HL Deb 11 October 1999 vol 605 cc192-200

(" .—(1) The Contributions and Benefits Act shall be amended as follows.

(2) In section 119 (persons outside Great Britain), at the beginning there shall be inserted "Subject to section 119A".

(3) After section 119 there shall be inserted—

"Entitlement to pension etc uprating (residence outside

Great Britain)

119A. Notwithstanding the provisions of any other enactment, no person who is entitled to a retirement pension under Part II or III of this Act shall be disqualified by reason of residence outside Great Britain from any benefit under this Act, or any uprating of any such benefit, if he would have been entitled to such benefit or such uprating if he had instead been resident in Great Britain."").

The noble Baroness said: My Lords, in moving Amendment No. 92 I should like to speak also to the second amendment in my name which complements the first. I make no apology for seeking to raise it at this hour: the importance of the topic does not diminish because it is late. This is a very longstanding grievance which these amendments seek to remedy. I am sure that noble Lords will be aware that British pensioners who go to live abroad immediately find that their pension is frozen and that for many no upratings are allowed. There are some pensioners who are lucky enough to live in countries where there are reciprocal arrangements for upratings, but there are about 433,000 pensioners whose pensions are completely frozen. The first amendment seeks to get rid of this bar so that we can consider in the second amendment how changes may be made to remedy the situation.

It is a long-standing grievance that has met the deaf ears of Ministers of both political parties, so there is nothing to choose between past governments in this regard. It has always been a question of cost. But there is a very real sense of grievance among these pensioners who are scattered across the globe. They feel that they contributed to an insurance scheme, albeit a state one, and that having made the contributions they are entitled to the benefits.

The Social Security Select Committee in the other place which looked at this matter and reported in 1997—Mr Frank Field chaired that committee at the time—pointed out bluntly that in reality it was a taxation system and it could be changed at any moment by the government of the day. But that is not how pensioners see it; they still believe it to be a contributory system and that they are, therefore, entitled to it.

The grievance is compounded by the fact that some pensioners get the upratings if they live in particular countries but others do not. This is startlingly illustrated by someone who lives in the south of Canada or the north of the United States. The line is very fine. For example, in 1974 a single pensioner without a wife who lived on one side would have had a pension of £10. That would equate to about £65, but if he was living on the Canadian side it would still be £10. For a widow who retired 30 years ago at the age of 60—there are many 90 year-olds about—a pension of £5 would still be £5. People suffer in a very practical way because there has been no upgrading.

I realise that the real enemy is the money that it would cost to put it right. That is why in my second amendment I suggest that the Secretary of State should have consultations with the various governments involved to see whether some compromise may be reached that falls short of full uprating but which nevertheless removes the main grievances, with a report to Parliament within a year. I had in mind that perhaps the upratings might not be updated but would take place from now. Alternatively, one might give the upratings to older pensioners, say those over 80 or 85, so that those in most need who are dealt a greater blow by reason of age and size of pension that they receive may be helped. One might find a compromise in other ways. I am not sure whether that would be acceptable, but it is something that should be explored.

I very much hope that I get a sympathetic response from the Minister, although my years in politics suggest that that may be misguided and overoptimistic. None the less, because this is a matter of such importance to our pensioners, many of whom would have served in war—we have a special feeling for those—I must make the point as strongly as I can whether it be two o'clock in the morning or in the afternoon. I beg to move.

Lord Goodhart

My Lords, I have tabled Amendment No. 104 which is grouped with the amendments of the noble Baroness, Lady Fookes. My amendment is very much to the same effect as Amendment No. 92. As the noble Baroness said, this is an attempt to remedy a longstanding grievance. It was raised at Committee stage, and I think is rightly raised again.

There are about 850,000 pensioners resident outside the United Kingdom. They have earned their pensions by paying national insurance contributions in the United Kingdom. I recognise that they have not earned those pensions in the strict legal sense because, as we all know, contributions by current earners pay for the current pensioners not for the pensions of the contributors themselves. But those contributions have given them a moral right to the pension.

Non-residents receive a pension whether they are still in this country or abroad when they reach the state pension age. I could see some argument or logic—I would not for a moment agree with it—in saying that if you are non-resident you receive no pension. But it is a wholly indefensible anomaly to say that you receive your pension but you do not have it uprated along with everyone else who gets a pension. Most of the non-resident pensioners do not receive the yearly uprating of pensions in line with prices. It is true that when that rule was introduced pensions were uprated in line with earnings. There may be some argument for not uprating them in line with earnings but none that I can see for not uprating them in line with prices.

