§ 3.9 p.m.
§ The Lord Chancellor (Lord Mackay of Clashfern)
My Lords, I beg to move that this Bill be now read a second time. Perhaps I may say how much I am looking forward to the maiden speech of my noble and learned friend Lord Taylor of Gosforth.
This afternoon we are debating the Judicial Pensions and Retirement Bill, which I introduced into this House on 4th June. The Bill makes new arrangements in respect of judicial pensions and amends the law relating to the date on which certain judicial office holders are required to retire.
It may be helpful if I say something about the history of the Bill and the context of some of its main provisions. I start with pensions. It is nearly two-and-a-half years since I announced to this House a review of the judicial pensions schemes. Some of your Lordships may remember the occasion: it was on 5th February 1990 during the Committee stage of the Courts and Legal Services Bill. I explained to the House then that the judicial pension schemes were extremely complicated and carried a good number of difficulties for those who have to try to make out their rights under them. I said that the situation called for a radical examination of pension arrangements and promised to conduct such an examination. What I wished to do, if I may put it in a nutshell, was to 119 rationalise the current, somewhat haphazard arrangements for judicial pensions and bring those arrangements more into line with the standards which now apply to all other pension schemes in the public and private sectors, if they are to be allowed privileged status under the Income and Corporation Taxes Act 1988. In devising the new scheme, I proceeded on the assumption that in general any new arrangements should not prejudice the pension position of those already holding judicial office.
Before turning to the details let me say that I am aware that the pension on offer is an important part of the remuneration package which a prospective judge will wish to consider when deciding whether or not to take up a judicial appointment. It is in the interests of all of us in a free society that our judges should be men and women of the highest calibre, able and willing to carry out the heavy public duties which we expect of them. It is right, therefore, that the pension Parliament provides to our judges should be sufficiently substantial to attract, or at least not deter, those candidates best fitted to serve. At the same time, as a member of the Government, I am mindful that judicial pensions are paid from the public purse. The proposals which we published for consultation in December 1990, and the provisions of the Bill before your Lordships today, are the result of careful consideration as to how best to balance those potentially conflicting demands.
Why, therefore, did I say a few moments ago that "radical examination" of the current arrangements was necessary? I said it because I did not think that anything less would suffice to correct the anomalies and inflexibilities of the current schemes. That those anomalies and inflexibilities exist is hardly surprising. The judicial pension schemes have grown up piecemeal and emanate from a time when pension arrangements were less sophisticated than they are today.
Let me mention, in broad terms, just some of the anomalies and inflexibilities. First, the rules on aggregation. As many of your Lordships will know, under the current rules a holder of a judicial office who subsequently takes a different judicial office may aggregate his service in both offices for pension purposes but, in certain cases, only on the salary and pension terms of the lower paid office. For example, a circuit judge promoted to the High Court Bench may opt, at the time of the compulsory retirement age of 75 of that office, or if he retires earlier, to take either a pension based solely on his service as a High Court judge—in which case he can do it by reference to the High Court judge's salary—or one based on the current (that is, at the time of retirement) pension of a circuit judge, but in that case with aggregation of the time of service in both offices. In effect, a person who takes the pension of the second office loses the benefit of the years of service in the first office. That cannot be right. It is most unfair to those who, having served conspicuously well in their first judicial post, move to a more senior appointment; and it could act as a disincentive to promotion in that situation.
Another anomaly which currently gives rise to 120 anxiety relates to the different accrual periods which apply without any rational basis to the different pension schemes now in existence. For instance, with regard to England and Wales, High Court judges, circuit judges and chairmen of industrial tribunals have 15-year accrual periods. Stipendiary magistrates, district judges and members of the Lands Tribunal, on the other hand, have a 20-year accrual period. The clock ticks even more slowly for immigration adjudicators where the accrual period is 40 years. When one looks north of the Border and across the Irish Sea, the disparities are perhaps even more marked. Scottish sheriffs have a 20-year span compared with the 15-year span enjoyed by their English counterparts, the circuit judges—an anomaly which I am aware has caused considerable resentment north of the Border and which is not easy to explain. District judges and Supreme Court Masters in Northern Ireland have a 30-year span compared with the 20-year span of their English counterparts. To my mind those differences simply cannot be justified.
A further anomaly exists by reason of the fact that certain judicial officers in schemes with a 20-year accrual span have to serve for two years before qualifying for a pension on grounds of ill-health. No minimum period of service is, however, required of office-holders in 15-year schemes.
The Bill corrects those anomalies. It creates a single, unified pension scheme for all the judicial officers in the United Kingdom listed in Schedule 1 to the Bill. The Lord Chancellor and the Secretary of State for Scotland are given power in Clause 1(6) to add offices to that list. The new scheme will apply to new entrants to the judiciary, and to those in one of the existing schemes who elect to join the new scheme or who are promoted to another judicial office, which is covered by a different scheme, after the new arrangements come into force.
