HL Deb 20 October 1981 vol 424 cc693-6

2.49 p.m.

Lord Orr-Ewing

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what is their estimate of the total increased cost this year of fully indexing the pensions of all those now retired from the public sector who have been granted statutory or discretionary immunity from price rises.

The Chancellor of the Duchy of Lancaster (Baroness Young)

My Lords, there are about 1.6 million public service pensioners whose pensions are index-linked by statute. The first year cost of the increases due to these pensions on 23rd November will be about £232 million. I am circulating in the Official Report a table showing the main groups of public service pensioners concerned, together with the cost in each case.

There are in addition about 700,000 former employees of other public sector bodies whose pensions are index-linked either under the rules of the relevant pension schemes or on a discretionary basis. I regret that information is not available centrally about the cost of increasing these pensions this year, which is met in the main from the pension funds concerned and not directly from central Government expenditure.

Following is the table referred to:

Public Service Number of pensions '000 First year cost of 1981 increase £ million
Armed Forces 281 40
Civil Service 384 52
Teachers 183 44
National Health Service 205 30
Police and Fire 101 19
Local Government 356 37
Overseas 57 10
Total 1,567 232

Lord Orr-Ewing

My Lords, while thanking my noble friend for that reply, may I ask whether she is aware that the commitment to pay fully indexed pensions to 1.6 million public service pensioners, and in addition some .7 million, making a total of 2.3 million, is a very considerable burden which in the long run must fall on the taxpayers and industry of this country? Will she, therefore, in the next round of pay adjustments for the Civil Service consider negotiating out this commitment? Otherwise, you will continue to have a burden year on year as inflation, albeit greatly reduced, will continue to impose this responsibility on Governments of all persuasions in the future.

Baroness Young

My Lords, the Government are aware of the undertakings that were given to the public service pensioners at the time of the last election. My noble friend will be aware that we set up the Scott inquiry into this matter, and we hope that the Government's conclusions on it will not now be too long delayed. We have also instituted another inquiry to look at Civil Service pay, and I have no doubt the points my noble friend has raised will be included in the discussions on that.

Lord Shinwell

My Lords, may I ask the noble Baroness the Leader of the House who are these highly favoured people who are immune from price rises? Are there any Members of your Lordships' House in that category, and, if so, who are they?

Baroness Young

My Lords, the short answer to the noble Lord is that about a quarter of the working population is covered by index-linked pension schemes. Although I would not like to say that this applies in the case of the noble Lord himself, I believe Members of another place are also covered by such schemes.

Lord Boyd-Carpenter

My Lords, is my noble friend aware that in the private sector very few pension schemes indeed are able to afford index-linking? Will she, therefore, in considering demands for pay increases in the public sector, take full account, for the purpose of comparability, of the fact that in the public sector the persons concerned enjoy this very substantial benefit not available, on the whole, to their opposite numbers in the private sector?

Baroness Young

Yes, my Lords. We are, of course, aware that public sector pensioners are generally better protected than those in the private sector. The Government have in mind the points that my noble friend has made and will certainly bear them in mind in the current review of the arrangements.

Lord Glenamara

My Lords, can the noble Baroness form any estimate of the cost of indexing in the private sector, where a great deal of it takes place, not by indexing written into the pension scheme but by a decision taken each year to increase the pensions by an amount equal to the increase in public sector pensions?

Baroness Young

My Lords, I have not got the information available on private sector schemes. I recognise that there are private sector schemes which give a high degree of protection to their pensioners, but one must recognise that not all of them do.

Lord Rochester

My Lords, in order to allay public anxiety on this matter, will the Government consider whether there is any practical way of making more widely available information such as that in the Scott Report on the relative value of index-linked pensions to their recipients?

Baroness Young

My Lords, I will certainly take note of that suggestion.

Lord Plant

My Lords, will the noble Minister agree that the figures she has given are the gross cost and that after deduction of tax the net cost would be very much less? Further, will the noble Baroness agree that the average index-linked pension of public servants is less than £30 per week?

Baroness Young

My Lords, the first point the noble Lord made is, of course, quite correct. Pensions will of course be subject to tax. On the noble Lord's second point, it is true that the average weekly pension, after the November increase, will be £36 a week, and that the average extra pension increase will be just about £3 a week.

Lord Orr-Ewing

My Lords, is my noble friend aware that the Scott Report recommended that this burden be added to all pensions, and that that means for all those working in manufacturing industry? Will she bear in mind that manufacturing industry is already carrying many burdens, and it will not be competitive in the export field if this added burden, which is already on the public sector, is added to its responsibilities?

Baroness Young

Yes, my Lords, I certainly take note of that point. As I indicated earlier, the Government have not yet reached their conclusions on the Scott Report.

Lord Davies of Leek

My Lords, whatever questions may come from either side of the House, will the noble Baroness bring a little compassion to this problem, because many of these people have fought for this country and in their old age deserve to be protected from inflation? Without them Britain might not have been what it was after the war.

Baroness Young

My Lords, I had not recognised that in any of the remarks I have made I was anything other than compassionate about both groups, those who are indexed and those who are not. What we are trying to elucidate in this question is the facts of the case.

Lord Pargiter

My Lords, having regard to the fact that the indexation is for the purpose of providing against hardship among pensioners, will the noble Baroness say whether or not there ought to be a cutoff point where the hardship no longer applies?

Baroness Young

My Lords, that is another suggestion of which I will take note.

Viscount St. Davids

My Lords, will the noble Baroness not agree that the most compassionate thing she can do in this very difficult set of circumstances is to put an end to inflation?

Baroness Young

My Lords, that is a major objective of this Government.

Lord Bruce of Donington

My Lords, is the noble Baroness aware that the amount involved per annum which has been a charge on public funds is a very minute fragment indeed of the vast expense that has been incurred as a result of the pursuit by the Government of their monetarist policies and the creation of mass unemployment?

Baroness Young

My Lords, I do not think I will follow the noble Lord down that line of argument. I think it important to recognise that the taxpayer cannot afford to pay an unreasonable share of the cost of public service pensions, and that is why the Government set up the Scott inquiry.

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