after comparable service. This shows the difference between topping up pensions by reference to the cost of living and not topping up pensions by reference to the improvement in wage and salary standards, and the Civil Service pension scheme fell behind by being adjusted to cost of living terms and not to the improvement in salary terms in the rest of the Civil Service.

I have spoken long enough, and there is a great deal else to be said. I welcome this debate. It may be the beginning of a further, closer examination of the problem which we all recognise exists. But I utter a warning. Do not hasten unduly to subject Civil Service conditions to further independent scrutiny unless there is strong ground for thinking that they are in need of further attention. Do not let it be an excuse for unfairness on the part of some, and weakness on the part of others.

6.37 p.m.

Lord GARNER

My Lords, as the noble Lord, Lord Helsby, said earlier no civil servant worth his salt would seek to be immune from criticism, but in this country, which has recently so often been said to be one of sectional interest where people pursue personal advantage and are envious of others, I must confess that I have found this constant denigration of the Civil Service in the media and publicly a most depressing symptom. Most of the allegations are quite unfounded, and I am sure both Past and present members of the Civil Service will be most grateful for the valuable and important contribution which the noble Lord the Leader of the House made earlier. He is not in need of any assistance from me, but I can add one statistic that may help some of the argument. There has been much talk of the tremendous growth in Government servants, but all of that applies to central Government and to local government. The service to which I had the honour to belong, and which has recently celebrated its 10th birthday under its new name, has reduced its total staff by 12 per cent. in that period. The Diplomatic Service, therefore, on an annual rate decreased its staff by at least 1 per cent. every year, so that is something to set on the other side.

The noble Lord, Lord Orr-Ewing, addressed his remarks to the" three p's"; pay, "perks", and pensions. I shall not have very much to say about either of the first two. On the first, I think it is accepted that if you want the best Civil Service you must give it reasonable conditions, and I think there is general agreement in this House this evening that the principle of comparability is a perfectly just one. As regards "perks", I can only say that I was a member of the Civil Service for 38 years and I never discovered any at all. Reference has been made to the boarding allowance, but I think the noble Lord, Lord Orr-Ewing, did not really refer to it in a derogatory sense as a "perk". I should like to say on that that in my own experience and my experience of others in the service the question of family is the most worrying one in the entire career of somebody who is serving abroad. Although, of course, I know that the boarding school allowance is an expensive item in present circumstances, I assure noble Lords that it is no compensation at all for the fact of forced separation from one's children when they are at an extremely important stage of their education and need parental attention more than at any other time.

I must comment on the question of pensions because the case is sometimes made that, owing to the multiplier effect of perhaps a series of different factors, a more generous final result is produced than might otherwise have been expected. I do not think this is true in general. I do not think it is by any means true of the average pensioner, but it may have some validity in relation to people at the top of the Service, particularly in times, as at present, of rampant inflation. There is, first, the percentage factor. It seems to me that there is an inherent unfairness about percentages and, indeed, this is recognised in the current anti-inflation policy with the flat rate increase of£6 a week on incomes. But pensions are based on salaries and a cost of living increase is paid as a percentage of the existing pension. It does not seem to me self-evident that, with an increase of 25 per cent.—and the present increase is just over that—if it is right for a pensioner on £1,000 a year to receive an increase of £250 a year, it is therefore, automatically, equally right for a pensioner on £10.000 a year to receive £2,500.

The position of pensioners is compounded by two other facts; in the case of senior staff, since the pension is based on a salary which is itself unduly inflated to take account of the very high incidence of taxation at the top levels, and, secondly, perhaps sometimes by the earlier date of retirement that is now generally adopted in order to open up opportunities for younger members of staff, and the retiring age, which used to be about 65, is now more normally 60, and in the case of the Diplomatic Service there are special conditions and there is provision for premature retirement with sometimes very generous terms. But the fact is that most of us are now living a good deal longer and many—this House is a very eloquent example of this fact—are still extremely active well after 60. The second point is the counter-inflation policy. There seems to be an apparent conflict with this since pension increases can exceed £6 a week—this applies to quite a number of Government pensioners—and can also break through the £8,500 upper ceiling. That, in fact, could apply only to a small handful right at the top.

As the noble Lord, Lord Houghton of Sowerby, who has far more experience of these matters than I could possibly claim, made clear, pensions are an extremely intricate and complicated matter. They depend on arrangements often made decades back in circumstances quite different from those obtaining today; they are on a contractual basis and they frequently have statutory provision. The first requirement in this matter seems to me to ensure that the men and women who devote a lifetime of service to the State receive fair treatment, but the second requirement is perhaps equally important, as has been said before in this debate; that is, that treatment should not only be fair but be seen to be fair. As the noble Lord, Lord Helsby, mentioned, I can confirm that there are certainly some former senior civil servants who, in the national interest, would gladly accept voluntarily some reduction in the increases that have been applied. But this is not an easy thing to do; it may appear invidious and it may be awkward to come forward on one's own, because equally there are, I think, others who were in the Service, who have incurred commitments and who would feel it a grave injustice if any diminution were to be made in their just allotments.

Whichever view we take, all of us are, of course, concerned about the reputation of the Service. I was very glad to hear the Lord Privy Seal say that the Government would in future take careful note and would review the arrangements if the present inflation were to continue at a high level. Indeed, I was attracted by the suggestion of the noble Earl, Lord Jellicoe, that there should be an inquiry. I had indeed thought of this myself—there was no collusion between us—but I had not thought of so wide-ranging an inquiry as the noble Earl suggested, and I see the force of some of the arguments which the noble Lord, Lord Houghton of Sowerby, put forward on this issue. There is a psychological point here as well as a mathematical or financial one, and it seems to me that there would be some advantage if these arrangements could be looked at as a whole, preferably by a body that is recognised as impartial, something per. haps on the lines of the inquiries that are at present conducted by two noble Lords of this House; the noble Lord, Lord Boyle, and the noble Lord, Lord Diamond. If the Government were to see fit to do this, it might help to take some of the steam out of the controversy and should help to dispel this worrying impression that the Civil Service has somehow secured a special advantage for itself at the expense of the community as a whole.

The future of all of us depends on Britain's recovery and this will come about only, in the first place, if we ail work harder, but also if we can continue to secure a measure of restraint by all sections of the community. This will come about only if it is based on a feeling of fairness to all, so that particular claims are not pressed against the national interest. I believe that if matters can be seen in perspective—and I hope that this debate has played a considerable part in enabling that to be done—this could play a not inconsiderable part in the major task that faces us; that is, of overcoming inflation, which is the root of all evil and the root of a good deal of the malaise which lies behind the criticism of the Civil Service.

6.48 p.m.

Lord PANNELL

My Lords, those who have spoken in the debate so far are, in the main, noble Lords who have had a close association with the Civil Service over a period of years. I draw the attention of the House to the terms of the Motion, which says in the latter part: …and in particular to the comparison between these and the benefits of private sector employees …". It is that passage to which I wish to refer. Generally speaking, the average person considers the Civil Service to be an institution rather well cushioned from the bleaker winds of economic adversity. That is not unfair, and I served my time originally in engineering workshops.

Consider, for example, my trade union, which has about 1 million members. I suppose that about 750,000 of them work in private industry. The remaining 250,000—if that is the figure—who are in the public sector, are considered the more fortunate of our brethren. Consider two men who go into the engineering trade, as I did originally. One of them may go into a local government job. He keeps his nose clean and he behaves himself and is not particularly truculent and at 60, after 40 years' service, he retires under the superannuation scheme on a comfortable competence with perhaps half or two-thirds pay. Another chap in the same town may enter an engineering firm. Through 40 years he will bear the heat and burden of the day. He will go out on strike for better conditions—something which rarely happens in local government—and will face the full blast of foreign competition and will be locked out from time to time. At the end of the day he will not retire comfortably at 60 or 65. Indeed, he may probably find himself finishing up on supplementary benefit. Noble Lords misunderstand the position if they do not recognise that there is a deep-seated resentment of the "two nations" in our society. Therefore, this afternoon's debate is a rather limited one, restricted as it is to the better-heeled section of the community.