The scheme will provide for their existing pension rights to be credited to the new pension arrangements: that is, Clause 12. Judicial officers under the new scheme will have their pensions calculated according to their actual service, in years and days. That provision is in Clause 3(3) (c). That will alleviate the problems arising from the current aggregation rules which I mentioned a moment ago. It removes also the current unfairness which can arise as a result of some of the schemes calculating pension by reference to the "completed year of service". As matters stand now, if a judge is obliged to retire on his birthday which happens unfortunately to fall a few days short of a completed year of office, that part of his service does not enhance the rate of pension which he will enjoy. Under the provisions of the Bill he will be entitled to count all the time he has served.
The Bill provides in Clause 3 for a single accrual rate of 20 years. That, I know, has been the subject of a certain amount of adverse comment. That period is not, however, an arbitrary one. It is the limit fixed by the Finance Act 1987 as the minimum accrual period for a tax approved pension scheme to provide maximum pension benefits; and, as I said a few moments ago, it is the Government's intention that 121 the new judicial scheme should, for tax purposes, be brought more into line with the pension arrangements applicable to other members of society.
While on the subject of tax, let me say a few words in regard to capping. The Finance Act 1989 requires the salary on which benefits from tax approved schemes are calculated to be capped at a specific level. That level increases annually in line with price inflation. The current level for the 1992–93 tax year is £75,000. All private sector schemes were automatically capped by the 1989 Finance Act for new entrants from the time that Act came into force—for most people that was on or after 1st June 1989. The same result was achieved for members of public sector schemes by amending regulations. By July 1989, the only group of pension scheme members who were excluded from the cap were the judiciary. The judicial pension schemes can be changed only by primary legislation, which is what we are doing in this Bill. The result of that is this: those members of the judiciary appointed between July 1989 and the date the Bill comes into force have an advantage over other new members of pension schemes because their potential pension benefits have not been subject to the cap. They will continue to benefit from that position, as will those in a judicial pension scheme before 1st June 1989, unless and until the new arrangements apply to them on one of the routes that I described earlier.
It is because the salaries of some members of the judiciary exceed the cap that the Government have decided that judges' salaries above the cap will be pensionable under a top-up scheme. That will come into effect automatically. The benefits from the scheme will be modelled, on the main scheme but the top-up scheme will not àttract tax relief. As against that, and unlike the position under the main scheme, judges will not have to pay contributions for spouses' and children's benefits in respect of that part of their salary in the top-up scheme. Uniquely also for a scheme as beneficial as this one, as happens at present, benefits from previous pension arrangements will not affect those payable under the judicial pension scheme —that includes pensions payable under private self-employed schemes.
I would suggest that the new scheme is appropriate for the judges. The full pension, payable after 20 years' service, will be half the salary paid to the judge in whichever period of 12 months during the previous three years gives the best result. For service of less than 20 years, the pension will be one-fortieth of the salary paid to the judge (in whichever period of 12 months during the previous three years gives the best result) multiplied by the length of the judge's service in years and, of course, allowing for part years, as I explained. In addition, judges will be entitled to a lump sum of two-and-a-quarter times the annual rate of their pension. At present the lump sum is twice the rate of the pension. As now, there will be provision for widow's and children's pensions. There will be provision also for the payment of a death gratuity of one-and-a-half times the amount of the judge's pensionable pay. Any judge who has served for five years will be entitled to an immediate pension at the age of 65. Judges between the ages of 60 and 65 will be 122 able to take early retirement with an immediate pension which is actuarially reduced. These limits do not apply to ill-health retirement, the payment of a death gratuity or the payment of spouses' and children's pensions. All these matters are covered in Part I of the Bill. A judge's right to take a preserved pension payable at 65 after only two years' service is unaffected by the Bill.
Before I leave the pension provisions of the Bill, I should just mention Clause 29(3) and (4). There the Bill gives the Lord Chancellor or the Secretary of State for Scotland, as appropriate, power to make regulations or orders. The Bill also gives the Minister power to make transitional, consequential, supplementary or incidental provisions or savings in relation to those regulations or orders. This power includes, where necessary, power to modify the operation of this Bill or any other enactment. But—and I must stress this—this power is a very limited one; it can be used only in connection with transitional, consequential, supplementary or incidental provisions. Given the complexity, diversity and existence of anomalies in the existing schemes, the House will appreciate the need for this type of provision as the matters are worked out.