Of those pensioners, 390,000 live in the European Union or in countries where, by virtue of a reciprocal arrangement, they have the benefit of the uplift. But about 450,000 receive no uplift and therefore in real terms they get a year by year cut in their pensions as they get older. In past years, when inflation was high, there has been a large cut in real terms.

I recognise that some benefits such as jobseeker's allowance or income support cannot appropriately be paid to non-residents. But pensioners are in a different position. They have earned a moral right to the pension by the contributions that they have paid. Some may have worked in the United Kingdom for only a few years and will receive only a small pension.

Furthermore, non-resident pensioners are saving money for United Kingdom taxpayers because they impose no burden on the National Health Service or on social services. The problem is that non-residents have little clout because few of them have votes. Refusal of uprating is impossible to justify on principle. The only defence put forward by the noble Baroness at Committee stage was cost, which is alleged to be some £275 million a year. I accept that that is a significant amount, but it is not enormous and is more than covered by the additional tax that is intended to be secured by the blocking-up of the personal service company loophole.

The Government say that this is not a priority for expenditure. But the Government and the United Kingdom taxpayer should recognise that the rights of this defenceless group should be recognised as a matter of common justice.

Lord Monkswell

My Lords, I had not intended to speak but it is only right that the Benches on this side of the House should be associated with the recognition of the perceived unfairness of the situation: that some overseas pensioners receive uprating and others do not.

I take exception with the noble Baroness's amendment where it suggests that we should take unilateral action. We all recognise that pensioners who live overseas in countries which have a reciprocal arrangement receive uprating. While I object to the proposed amendment to deal with the unfairness and anomaly, the House should recognise that unfairness and anomaly. I hope that the Government recognise the need to address the issue not by a unilateral uprating and indexation of pensions from the United Kingdom on its own but by taking urgent steps to ensure that we negotiate the right reciprocal arrangements to deal with this heartfelt problem.

Lord Higgins

My Lords, I am sure that the House will want to congratulate my noble friend Lady Fookes not only on her stamina but also on her patience. She has sat through all the debates, which have been going on for some time. No doubt many late nights in the Chair of another place provided her with both those attributes.

My noble friend raises an important issue which we discussed in Committee. Somewhat to my surprise, I found myself seeking to approach it with an open mind. The issue has been around for so long that one's views have perhaps ossified. In the light of correspondence I have received from a number of people overseas, I discovered that I was wrong in one or two of the remarks I made in Committee. I suggested that the increases were being paid for by taxation, by those who were resident here as against the people resident overseas. In fact, it is a pay-as-you-go system based on the contributory principle. As the noble Lord, Lord Goodhart, pointed out, to the extent that they contributed and then retired, they might reasonably expect to receive the same benefits as other people who happen to be living here. But of course the difference is made up by the contributions of those who remain, not retired, because the whole system is based on the idea that pensions being paid today are financed by those who have not retired, and the thing goes on from stage to stage in that way.

It is right that we should reconsider the matter. After the Committee stage, I took the opportunity to refresh my memory and read in more detail the report of the Social Security Select Committee of another place. It examined the matter in some detail and made specific recommendations to which I shall turn in a moment. However, on reflection, I find the whole reciprocal arrangement rather strange. I am not sure how we got into the position of saying, "If you pay ours, we'll pay yours". It is a strange arrangement and rightly gives rise to some claims of discrimination. Whether you are uprated or not depends not on whether you went abroad, but to which country you happened to go. That is not a good basis for deciding the matter one way or the other.

However, those arrangements exist and have been to the advantage of those who have gone abroad if they were fortunate or clever enough to go to a country which had a reciprocal arrangement. Therefore, I was rather disturbed after the Committee stage to receive an e-mail suggesting that the Australians, who I understand are included in the reciprocal arrangement—

Noble Lords

No.

Lord Higgins

My Lords, not so. In that case, I am puzzled by the e-mail which I received. It suggested that, following a meeting with Alistair Darling, the Australian Social Security Minister, Jocelyn Newman, gave notice to the UK that Australia intended to end the social security agreement with the UK because of the UK's intransigence on the frozen pension issue. In that case, I am puzzled by the e-mail and do not understand exactly what the position is. It would be helpful if the Minister could throw some light on that.

At all events, after the Select Committee in the other place had looked at the matter in considerable depth, the conclusion was that it is a question of priorities. There is some cost—of the order mentioned by the noble Lord, Lord Goodhart. It is a question of whether that is something that is appropriate to give priority to rather than some alternative use of the equivalent amount of money. The report suggests that there should be a free vote on the issue. If the House is to assess priorities, it seems to me that there could be some case for that argument.