The position is of course not helped when people read in the paper that a man who has held a prominent position in the Civil Service has retired and within a month or two has taken a job with a bank at £35,000 a year. It may be said that that is an individual case, but these are the cases which the Press speaks of and they are cases which cause deep resentment. I consider that the present Prime Minister and previous Prime Ministers did a bad service to the cause of egalitarianism when they allowed such a position to arise. If we say that justice must be seen to be done, it seems to have been very uneven in that case.

The noble Lord, Lord Houghton of Sowerby, whose friend I am very glad to be, spoke with his familiar truculence on behalf of the causes he has upheld for a lifetime as an ex-Chairman of the Staff Side of the National Whitley Council. We are very selective when we consider the public service. When I went into the House of Commons over 25 years ago, I sacrificed my superannuation rights and went into a vocation—or if your Lordships wish, an avocation—to which no pension was attached at the end of the day. One had to pay for public service. This was brought to a head in about 1958 by the death in a road accident of one of the more brilliant young Members of the House, the late Wilfrid Feinburgh, who left five children. The Labour Party had to set up a benevolent fund to look after them and other similar cases. For many years I was the chairman of that fund and my noble friend Lord Houghton was the treasurer. We did rather better than the Conservative Party because when our colleagues were defeated at Election time, as they often were, we had to mount a rescue operation.

I remember that the 1959 Election was a particularly distressing one and in 1970 I had to attend to no fewer than 70 Members of the House who found themselves in difficulty. Whenever it was suggested that the remuneration of Members of Parliament should be increased we would find that, despite a vote of the House of Commons—Winston Churchill ran away from a vote and it was only Macmillan who had the courage to mount a rescue operation properly and to put up the pay—we could expect the usual leading article from The Times saying that being a Member of Parliament was a noble calling but that it ought not to be remunerated as are lesser men.

I was also associated with my noble friend Lord Houghton in his Private Member's Bill to set up the Boyle Committee. Mr. William Whitelaw, who was Leader of the House and who is a man of great humanity, understood the problem. I can think of Members of Parliament who were almost household names and who served the State with great distinction but who were neglected at the end of the day. Among the legislative and elective element there are only two pensions, one for the Lord Chancellor and the other for the Speaker of the House of Commons. The latter gets a pension so that he shall not accept any job when he has retired. This was laid down by Earl Baldwin who said that a Speaker of the House of Commons must look neither to the right nor the left but, having held the greatest Commons Office in the State, must retire on a pension. I believe that what is good for the Speaker of the House of Commons ought to be good for the Head of the Civil Service. It was a great mistake when there was a breach in that principle.

I do not want to harp on that point except to say that the noble Lord, Lord Shepherd, prayed in aid the fact that Members of Parliament would get the benefit of the increased pension—the 21 per cent. or whatever it was. The noble Lord has never been a Member of the other place and he cannot have known what he was talking about. That applied only to Members of Parliament who were in in 1964 andl who were permitted a 10-year allowance for their services. I can think of a noble Baroness—and she reminded me of this this afternoon—who lost her seat in 1959 and found herself without anything at all. Public service to the State through elected Office is not properly looked after. I notice that there is now a great deal of bleating because we pay people in local government a lost time allowance, but I remember that for many years before I went into the other place I returned a lower rate of income tax as an engine fitter because of the amount of lost time which I incurred through public service on local and county councils.

We speak of people being kept above corruption and we have the Salmon Commission which is looking at this. I hope that it will tinge justice with humanity and memory in dealing with this matter. Nye Bevan said in his last speech: The burdens of public life are too great to be borne for little ends. They may be too great to be borne for little ends but they were borne for very little remuneration or public gratitude. There is no question at all about that and I have always been rather proud to have been associated with the other place because, whatever may have been said about it, its Members have always done what they thought was urgently important. They were prepared to bear the heat and burden of the day and they and their wives suffered financially because of it. All the way down the line, with every good thing that can be said for civil servants, they are being cushioned by the efforts of people like my noble friend.

I believe that part of the discontent was touched on by the noble Earl, Lord Jellicoe, when he spoke at the end of his speech of the kernel of the matter being the increase of manpower in the public service. I have studied legislation over a period of years. I can think of no more incompetent piece of legislation—including the 1971 Industrial Relations Act, which was bad enough—than the scheme for the extension of local government which was brought in under the last Government. One has only to consider the local government chronicles and the lists and the salaries which they are offering. The present Prime Minister has been rather careful always to cut the increment of Ministers. He did so in 1964, and again later on, and he has never given them the full entitlement.

But there is no doubt about it, the Clerks of what were regional or county councils were getting far more than the Ministers of State to whom they were accountable. Such a situation has gone on elsewhere in exactly the same way. When doing some research on a subject about which I had some knowledge I found that in 1826 the Speaker of the House of Commons was getting £6,000 a year, while the Clerk was getting something over £1,000. A Committee considered the matter and it stopped him selling the gold plate back to himself and reduced his salarly to £5,000. But consider how the position of the Clerk has come up over the years. The Clerk of the House of Commons now receives much more than the Speaker himself, and I suppose that the Clerk's salary is approaching that of the Prime Minister. We must bear in mind here that Ministers are bearing the great responsibilities of Office.

These are the sort of matters against which the Civil Service is judged: that is, the responsibility which civil servants carry, and what happens to them at the end of the day. As one who joined the Labour Party in 1918, I am not satisfied with the present set-up. I want to see an extension of national superannuation so that it takes in every member of my trade union, and so that people, whether in the public sector or the private sector, can have honourable and dignified retirement. The whole of our superannuation schemes are built on the idea that "unto them that hath, shall be given".

We are now passing into a phase of depression, and there will be considerable unemployment in the engineering industry. Chrysler is up for sale. All these jobs, whether or not they are in local authorities, will continue to be the prize jobs. We have had such a long period of full employment that the public sector tends to discount the risks which fall upon those who work in the private sector.

This speech may be a bit off the beam so far as the Motion is concerned. But this House would help its own dignity and its worth in public life if it were to include the whole picture and did not continue to have debates that are partial and selective. I do not want to say an unkind word about civil servants or the pensions they receive. All I am concerned about is that, when we share out the national cake, those who help to pay for it—by industry and otherwise —shall also be in favourable circumstances at the end. I found how true the situation was when I was reading an article in the business section of the Sunday Times. The article contained a cartoon, showing a little man--probably an engineer—and on his shoulders he was bearing layer upon layer of admistration and infrastructure. He had to keep the lot of it.

We are not finished; we are going on to devolution, and that will be another lot which someone will have to keep at the end of the day. Before we know where we are we shall be the most over-governed country in the world. I tell your Lordships this: the most efficient unit of production is one man working on his own in exactly the same way that the most civilised idea of conversation is that of two men speaking to one another. To the extent that that is multiplied it is made less efficient; to the extent that the circle of the conversation is extended exhibitionism is brought in, and at the end of the day, I have no doubt, nations go to war. That is what really happens. We want to get back to the individual unit and the individual responsibility. In case anybody says that this is turning on the Socialism on which I was brought up, I should remind him that it was the late Lord Snowden who said that Socialism was the individual properly clothed.

7.5 p.m.