Let me turn now to retirement which is the other subject dealt within the Bill. This is covered in Clauses 25 to 27. As with pensions, part of my aim here is to introduce consistency. At the moment, judges and judicial officers have a variety of retirement dates. Some of these are already below 70—such dates will not be affected by this Bill—others are at or above 70. Some relate to the attainment of a particular age, others to the completion of the year of service following a particular birthday. The retirement age for circuit judges in England and Wales, sheriffs in Scotland and county court judges in Northern Ireland, for instance, is the end of the year of service in which they reach 72 whereas that for High Court, court of session and other senior judges is 75; and for some appointments, particularly in tribunals, there is currently no statutory retirement age at all.
I have discussed these matters with some of my senior colleagues and we consider that a retirement age of 70 would be more appropriate to modern conditions. I therefore consulted earlier this year on a new and general retirement age of 70. I am pleased to say that the consultations indicated that there was general support for this. Clauses 25 to 27 and their accompanying schedules accordingly provide for a general retirement date at the age of 70. I thought that it was appropriate to deal with any proposal to change the retirement age in conjunction with the proposals about pensions so that the full effect could be seen at once. Those clauses also provide that persons holding judicial office when the new retirement provisions come into force, will be able to keep this retirement age. This will also apply when someone subsequently moves from one full-time office to another. For example, if a circuit judge is subsequently appointed to the High Court Bench, he will retain his present retirement age of the end of the year of service in which he reaches 72.
123 At present there are powers to extend service in some, but not all, judicial offices beyond the retirement date otherwise applicable. The application of these powers, where they exist, has been helpful in providing flexibility to meet the needs of the courts and in ensuring that the ability and expertise of experienced judges need not be lost prematurely if that is in the public interest. I consider it appropriate to retain such flexibility and, with the introduction of a new retirement age of 70, to provide for the possibility, consistently for all offices, of enabling service to be continued in the public interest. The Bill accordingly provides that service may be continued after the age of 70, but only if the Lord Chancellor or Secretary of State for Scotland, as the case may be, considers that desirable in the public interest, and then only for periods of no more than a year at a time up to, but not beyond, the judge's 75th birthday. I must emphasise that I believe that this power would be used sparingly and applied only where it was clearly in the public interest to do so, taking careful account of all the relevant considerations including in particular such things as the health of the judicial office holder in question.
Under current provisions, Lords of Appeal and other judges who have retired from full-time service, may be invited from time to time to serve in retirement on a part-time basis. I am very grateful for the help which has been provided in this way by Members of this House and the other judges concerned. They have made an important contribution to the administration of justice. But I believe that it is no longer fair to expect them to be available indefinitely in this way and so the Bill provides for the overriding limit of 75 to apply in these circumstances also.
Any retirement age is of course a matter for judgment. Conflicting considerations have to be balanced to achieve what the person seeking to make the judgment believes to be right, both in the interests of the judges and in the interests of the public. On the one hand, the increasing burdens of judicial office must be acknowledged. On the other hand, although the current retirement ages for our judiciary are higher than those for most other professional people, we also have to recognise that judges are appointed relatively late in life. They are usually drawn from those who have already established themselves in a successful career in the law, and their years of experience are part of the necessary qualifications for the position. Accordingly, they bring with them a maturity of judgement which I believe is essential for judicial office.
The point has been made by some members of the judiciary that a retirement age of 70, however desirable in itself, would result in difficulties in relation to appointments. Well, I understand the point but I do not share the anxiety. We all know from recent experience of opinion polls that what people say they are going to do and what they actually do may not always absolutely coincide. Three score years and ten seems to me to be an appropriate general age for retirement and that is the age on which I believe we should settle. I commend this Bill to the House.
124 Moved, That the Bill be now read a second time. —(The Lord Chancellor.)
§ 3.27 p.m.
§ Lord Mishcon
My Lords, the House will be grateful, as always, to the noble and learned Lord for a lucid exposition of this Bill which deals with a somewhat esoteric subject. Before I try to deal most unsuccessfully with that esoteric subject, I join with him in saying how much from these Benches, as I know from all Benches, we are looking forward to the maiden speech of the noble and learned Lord the Lord Chief Justice whom we are delighted to have in our ranks.
I believe that it has been said wisely that a nation is judged by the standard and excellence of its judges. I hope that the same does not apply to a judgment of this nation as regards Treasury Ministers and their officials, honourable men though undoubtedly they are. I say unashamedly that if I see a conflict between the Treasury and the judges, and I believe that it is going to conflict with the aim which I know your Lordships and the nation will have of having in its judiciary the most excellent recruits that it can, I am on the side of the judges.
Perhaps I may deal with the situation of special provision. The noble and learned Lord very fairly said that, where there were anachronisms, conflicts and illogicalities which could be ironed out in legislation, they should be removed in a statute. That is absolutely right.