As to the second amendment moved by my noble friend, there may be some case for those consultations, although it seems to me that the real problem is that there is clearly an anomalous situation when some countries have a reciprocal arrangement and others do not. It is right that we should reconsider the issue. I am glad that my noble friend has taken the opportunity at 2.15 in the morning to raise the point. Since I gather that we are not competing with the Commons on the parliamentary programme, it may be that there are those getting up now in Canada or wherever who have been listening to what she has to say and probably complaining about the reply which we may receive from the Minister.

2.15 a.m.

Baroness Hollis of Heigham

Yes, my Lords, if they are, then they probably will.

The amendments have one purpose: to attempt to redress the situation where more than half of UK pensioners living overseas do not receive annual cost of living increases in their retirement pension. The House is well aware that the issue has been discussed for many years and has been considered in previous debates, including the Committee stage of this Bill. I am aware of the importance which some Members of the House attach to the issue and of the strength of feeling among many UK pensioners overseas. In return, noble Lords know the Government's position well and I do not believe—as the noble Lord, Lord Higgins, suggested—that they will be particularly surprised at my response to the amendments proposed.

UK pensions are paid anywhere in the world. We pay some 870,000 pensioners in more than 150 countries. In 1998 the UK paid over £1 billion in retirement pensions to pensioners living abroad. Some 470,000 of those pensioners have what is commonly referred to as a frozen pension—in other words, it is fixed at the point at which they left the UK permanently or at the rate initially awarded on retirement if the person is already resident abroad. The pension remains frozen at the rate payable when a person ceases to live permanently in the UK.

Upratings are only paid within the EEA, in the Channel Islands, the Isle of Man and in about a dozen other countries where certain long-standing social security arrangements, going back to the 1950s for the most part and certainly before the 1970s, exist.

Noble Lords must also recognise that pensioners who live abroad have chosen to do so, and they knew that their pension would be frozen when they made that decision. That position does not represent a change in government policy—it has not changed since 1955. It is not solely a priority for this Government to reconsider and it is not just the Government's view. The Social Security Select Committee came to the same conclusion in 1996 when they considered the matter. If it wants a free vote on this, I wonder whether it would like a free vote on all areas of government expenditure so that on the basis of free votes we can all decide what our priorities are.

We already know the scale of the total cost of uprating all frozen UK state pensions paid a broad to the rate of pensions in the UK. It would be some £300 million per year for all countries affected. The amendment as drafted also seems to suggest that any pensioner could be entitled to attendance allowance as well. If that happened it would add many millions to the bill.

The noble Lord, Lord Higgins, read from the e-mail about the Australian Government. The Australian Government recently announced that they will be ending their social security agreement with the UK because we have rejected their proposal for a limited unfreezing. Over 45 per cent of frozen rate pensioners live in Australia and total unfreezing would cost £129 million. The Australian proposal would apply only to the 3,000 people who already receive the means-tested Australian old age pension and those who start to get a UK pension in Australia in the future. It would not benefit the great majority of the 200,000 UK pensioners resident in Australia. In other words, the Australian Government asked not for a total unfreezing but for a certain response from us for the 3,000 who already receive the means-tested Australian age pension. That would not affect the majority of those living there.

It may be helpful if I repeat the figures I gave to noble Lords when we discussed this issue. My noble friend Lord Monkswell seemed to suggest that all we needed was a reciprocal arrangement; that we should then have symmetry and all would be well. That is simply not the case. At the moment, for example, there are 17,000 Australian citizens living in this country while there are 210,000 UK citizens living in Australia. From New Zealand, 7,600 live here; 34,000 of our citizens live there. From Canada, 9,500 live here; 138,000 British citizens live there. Therefore, though it might be reciprocal, any unfreezing would not be at all symmetrical. The costs would very heavily fall on the UK Government.

I can only repeat what I have said before: those UK pensioners living abroad have chosen to do so in full knowledge of how it would affect their pension. As is very clear from these figures, we are not talking about equality of spending between two countries. Our overall position is clear. We do not consider unfreezing to be a priority call on resources. Those who have chosen to live abroad cannot have first call on resources in the light of some of the issues about social exclusion and so on which we have been talking about tonight. We have much to do to improve the position of pensioners and indeed the very poor who are in the greatest need in the UK. I regret, therefore, that I shall not be able to accept the amendment proposed tonight.

Baroness Fookes

My Lords, as I was not expecting any concessions, I have not been disappointed. However, that does not mean that I do not: remain annoyed nor that I shall not continue to work on what I believe to be an injustice. Clearly, for the time being, I shall make an orderly retreat but only so that I can regroup to fight another day. In those circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 93 not moved.]

Lord McIntosh of Haringey

My Lords, I beg to move that consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.