Lord MORRIS of GRASMERE

My Lords, I want to speak to only one quite restricted point about pensions. I ought to declare an interest, because as I retired 12 years ago from being a university vice-chancellor, my pension is index linked. Although it was 12 years ago, and salaries were very different then, I am immensely grateful for the index linking. Someone said—I am afraid that I cannot remember whether it was the noble Earl, Lord Jellicoe, or the noble Lord, Lord Shepherd; or perhaps it was neither of them—that index linking was a great milestone. It was a great milestone! Index linking for National Insurance pensions has made more difference, I suppose, than one would ever have thought it possible for any action of Government to make. When I was a young man in Germany, in the days when these matters were highlighted parts of our lives, in the 'twenties, we knew very well how our friends—academic, and others—and their widows suffered and starved. If anything that was said or done about pensions, or said or done about index linking, was in any danger whatever of risking index linking to National Insurance pensions, it would be a most terrible thing and clearly not worth anything that could be saved on anything that could be done elsewhere.

But it is a fact that some of the pensions mentioned that are index linked seem to be very high. A figure of £9,500 —and then to be index linked—is clearly high. I am not pretending to know very much about these matters, but I have been very much impressed by the heaviness of the guns in speaking about pensions and salaries—especiallyabout salaries. I have in mind something which was said by the noble Lord, Lord Helsby, and some things said by the noble Lord, Lord Garner. I should have had to try to say those things myself in introducing my brief remarks had the noble Lord, Lord Garner not already said them. But he said them very much better than I would have been able to do. So I will not attempt to repeat what he said about some of the considerations that come to the minds of many people—including his mind, and the mind of the noble Lord, Lord Helsby, and the minds of some of his friends—about this question of index linking for these very high pensions at a time of really great national stringency. I have in mind the £6 a week limit and such matters.

I am told that a number of ex-Permanent Secretaries and other high civil servants who are now retired have actually approached the Government to speak on this point, and to emphasise that there are a number of them who feel strongly that in present circumstances—in this period of the £6 a week limit—it is rather difficult to regard it as quite right for these very high pensions to be index linked in quite the same way. If it is the case, as I am told, that a number of these ex-senior civil servants have approached the Government on this matter, it would be welcome if the noble Lord who is to speak for the Government could refer to this because I have not seen this point mentioned. Bearing in mind the many things that have been said about the Civil Service and about the type of people who are civil servants, this would seem to be a matter of great public interest.

I turn to my second, small point. Unlike the noble Lord, Lord Helsby, I had 42 years of service to count towards my pension, so I have known something about pensions, of one kind of another, in the public service for a very long time —both for myself and for other people, of course. If I remember rightly, up to, I suppose, 1971 the calculations on the fraction per year of service were tapered in the case of some of the very high level people. I do not remember in detail how much they were tapered, and so on, but I believe they were tapered. I believe that that stopped in 1971. I suppose there must have been very good reasons indeed for that, but of course it has a bearing on the point I am referring to about the very high-level pensions and the representations and feelings of many people about them. Those are the only two points that I wish to make to your Lordships.

7.10 p.m.

Lord GEDDES of EPSOM

My Lords, the noble Lord, Lord Orr-Ewing, twice said in the course of his remarks that he had no desire to undermine principles. He then went on to suggest, however, that the Government should look at the whole question of pay and conditions in the Civil Service with a view to changing policy. Of course, you cannot change policy on these matters without breaking agreements. Is the noble Lord, Lord Orr-Ewing, in favour of breaking agreements? He will not be able to answer that, of course, because he will not have heard me say it. Nevertheless, the noble Lord, Lord Houghton of Sowerby, made some reference to what would happen if any attempt was made to change these agreements. We have been in the position over many years that the Civil Service is one of those bodies which will never fight for its rights. I am bound to inform your Lordships that in my opinion—and I have some experience—any attempt to try to interfere with the present basis of arriving at wages or with the present system of pay and pensions would result, not in a minor strike which fails, such as we had recently in the postmen's strike, but in an upheaval in the administration of this country which could not for many years be overcome.

Much is being said about the cost of pensions. Of course they cost money. But certainly for as long as I have been connected with the Civil Service—and that goes back to 1911—it has been a principle accepted by all sides (by the official side, by the unions and by the staff side) that pensions were deferred pay. I do not think the noble Lord, Lord, Helsby, would challenge that. The principle has been that pensions are deferred pay; in other words, the civil servant draws his pension, not because of a gracious act on the part of the employer but because he has in fact saved that money by having a reduced salary over the years during which he has been employed. It is not a gracious act; it is deferred pay and he is entitled to that pension.

Then we come to the question of the amount. Listening to the noble Lord, Lord Orr-Ewing, one might come to the conclusion that every pensioner in the Civil Service retired on £8,000 a year or more. The noble Lord based his argument mainly on that position. which, of course, is utterly absurd. There are thousands of civil servants who retire as clerical officers or on the salary of clerical officers—thousands of non-industrial civil servants and thousands of industrial civil servants. in fact, there are more people retiring below the salary of an executive officer than there are those who retire at or above that salary. But may I put this to your Lordships? The average service on retirement of a clerical officer is 25 years. Again, we have the noble Lord, Lord Orr-Ewing, talking about 40 years' service, talking about a gratuity based on 40 years' service and talking about forty-eightieths as being the pension. But if you take the average service—and I am taking the average of the clerical officer—such a civil servant retires on twenty-five-eightieths, not forty-eightieths; and his gratuity is not a year and a half's salary but is less than one year's salary. Therefore, we can get hopelessly confused and hopelessly biased if we try to judge this issue solely on the basis of those who retire on the higher rates of salary.

My Lords, let us examine this for a moment. If you have a system of pay and pensions, must that system not apply to everyone? Are you going to bring in a man as a clerical officer at 18 years of age and say, "Your pension when you retire in, perhaps, 40 years' time will be based on eightieths", and then, in 10 or 15 years. when he is promoted to another grade, are you going to say to him, "But now your pension will not be based on eightieths; it will be based on something different"? Then, when he gets a little higher in the scale, are you going to say, "The basis of your pension will now change again, and it will be based on something quite different"? This, surely, is utterly absurd. You must have a system, and that system must apply, surely, throughout the whole of a man's career, whether he finishes up as a clerical officer or as the head of a Department.

My Lords, let me now talk about job security—and I shall try not to be long. We talk about job security in the Civil Service on the basis that nobody appears to get the sack; or, at least, that very few do. But is there not another side to that coin? Why is it assumed that because very few people get the sack therefore a number of inefficient people are employed? Why can we not accept the simple position that there are very few inefficient civil servants? Then it is said "Ah! But of course there must be inefficient civil servants. There must be!" Why must there be? You have to bear in mind, I submit, that the type of man or woman who comes into the Civil Service comes in intending to make it a life's career. They come in looking upon the Service as a job that they want to do. They want to serve the country, they want to be loyal to the Service and give loyal service; and, therefore, there is no need to sack them, because they are doing their job as they were intending to do it. If you look at job security from the point of view of the Civil Service being very good indeed because nobody is sacked, then I suggest that you are looking at it from a completely wrong point of view.

The noble Lord, Lord Orr-Ewing, suggested that it would be a good thing if you added consultants to the Pay Research Unit, and the noble Lord, Lord Houghton of Sowerby, tended to agree with him. I profoundly disagree with the noble Lord, because he suggested—I may have misheard him, but I do not think I did—that the consultants he had in mind were expert in assessing job value. But this is to completely misconceive the PRU. The PRU is not a wage-fixing body; it is not the body that fixes wages. All that the PRU does is to prepare the statistics which form the basis of discussions which can take place subsequently to determine the wages The fact that you have a consultant who is an expert in job evaluation has nothing to do with the PRU. The function of the PRU has been explained in full by my noble friend Lord Houghton of Sowerby. It is not a wage-fixing body; it is a body which prepares facts. If it is thought that an outside economist might do better, that is one thing; but, after examining the qualifications of the members of the PRU, I doubt whether one could much improve on them.