However, I did not bend towards the noble and learned Lord with the utmost alacrity when he seemed to suggest that judicial pensions ought to be of the same kind and meet the same terms and conditions as pensions for other folk. For many, many years the principle has been recognised that there has to be special provision in regard to the pensions of judges for the very obvious reason that they come to their appointments in mid-career. They do not have 40 years of continuous service as other people might have in other occupations. Therefore, the question of conformity worries me, and it will worry me considerably if I and your Lordships find that it will deter certain people whom we would love to see as judges from accepting recruitment when that honour is offered to them.
I should say at once that I have no quarrel at all with the reduction of the retirement age to mandatory retirement at 70. I believe that the Bar Council has expressed the view that it would like the mandatory retirement age to be reduced to 65 eventually. There is merit in the idea of reducing the retirement age both from the public point of view and from the point of view of experience. There is a time when that heavy load should be laid down.
However, I am not saying that I necessarily bow to the worship of youth for the sake of youth. I am looking—as I know the noble and learned Lord the Lord Chancellor would always look—at the suitability of making appointments at too young an age. If one starts thinking in terms of the age of 45 and says to somebody of 45, "Please give up your career just as it is about to reach its zenith and look forward to 125 working for only 15 years before you can retire on full pension", one can understand the attraction. However, to say, "I am afraid that you will have to stay on until 65 before you can retire in that way", does not seem to me to be a sensible way of achieving fairly early retirements or of offering inducements to those of that age in that position.
I have said that youth for the sake of youth does not seem a very sound maxim to follow. Those of us who have been in the law and who have loved it for many years can no doubt think of examples of brilliant advocates who made awfully bad judges and of brilliant lawyers who made stuttering and stammering judges and who extended cases over an absolutely unconscionable period of time. There must be a certain temperament that makes for suitable judges. There must be experience. Perhaps those about to be appointed could take an acting judgeship for a time—a temporary position—while their abilities and temperaments could be weighed up by those who have the grave responsibility of appointing them as judges.
I dare say—even in your Lordships' midst—that some people may have been appointed even to the highest tribunal in the land, which is part of your Lordships' House, who have seemed to have a quite unsuitable temperament, being aggressive, impatient or irascible. I am certainly not speaking of the present Members of your Lordships' House who sit in a judicial capacity. I get very angry when judges are irascible towards young counsel. There was a case not so very long ago—I am told that it is not apocryphal—when a Law Lord peppered a leading counsel to such an extent that the man was literally reduced to a state of almost collapse. Having done that, the Law Lord looked at the junior counsel and said, "Now, have you any further observations to make?", to which the junior counsel very courageously replied, "Not without a helmet, my Lord". I tell that story not so much as a joke—although it is nice to see your Lordships smile occasionally in the midst of a serious debate like this—but because the question of a tried temperament and of experience must be taken into account. They are most important matters.
Does that make the increase in service from 15 to 20 years sensible? If we really want experience, should we not be thinking in terms of the average appointment being made to somebody in his or her early 50s? How does that fit in with having to have 20 years' service before the full pension can be earned? With respect, perhaps I may say that that is the Bill's first mistake. Indeed, I believe that I am in good company in thinking that it is a mistake because I believe that the Top Salaries Review Body would love to have the opportunity of expressing a second view. It has already expressed a first view on this topic.
Perhaps I may mention one other matter by way of a question that I should like to direct to the noble and learned Lord the Lord Chancellor. I am not sure of my ground here. I know that there was an anomaly about which retired circuit judges were very worried. Although I have not had a lot of time, I have been reading the Bill to see whether the point has been covered. I hope that the noble and learned Lord will forgive me if I make a bad point but that he will 126 answer it if it happens to be a good point. Obviously circuit judges should be paid the pro rata rate for a circuit judge in the same way as a retired High Court judge is paid. I do not know whether the provision has been altered by the Bill, but I have been told that circuit judges are paid at the lesser rate—namely, at that of an assistant recorder, while a recorder is properly paid at the rate of a circuit judge. When submissions were made on behalf of the second rung of the judicial ladder, I am told that the Lord Chancellor's Department said that it recognised that that was an anomaly and that it should be corrected. However, here comes the Treasury again, because I am told that until recently—or until now—the Treasury has said that it will not agree to the anomaly being put right.
I am sure that many of the Bill's provisions are sensible and good in regard to its tidying-up process —a legislative duty which your Lordships will regard as very proper. However, when it comes to seeing whether everything is in order in this Bill, I know that your Lordships will want to look—as I have looked humbly—at one aim and that one aim alone. We have a high reputation in regard to our judges. We must keep it that way. We must ensure that recruitment is made easy and not difficult for the best men that we have in the profession.