The noble Lord, Lord Orr-Ewing, was congratulated on his research. His research may have been good but I am going to suggest, with the greatest of respect, that his research did not go back far enough. What he did not do was to try to find out what gave rise to the Priestley Committee recommendation. I suggest—I may be wrong and, if so, I apologise—that he has not studied the evidence given by the trade unions to the Priestley Committee on this matter. I suggest that he is not aware of the main point made in one part of the evidence by my union: that it was of absolutely paramount importance to get an agreed basis on which to discuss wages.

My noble friend Lord Houghton has already referred to it. Over the years each side would prepare their facts. There would then be a disputation on which of the facts presented by each side were relevant to the case. Having done that, there was then a long disputation as to the interpretation of the facts, even if they were agreed. Then one finally reached a situation where, because there was an arbitration clause in the Civil Service agreement, the official side elected to go for arbitration as a matter of alibi with the Treasury so that they would not be blamed for coming to the agreement.

My Lords, I have lost faith completely in arbitration. I began to do so when the Government of the day decided to abolish the Industrial Disputes Tribunal. It was generally agreed among trade union leaders at that time that this had been done because the IDT, by and large, tended to favour the workers. But what shattered my belief in arbitration was an incident which occurred when I was a member of that Tribunal. We were examining facts and the facts showed that the lower paid were entitled to an x amount increase. In my innocence I argued that since the facts were exactly the same they should apply also to the higher grades—only to be informed by one of the independent members of the Tribunal, someone isolated: "We do not do that sort of thing". If he did not do that sort of thing, what did he do? I suggest that what he did was to become a wage regulating body, something which the arbitration courts were never intended to be. I came to the conclusion that arbitration on those lines was no good to me and no good to the workers generally. So we submitted evidence to the Priestley Committee suggesting that there should be an agreed basis between each side.

My Lords, I am going to close on this. What a wonderful thing it would have been if over the last 20 years there had been an agreed basis between the employers and the trade unions as to what should determine increases in wages! What a wonderful thing that would have been! What a remarkable change would have taken place in industrial relations! The introduction of the new form of wages claim, the claim for a substantial increase in pay, had in it the ingredients of absolute disagreement; for how could employers and workers possibly agree on what was substantial? Inevitably the seeds of disagreement were there from the moment the claim was put on the table because there was no basis on which to determine what was substantial and what was not. This led to the present system of, "Stand and deliver!" and, "I want a substantial increase in pay; and if I do not get it. …" If, 20 years ago, there had been, not the Civil Service basis, but an agreed basis, on which both sides would go into a wage discussion and be able to say: "This is the basis on which we are going to come to an agreement. These are the facts. What is the result?", then the economy of this country and its future could have been entirely different. Therefore when you talk about undermining the present system of pay in the Civil Service, think back. Think how much better it would have been if it had been applied universally.

7.27 p.m.

Lord ALEXANDER of POTTER-HILL

My Lords, I do not wish to discuss the nay or pensions or "perks" in the Civil Service nor do I wish to discuss figures; except that I would assure the noble Lord, Lord Pannell, who gave the example of the £1,000-a-year pensioner who got an increase of £250 compared with the £10,000 pensioner who got £2,500, that by the time Mr. Healey had dealt with the £2.500 the one would not have been very different from the other. Therefore, I do not think these global sums have any great meaning. My concern is a much simpler one. I suppose that traditionally the Civil Service has been as good a subject for music hall jokes as mothers-in-law. But these were almost always good-natured banter and there was an underlying conviction in the public mind of complete confidence in the Civil Service and in its integrity. My concern is that it seems to me that in the last six months there has almost been a campaign—a rather vicious campaign—against the Civil Service which inevitably will to some extent impact on public opinion.

It is reasonably true that public opinion may become, or perhaps is becoming, increasingly disenchanted with Parliament. But that disenchantment is no justification for criticism of the Civil Service. Perhaps they are becoming increasingly concerned at the level of public expenditure, but, again, that is no ground for criticism of the Civil Service. The Civil Service must not suffer for the misdeeds of their political masters who arc responsible in these matters. I am not a civil servant. I have never been a civil servant; but I have negotiated and worked with senior civil servants for 30 years—not always in agreement with them, not always (to be fair) even in harmony, but always with the deepest respect for their ability and integrity. That is my concern in this matter, a point to which reference was made both by the Lord Privy Seal and the noble Earl, Lord Jellicoe, in their speeches.

If there is the slightest measure of corruption it is headline news in this country. But why is it headline news? It is because it is a rare event. There are other countries where such an occurrence would not even have been thought newsworthy because it would be almost a daily occurrence. I greatly fear that these attacks in the media—in the Press —could seriously affect the morale of the Civil Service, and this to me would be a matter of the gravest possible concern. I believe we probably have the best and certainly the highest standard of integrity of any Civil Service in the world. It is therefore imperative from this House to put on record our complete confidence in that service, and in its standards of integrity, which is of the greatest importance to the welfare of the nation. Most of us have visited many countries; some of us have worked with Civil Services in other countries. I greatly welcome the debate in order that our House may make clear to the public that we have complete confidence in the integrity of the Civil Service, as we have always had.

7.32 p.m.

Lord GRIDLEY

My Lords, I have an interest to declare in this debate. I served overseas for 30 years and I am an overseas service pensioner. It would be out of keeping with the custom of your Lordships' House for a speaker following on what the noble Lord, Lord Alexander of Potter hill, said, not to have appreciated everything he said about the Civil Service. I am a member of the executive committee of the Overseas Pensioners' Association. We have a London office, a full-time Secretary and a small staff to deal with the problems of pensioners in this country and officers who have settled overseas. Many problems in this connection have arisen with overseas Governments in many quarters of the globe.

I will not weary your Lordships with all the details with which our Association has been involved in negotiations with Governments of both complexions, Labour and Conservative, in this country since 1960 when we were formed here. In all humility, we have endeavoured to co-operate with the situation in Britain while protecting the rights of overseas pensioners. At all times we have been fortunate to be able to maintain an excellent relationship with Members of both Houses of Parliament and with various members of the Government. It so happens in this connection that we were included with others in Section 3 of and Schedule 3 to the Pensions (Increase) Act of 1962. Then it was considered equitable that our position should be further protected in the 1971 Pensions (Increase) Act which consolidated the law bringing the colonial overseas pensioner into line with home service pensioners and the Armed Forces.

It may be appropriate for me to say at this stage that there is a distinction between the 1 million to 1¼million public service pensioners excluding the Armed Forces and ourselves. Today we number just below 12,000 pensioners, and so at present we are a comparatively small fraction of the total number of pensioners enjoying pensions under the Pensions (Increase) Act. We are in fact a dying race. The Colonial pensioners in the not too distant future will become completely extinct. As your Lordships are aware, there is no further recruitment to the Colonial overseas service so there will be no pension liability due to us in due course, which may be of some comfort to my noble friend Lord Orr-Ewing.

I listened carefully to Lord Orr-Ewing's remarks and to the reply of the noble Lord the Leader of the House to that speech. I greatly preferred the speech of the Leader of the House. Of course, I sympathise with my noble friend Lord Orr-Ewing in his arguments regarding the present difficulties in the business world. He was effectively answered in this connection in the speech which was made by the Leader of the House. I further appreciate the difficulty in drawing distinctions at this time between pay and pensions in the business world and pay and pensions in industry. But my noble friend Lord Orr-Ewing must understand that the pensions drawn by pensioners today were earned by service extending over many years back from the year 1975—in my own case from 1925 to 1955. Is my noble friend going to tell us that business over that period was never prosperous? It was far more prosperous then than it is today. The salaries of those in the Service overseas, and the emoluments drawn by civil servants at that time, were considerably less than the salaries drawn in industry. The individual had to choose: opt for a Civil Service appointment with greater security and a pension, or the greater risk and the prospect of higher remuneration in industry.

If I may return to something in the speech of the noble Lord, Lord Pannell, he referred to a feeling in industry, particularly the engineering industry, that the situation regarding emoluments was far less favourable to them than might be the case of people who were enjoying civil servants' pay and pensions. I well understand how people in the engineering industries in this country may feel in that connection. To me it seems largely a matter of choice. You can choose what career you follow and you take the consequences of what might happen in any particular section of that work which you do.

To turn to other matters in connection with overseas pensioners, and with reference to industry itself, when I served overseas people in industry were permitted at that time as a matter of course to invest in the share market of overseas companies. Under the Colonial regulations, which were applicable to all civil servants serving in overseas territories, it was absolutely forbidden to have any investment by way of shares in any company in the country in which an overseas service officer was serving. If he did not comply the penalty was to be sent home on the next boat and to be dismissed from the Service. The noble Lord, Lord Helsby, referred to the requirements of very high integrity which were necessary in the Civil Service. I have no reason to believe that those people who are responsible for our Civil Service in this country at the present moment do not require an equally high degree of integrity in whatever capacity they are serving in Britain today. In conclusion, my Lords, I do not think that the 12,000 Colonial civil servant pensioners—who, as I have said, are about to become a dying race in the not too distant future—with all the Pensions (Increase) Acts, inflation-proofing and so on, on average draw more than £2,400 a year. There might be one or two in the larger group embracing civil servants drawing £8,000 in the wider bracket to which the noble Lord the Leader of the House referred, but I do not think there can be more than one or two. I believe the noble Lord referred to the larger category of civil servants numbering 70,000, of whom he thought 70 might be drawing something in the region of £8,000.

I am grateful for the opportunity of speaking in this debate and more than grateful for the manner in which so many of your Lordships have spoken in favour of the justice which is now being done in regard to the pensions paid, particularly to the overseas civil servants, in accordance with the arrangements agreed between the Governments concerned. I can assure the noble Lord, Lord Orr-Ewing, that there exist no more loyal individuals than the overseas service pensioners and also that the pensions they at present enjoy are only just adequate—really no more than that—for these people in their retirement.

7.41 p.m.

Lord SNOW

My Lords, perhaps you will forgive me if I make a short intervention in this debate. As I think is well known, no one believes more strongly than I that speeches in this House and elsewhere are getting longer and ought to be diminished. Therefore, I shall not detain your Lordships for long, but I have a message to convey.

For a good many years I happened to have a connection with the Civil Service —and let me hasten to add that it was both part-time and non-pensionable. That was for me a most rewarding and valuable experience, and I have the greatest respect and affection for many of those whom I met at that time. I may say that one of them was my old chief, now the noble Lord, Lord Helsby. It happens that some of the friends I made then suggested to me only a few days ago that it might be a good idea if I tried to convey to this House what some of them were thinking about the matters we have been discussing today. In fact these characters happen to be precisely those who were mentioned by the noble Lord, Lord Morris of Grasmere. These are people, all of them retired of course, who have held high positions in the Civil Service —normally Permanent Secretaries or the equivalent—and they were all extremely worried, to put it no stronger than that, about receiving these extremely large increments in their pensions. I cannot tell the House the names of all these people, partly because some of them are actually involved in negotiations or in positions where to make a public display over this matter would be embarrassing. But I am sure that Sir Gilbert Flemming, who was for years Permanent Secretary at the Ministry of Education, and Sir Paul Sinker, who was once First Civil Service Commissioner before the noble Lord, Lord Helsby, and who later became the Director-General of the British Council, would not be worried if I were to mention their names. I think they would agree that I am trying to represent accurately their thoughts and their feelings.

As I have said, all these people are retired civil servants of high rank and they are all getting large pensions. They have canvassed opinion among persons like themselves, and out of 13 they found that nine were in substantial agreement. They agree on these proportions: first, they think that the horrible phrase "inflation proofing"—my Lords, what are we doing to the English language; it is worse than "index linking"!—may very well be all right for the lower levels. But at the levels with which they are concerned, the levels at which they exist, they find it worrying. Secondly, although they think it is too late to do anything about the recent increase, they would like the Government at least to consider the position in the terms they are suggesting before the next round of increases. In this respect I am perfectly sure that they would welcome the suggestion made by the noble Earl, Lord Jellicoe—and may I say that we were all delighted to hear him on his feet again in this House. Thirdly, they would say that in fact when we are dealing with counter-inflation measures and trying to get people to accept pay limitations and limitations on everything, it is not a particularly good example to have persons who have held great positions in the affairs of the State cheerfully receiving large increases—and not only large absolute increases, but large relative ones. Perhaps I ought to mention a name here, and I will mention Sir Paul Sinker, who would say, "If we don't give a lead, who will?" Anybody who knows Sir Paul will know that he would express that in robust, old-fashioned Anglo-Saxon English.

The noble Lord, Lord Morris of Grasmere, asked whether the Government had received representations from these persons. We all know that they have, and I am afraid that I shall have to ask my noble friend the Leader of the House what comments the Government have to make on representations made in precisely this sense. I speak tonight only as a messenger boy, but I cannot help saying that I feel rather proud to be one. It gives me a certain satisfaction to reflect that responsible persons are for once acting responsibly, or at least with imagination—and I had almost forgotten what that was like. I believe that this example, which is quite small in itself—it cannot possible extend to many people —would do great good to the image of the Civil Service if it was made known that such feelings were being expressed.

The Civil Service can do with a certain brightening up of its reputation. I agree very much with the noble Lord, Lord Alexander of Potterhill—although perhaps I would put it over a longer period than he suggested—that there is no doubt at all that the psychological or spiritual reputation, if you like, of the Civil Service has been definitely on the decline. I think one can tell that rather easily if one is dealing with some of the highly able and intelligent young people. The Civil Service is getting its fair quota of the Beta pluses, the good, sound, sensible people; but from my own limited experience I would say that it is not getting the absolute "stars". People who would have thought very hard and earnestly about going into the Civil Service when I was young, some 30 or 40 years ago, now tend to reject the idea. That is a great pity. You cannot have a good society without a good Civil Service, and to attract people you need more than good pay and more than even good pensions. If you are sufficiently able and ingenious—as, by definition, the people I am thinking of are—you can make similar contrivance by becoming a bookmaker.

What people of the highest quality want is to go into work where they feel that they are of use to society and where society recognises that they are fulfilling a useful role, which is equally important. Both are important—the second quite as much as the first—and the danger is that we may be losing that quality. Therefore, the spirit that my old friends are now showing would seem to be a part of what the intelligent young would like to feel and which might attract them into following these older men.

7.50 p.m.

Lord BOURNE

My Lords, I hesitated before rising to speak, but the Armed Forces have not been at all mentioned in this debate and I thought I should mention them. I have to declare an interest, because I am President of the Officers' Pension Society, but I am really speaking for the Armed Forces. I should like to make only two points in the interests of brevity. The first is that an average Lieutenant-Colonel—who was poorly paid for 20 or 30 years and retired in 1960, so he has 15 years of retirement behind him—probably drew £2,448in pension, whereas a Lieutenant-Colonel retiring today draws £3,617. The difference of £1,200 may not be a lot, but it means a great deal to those people. Furthermore, such officers had great responsibilities. They were either driving a submarine or an expensive aircraft, or were running a workshop in Singapore worth about £11 million. The responsibility which they accepted was terriffic.

Therefore, although we thanked the noble Earl, Lord Jellicoe, and his predecessor the noble Lord. Lord Shackleton, very much indeed for linking Service pensions to the retail price index, we did not give three cheers because, unfortunately, although that was a very great improvement, a second working career was necessary for nearly all those officers. I had a Lieutenant-Colonel who commanded a regiment, and I thought he was a military genius. He retired on £650 a year—admittedly, it was way back—and he kept two horses in the yard and a groom to clean them, as well as an inside servant. Only the richest people can do that nowadays. So I do not think we ought to clap hands now.

My second point is that the difference between public servants or members of the Armed Forces and the private sector is, as the noble Lord, Lord Gridley, pointed out, a matter of chance. In the private sector, you can go for a very high salary with a certain risk, and if you get to the end you will have a high consequential pension, whereas if you flog along in the Armed Forces you will not. One difference between members of the Armed Forces and civil servants is that it is virtually impossible to fire civil servants. They have to commit a criminal offence or do something disgraceful before the can be fired, whereas in the Navy, Army and Air Force there are redundancy schemes in operation today and quite efficient fellows are being fired or retired.

Another point which I do not think has been mentioned in this debate is that in the operative period last year wages rose 28 per cent., while our pensions rose 26.1 per cent., so that the Civil Service and the Armed Forces are still behind. My conclusion is that linking pensions to an economic index of some kind—preferably to the average wage, but, if necessary, to the retail price index as at present—is surely right. The House of Commons thought so in 1971, and they voted themselves index-linking of pensions. So that the right cure for our present difficulty, which we all recognise, is to slow down the rate of inflation.

7.56 p.m.

Lord CAMPBELL of CROY

My Lords, I should first like to congratulate my noble friend Lord Orr-Ewing on having raised a subject which has been arousing interest and concern in the country as a whole, and on having introduced the debate in such a helpful way. I congratulate him, also, on his presentation of the facts, and the noble Lord, Lord Shepherd, congratulated him on his research. My noble friend drew our attention to the problems and difficulties which can arise, especially for private manufacturing industry and smaller businesses upon whose efforts our economic future so much depends. He accepted the principle of comparability between the private and public sectors, and he put forward, constructively, considerations which should now be taken into account.

In this debate we have been fortunate in having distinguished speakers, including the noble Lord, Lord Helsby, a former head of the Civil Service, the noble Lord, Lord Garner, a former head of the Foreign and Commonwealth Office, as well as the noble Lord, Lord Houghton, who led the Staff Side of the Civil Service Whitley Council during a very important period, accompanied by the noble Lord, Lord Geddes of Epsom, who also took part in this debate.

As noble Lords will recall from some other recent debates, I was myself a professional diplomatist and, besides serving abroad, worked for periods in London at the Foreign Office and was seconded to the Cabinet Office. But I do not have a financial interest in that respect to declare, because I resigned at my own wish when a member of the Embassy in Vienna, in response to a request from constituents in the North of Scotland to come home and stand for Parliament.

I should, however, declare a financial interest from an earlier role, in being eligible for an 80 per cent. war disablement pension, which is included in the categories affected by Government policy now being discussed. Your Lordships will be cheered by the felicitous effect of this, in that I usually make short speeches since having to stand for any length of time is uncomfortable, to put it at its mildest, and Members in another place soon discovered that I was very willing to give way to interventions after a few minutes.

The noble Lord the Lord Privy Seal has taken the opportunity in this debate —and we thank him for it—to point out that there were some extravagantly critical, and mostly misinformed, articles in the Press. I agree with that. But the House has acknowledged in this debate that there is genuine concern in the country, at a time of unparalleled inflation, that the Government have vast resources available with which to keep pay and pensions proof against inflation, while the private sector is exceedingly hard pressed to emulate this. There is also some feeling of resentment, to which the noble Lord, Lord Pannell, drew attention, at the difference which there appears to be between those who apparently have comfortable jobs, with full security—and he was describing local government and other areas, as well as the Civil Service— and those who work in factories and produce goods with which the country must earn its living.

I believe that this debate has helped to clear the air and to produce facts which will provide realistic comparisons. When comparing the pay and conditions of employees in the public and private sectors, let us also have the self-employed in the forefront of our minds. They have immense problems when faced with making provision for retirement in a time of very high inflation. Many of the self-employed play key parts in our economy, and the Government should bear them in mind.

May I first deal with pensions. Public service pensions were a cause for concern for some years until 1970. Many Members of both Houses of Parliament were worried and active at the time and will recall the widespread anxiety. I think particularly of my noble friend Lady Ward of North Tyneside and the noble Lord, Lord Harvey of Prestbury, who were very much engaged on this subject in another place. With others, they were especially concerned about those who had retired 10 or 20 years earlier and the effect of inflation, which seemed fairly tame in those days compared with this year's, on pensions.

As has been generally accepted in this debate, that situation was rectified by the Pensions (Increase) Act 1971. I was glad to be a member of the Cabinet which agreed to the Bill that was introduced—as also was the noble Earl, Lord Jellicoe, who piloted the Bill through this House and who must take the credit for it here. In his most helpful speech to us this afternoon the noble Earl has described the reasons for that Act and its main contents. As he told us, it was widely applauded at the time and I can remember no opposition anywhere to it; but that was at a time when inflation was running at about 5 per cent. Inflation running at 5 per cent. was considered to be dangerously high and one hoped that it would be infrequent. It is now, as we know only too well, over 25 per cent., a percentage that would have seemed impossible in those days.

On 1st December, less than two weeks ago, an increase of 26.1 per cent. was granted to public service pensioners. This includes not only former civil servants, as has been described by my noble friend Lord Orr-Ewing, but also teachers, local government officials and others. That increase was related to the retail price index and not to average earnings, although the one is directly related to the other. The passing of the 1971 Act, with general acclamation, brought public service pensions into line with what was then being done in some of the private sector. Except for a small element, pensions in the Civil Service are noncontributory and they are not funded. At the inflation rates of 1970, with investment possibilities and the dividend returns available then, private pension schemes could provide the kind of pension which the 1971 Act aimed to produce for public servants; but at the present rate of inflation, with the present curbs on dividends and price increases, the prospects for private schemes are very different.

Turning to the application of the £6 a week limit to pay increases which is part of the Government's policy in the tight against inflation, a fight in which we are all concerned to help them, the Government decided not to apply that limit to the pensions increase. According to the replies that have been given to Questions in Parliament—and it has been confirmed by the noble Lord. Lord Shepherd, today —information can be put together that the average increase in public service pensions is about £3.50 a week, which is well below the £6 a week pay limit.

The question that faces us is whether pensions at the top of the range should have been touched in any way. I do not dissent from the Government's decision which was a very difficult one to make. However, as has been mentioned by the noble Lord, Lord Morris of Grasmere, and also by the noble Lord, Lord Snow, some public service pensioners who, because of their outstanding services, receive large pensions were so concerned about the position that they came forward voluntarily and suggested that they might be treated differently, their increases being either stopped or curbed. This question should be looked at when considering any future programmes which may be necessary in the fight against inflation. I applaud the spirit in which that proposal was made by the recipients of these pensions.

Understandably there is anxiety because in today's conditions private industry and businesses find that it is almost impossible to match—I must use the expression if the noble Lord, Lord Snow, will excuse it —the "inflation proofing". As the noble Lord the Lord Privy Seal has said, some companies have been very successful in their schemes until now; but as my noble friend Lord Orr-Ewing has pointed out, the problems of competing with the public sector are overwhelming with inflation running at its present rate. When one considers that the increase in the amount of money required to deal with this pension increase between last year and this year is about £180 million, covering about 1 million public service pensioners, one can see how difficult it must be for smaller firms to compete. It is virtually impossible for them to stay in that league unless inflation is greatly reduced.

Our enemy is inflation. It is the enemy against which the whole country should combine as if these were wartime conditions. The noble Lord the Lord Privy Seal said that this was one single year of inflation at an unprecedented rate. Of course I hope that he is right. He suggested that we should be in single figures of inflation in the near future. Again I hope that he is right, but I fear there could be a danger of complacency if people think that this just happens without effort. If inflation were to continue at 20 or even 15 per cent. a year, there would still be great problems for British industry and businesses in general.

After a recent meeting at Chequers the Government announced that they would give priority to those activities—no doubt industrial, financial and commercial—which produce the country's wealth: for example, those who manufacture the goods and provide the services which earn the country its living. I am sure that most of us agree with that priority. I hope that the Government recognise the serious situation created by very high inflation, and they should try to help British industry so far as comparative pay and pensions are concerned.

Turning to pay, as several speakers have reminded us, Civil Service pay has been looked at by the Pay Research Unit. The noble Earl, Lord Jellicoe, told us that the Unit carries out its work fairly and meticulously within its directive, and this has been confirmed by others who have seen it at work from close quarters. I cannot see any serious difficulty over the suggestion of my noble friend Lord Orr-Ewing that it might be manned in future not only by the Civil Service but also by people outside, either independent experts or people from industry and business with whom the comparison is being made. This would help to demonstrate the impartiality of the Pay Research Unit, especially as the information with which it works is confidential; therefore that information does not become public.

I was interested when the noble Lord, Lord Houghton of Sowerby, told us that this was at the request of the companies and businesses concerned who produce the information. I can understand that, but there would be no difficulty over the confidentiality of the information if some representatives of companies and businesses spent a period, like their Civil Service counterparts, with the Pay Research Unit. I should think that the Civil Service itself would see advantage in this, and I could not myself see any objection. My noble friend Lord Jellicoe suggested an inquiry and, as for three years my noble friend was the Minister responsible for the Civil Service, I am sure the noble Lord the Lord Privy Seal will carefully consider that suggestion. Certainly if inflation is not greatly reduced the Government may need urgent advice based on an investigation of all the facts.

I should like to make one point about perquisites because I think, as a result of the debate, the only one that has been mentioned is education where the Diplomatic Service is concerned. I recall that the present system arose from the Plowden Report. First one Government and then another carried out the recommendations contained in that Report in 1964 and 1965. One of the points was the concern in regard to the continuity of children's education. This point has been brought to public notice by a letter in The Times a few days ago. From Parliamentary replies—particularly one on 27th November in another place—we see that £2l¼ million was spent on boarding education for the Armed Services, covering all ranks, and the Diplomatic Service equivalent was £2 million. So I think it must be seen as well in the wider context of the Armed Forces. Some of this was repaid in tax.

I am glad that the noble Lord, Lord Bourne, spoke about the Armed Forces, although we are mainly debating the Civil Service, one cannot, as I have indicated, deal with that without also considering the situation of the Armed Forces. Where the education of children is concerned, among those who have to serve for most of their time abroad, as part of their conditions of service, there is a disincentive if there can be no continuity in children's education. The noble Lord, Lord Garner, confirmed this from his experience.

Perhaps I may give a typical example of present day service in the Diplomatic Service. It would be quite normal for someone with a family of school age first to be in the Congo, then in Brazil, then in Saigon, then in Amman, with perhaps, in between, one or two spells in London. It is exceedingly difficult to provide in those places continuity of education in English. Noble Lords may be interested to know that, at the time I was in the Diplomatic Service, some of us considered, and used, the Lycée system. I did not use it myself, but some of my colleagues did because they found that they could get access to a Lycée in or near many of the posts in which they served in those days. Then their children received the continuity in education, but of course all based in French. Of course, that was helpful. Now that the Foreign and Commonwealth Office covers so much of the world, I believe it is no longer possible even to do that. Therefore, there is a need for children to return to this country to boarding schools, and I do not see how that can be avoided if one is to encourage entry by competition (as it is) into the Diplomatic Service. It is then just a question of whether people object to this money going to private schools as opposed to other schools. I will leave this to the Government to think about; while there is no wide range of boarding places in the state system, then inevitably this money must go to private independent schools.

I agree with several noble Lords who expressed the view that we are lucky in having such a good Civil Service. I will go further and say that we have the best Civil Service in the world. But we should keep its size in proportion to its tasks. In return for a service having good pay and good conditions, that service should be kept within reasonable size. We should not allow it to grow unchecked and we should not place—I think all Parliamentarians must take some responsibility for what has happened in the past —more and more tasks upon our Civil Service.

The noble Lord, Lord Helsby, said that some unpopularity had been incurred by the Civil Service because they had to interfere more in people's lives. I agree that that is one of the things that has happened. I deplore the effect that some recent legislation has had, particularly the Community Land Act which is expected to produce another 15,000 or so unproductive Civil Servants who can make no contribution to our country's industrial efforts. I am sure they will carry out their tasks well and ably, but that is the kind of thing which I believe we as a country can ill afford. I hope the noble Lord the Lord Privy Seal, who has welcomed the opportunity in this debate today to discuss these matters, will consider carefully what has been said and will agree that it has been a responsible and well-informed debate.

8.16 p.m.

Lord SHEPHERD

My Lords, I immediately respond to the noble Lord, Lord Champbell of Croy, by saying that I am very well satisfied with the debate that we have had today and I hope, too, that the noble Lord, Lord Orr-Ewing, who spoke at the beginning of seeking to elucidate some of the obscure matters concerning the Civil Service, its pay and its pensions, will feel, as I do, that this is a debate that is not only opportune but perhaps too long delayed. Perhaps if we had held this debate some two months ago much of the ill-advised criticism that has appeared in the media would have been avoided. I agree so much with my noble friend from North of the Border that the Service is of the finest, that it has felt bruised, and it was as though there had been an orchestrated campaign against the Service. Why, one can only surmise. Maybe it is only part of the problems with which we now live—the question of recession, the question of doubt as to the position of our body poli- tic—but without the Civil Service this country could not be administered and our democratic services could not be provided.

I should like to say to the noble Lord, Lord Bourne, that civil servants do get sacked for inefficiency. I understand that during 1974 some 600 were sacked for that reason and others were "removed"(shall we put it?) because their efficiency did not match up to the position they then occupied. So civil servants, like soldiers, are occasionally dismissed owing to their inefficiency.

Lord BOURNE

My Lords, my chief complaint was about redundancy, and perfectly good fellows in the Navy, Army and Air Force being sacked irrespective of being perfectly efficient.

Lord SHEPHERD

My Lords, that is quite another matter and it may be something which we can discuss on another occasion.

I am glad that the noble Lord, Lord Campbell of Croy, raised under the heading of "Perquisites" the question of the grants provided to overseas diplomats for the education of their children. It is quite right—this was seen some time ago, and I personally believe it to be right—that when our staff are sent overseas, sometimes to hard stations, there should be continuity of education which, generally, can be provided only at a boarding school in this country, particularly if a parent wishes to have his child educated here; and something has to be done about it. I thought the noble Lord, Lord Orr-Ewing, referred to it as being about £10,000 tax free. I gather it is possible to get £10,000 tax free if you have eight-plus boys or girls in your family. I am not aware of very many within the overseas service who have such a large family, all being educated at the same time. At the present moment, the current maximum rate of allowance is of the order of £1,200 per annum and that, if I may say so, is a rate that is struck from what is roughly the middle figure required at a boarding school.

With regard to manpower, I accept the concern about the ever-increasing numbers—and I have particularly in mind at this moment Central Government, although it is perhaps of greater concern in terms of local government. Certainly legislation creates an increase. The legislative programme of last Session required an additional staff of some 7,500 civil servants. Four thousand five hundred was the figure which resulted from the Child Benefit Act, which was supported from all sides of the House. This illustrates the fact that when we are going forward into this class of legislation the consequence to manpower is quite considerable. Personally, I take the view that we should seek restraint now within the public service.

The noble Lord, Lord Orr-Ewing, asked me a number of questions about whether various matters were taken into account. I think that in my opening speech I dealt with these matters although I do not know whether I made entirely clear that the question of job security is a factor. How one arrives at that factor, I do not know, but I am advised that there is a factor within the figure taking into account security of employment.

I was particularly interested in listening to the speeches of the noble Lords, Lord Houghton of Sowerby and Lord Geddes of Epsom, on the subject of their early days in Civil Service negotiations, the way in which Priestley came into being and how it developed. In my short experience, there is still tough negotiation. Those who may think that because the Pay Research Unit produces a set of figures, those figures are automatically accepted by management, or for that matter by the unions, have only to witness the tough negotiations that go on between the Staff Side and the management side. I refer to them particularly because it seems to me that the point that emerged from the debate as being of concern was not a matter of questioning the integrity of the system or the integrity of those who sought to administer the system, but whether it was right, whether it was possible, in the national interest, that greater information should be made available.

So far as nay is concerned, under the Pay Research Unit system, the noble Lord, Lord Houghton, is quite right. The difficulty about too much disclosure at the moment arises because of the understanding about confidentiality that the Service has with the very many private employers. Quite clearly, I cannot say anything until there is carried out a series of discussions with those in the private sector who provide a great deal of sensitive information—sensitive not only in their relationships with those in the particular industry or trade, but maybe also within the company itself. Therefore, we must recognise that this is an area where we need to go with caution. The noble Lord, Lord Houghton of Sowerby, is quite right.

Baroness SEEAR

My Lords, with the greatest respect, while I take the point that the noble Lord the Leader of the House is making, I find the answer about confidentiality just a little unconvincing. The Pay Research Unit goes to a number of different organisations; obviously it must, or it would be a quite improper study. We know that statistically the Unit does an extremely good job. Therefore, I do not see that there is any more difficulty in making public their findings, based on a large sample, and simply saying, "This is a result of the sample". I do not see any more difficulty in revealing that, than in revealing the survey findings of a large number of studies involving confidential inquiries in companies and other organisations for similar purposes.

Lord SHEPHERD

My Lords, I hope the noble Baroness, Lady Seear, will not think me discourteous if I suggest to her that she reads my opening speech, when I indicated the very large number of companies which are consulted, and in which inquiries of quite a deep nature are made. My point is that all those inquiries are made on the basis of confidentiality between the Government and the industry. Before you break confidentiality, if you wish confidentiality to continue, not only in this area but in many others, you do not move too arbitrarily. You do not make an announcement to do it immediately; you do it as a consequence of consultation. That is one thing I am prepared to consider, because so far as the Civil Service Department is concerned, and my understanding with those within the trade unions, there would be no difficulty from their point of view, or ours, about much greater disclosure in this field. But it is a question of dealing with those who are, shall we say, in partnership in the acquisition of information.

My Lords, with regard to pensions, the noble Earl, Lord Jellicoe, thought there may be a case for an inquiry into the way in which the 1971 Act is operating in the particular economic climate of today. I would hope that the deep inflation of this year will be dramatically reduced next year, and, therefore, the strains which are clear today will be less than what they are. Therefore, I am a little hesitant about suggesting that we should inquire into this matter. I said at the beginning of the debate that we were looking at the matter internally. Of course, we shall be consulting with the Staff Side, but we are looking at the possible consequences if the pensions are tied to prices and if prices still go up much higher than the rate of pay. I would hesitate to change the system of pensions because of a problem of a 12-or 18-month period. I think we have a right and duty to look into the matter.

A number of noble Lords asked me what we should do about those civil servants who have retired on high pensions. There has been some questioning as to whether the Government should have selected those in this group for some curb on their pensions, as was done in the realm of salaries. Rightly or wrongly, the Government felt that the pensions had been earned, and that as a consequence off air negotiations during 1975 it would be wrong arbitrarily to reduce or hold back any of the pensions due to civil servants or, for that matter, any within private or other parts of the public sector. It was put to me that perhaps some pensioners might wish to forgo on a voluntary basis what is due to them, and I was asked my view on that. I think this is a matter for each individual to decide.

I see these pensions as a matter of right, and it is not for me, nor I believe for the Government, to say how an individual should decide a matter of that sort. My position would be a great deal easier if there were some volunteers from the private sector. I have observed the pensions which some of the leading men of industry receive, and some of the" perks" that they will take for the rest of their natural lives because of a contract that they entered into with the companies of which they were chairmen. If there were a lead from there it might be easier for me to say something in regard to public servants. But this is a matter for each individual to decide.

Lord SNOW

My Lords, would the noble Lord allow me to intervene? That is not my point, as I think he knows. The ex-public servants to whom the noble Lord, Lord Morris of Grasmere, and I were referring have actually made representations to the Civil Service Department asking for this to be seriously considered. They do not think that one individual makes the slightest difference, but if this were done over a range, by agreement, it might have some effect. The important thing is that this should be known to be done. You cannot expect to make the Civil Service look slightly more amiable if all this is being done behind closed doors.

Lord SHEPHERD

My Lords, I think one needs to keep this matter in perspective. Of the quarter of a million or so Civil Service pensioners only 70 receive £8,500 or above. If I may say so, what concerns me about the point that my noble friend is putting is that it will look as though the Service has such large numbers in this category as to be of any real significance. I know approaches have been made. This is a matter which clearly the Service as a whole must look at. My own feeling is that pensions are as of right until such time as the Government, who are the employer, and who are the guardian of the public purse, might say that in the national interest something has got to be done and some change made. But this is a matter, I should have thought, on which we should move with great hesitancy, and not because of what I hope is a short-term problem of inflation. In the way of the noble Lord, Lord Campbell of Croy, I am not so doubtful of the ability of this country to deal with our present rate of inflation. There are already gratifying signs of an improvement.

My Lords, I have spoken a great deal longer than I intended. I am very grateful to the noble Lord, Lord Orr-Ewing, for initiating this debate. I only hope that the media, through the written word in the newspapers, who have been extremely vocal, the television and the radio, will pay a little more attention than they usually do to your Lordships' debates, and at least see that this House expresses its confidence in the integrity of the Civil Service; that it reaffirms the view of successive Governments, that we should be a good employer, no better or worse; that we should be fair, so far as it is possible, both to our servants and to the people of the country.

8.35 p.m.

Lord ORR-EWING

My Lords, I am most grateful to all those who have taken part in what has been a very good debate, of very high calibre and with special knowledge adding to our enjoyment and, I think, our satisfaction. I thank the noble Lord the Lord Privy Seal for what he has said. I still think there are one or two areas in the formula which are ill-defined, but perhaps he could write me about them. Concerning security, it is felt in private industry that there is much greater security within the Civil Service, and if this is a factor which is allowed for perhaps we should know what percentage. I feel that perhaps the present arrangements can continue for one more year; but if the hope of a substantial fall in inflation does not come about—and, after all, it was only a year ago when Mr. Healey was talking about 8.4 when it was 26.1:I hope this time we are getting back to single figures, but there are big problems to solve—I forecast that what I think Lord Pannell called "deep-seated resentment" and Lord Jellicoe called "schism" between public and private sectors will only widen and get deeper. Something must he done about this because we can ill afford to have more divisions within our nation. I wonder whether another £180 million this time next year can possible be borne by wealth-creating industry if we are to remain competitive and keep enough money to invest in the future.

On my last point, about the Pay Research Unit, I am sure he will not have any difficulty in allowing these figures to be published. We all do it through our trade associations, our little NEDCs, the Ministry of Industry and many other places. I am sure they are not secret; they can be put together globally, preserving confidentiality. The noble Lord did not quite make the point, but I will leave it with him. I should very much like to see the Pay Research Unit broadened to make use of other talents, which equally could serve for short periods as the civil servants do now. I thank your Lordships for your participa- tion and beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.