Expatriate Pensioners: Australia (Hansard, 3 April 2000)

§ Baroness Fookes
asked Her Majesty's Government:
Whether, in the light of the decision by the Australian Government to terminate a social security agreement between the United Kingdom and Australia, they plan to increase the pensions of expatriates currently receiving frozen pensions.

§ The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)
No, my Lords. It is unfortunate that the Australian Government have decided to end this longstanding agreement, which goes back to 1953, but our priority is to help pensioners in the United Kingdom, particularly those who are less well off.

§ Baroness Fookes
My Lords, I thank the noble Baroness for that Answer, which was, perhaps, predictable. That stark remark will bring little comfort to the many pensioners living in countries where their pensions are frozen. Is it not time that this long-standing injustice, which brings hardship to so many people, was remedied?

§ Baroness Hollis of Heigham
My Lords, the UK Government currently spend £1.34 billion on supporting UK pensioners who have chosen to live 1082 abroad. If we were to follow the noble Baroness's recommendation, that bill would go up from £1⅓ billion to £1⅔ billion. Releasing that extra £⅓ billion required to unfreeze all frozen pensions is not a high priority of this Government, any more than it was of the previous government.

§ Lord Shore of Stepney
My Lords, will my noble friend at least think very hard about this issue? I remember dealing with this matter in Cabinet some years ago. There was never any question but that, morally, our fellow citizens who worked for us here in Britain and who then migrated overseas were entitled to a pension by virtue of their paid-in contributions. We did not update the pension because of the chronic shortage of foreign exchange, but morally the case was clear. When we were controlling capital movement, when tourists could spend only £50 a year abroad, and when all kinds of restrictions faced us, we could not do it, but morally these people have a right to a pension. Will the Government fulfil that obligation at the earliest moment?

§ Baroness Hollis of Heigham
My Lords, I do not share the views of my noble friend. Many of the pensioners currently in Australia, Canada, South Africa and New Zealand went out to those countries during their working lives and have for many years contributed to the economies of the countries that they joined. The UK state pension is not a funded scheme but a pay-as-you-go scheme funded by current taxpayers. Given the priorities of government expenditure, I do not think that it is reasonable to ask UK taxpayers to fund the pensions of those currently living abroad who chose to live abroad and who, for a long time, have contributed to the economies of those countries.

§ Lord Goodhart
My Lords, does the Minister accept that the level of pension such people receive will be dependent on the amount of time they spent in this country? If they left during their working lives, the pension will be reduced. Does she not accept that these people paid national insurance contributions and taxes while they were working here? By going abroad, they have relieved the National Health Service of the burden of looking after them in old age. Does not the noble Baroness agree that it is disgraceful that this Government and previous governments have refused to pay these people the increases in their pensions?

§ Baroness Hollis of Heigham
No, my Lords; again, I disagree. Most schemes were set up following the 1946 Act. Except for the 30 "unfrozen" countries where reciprocal arrangements were made and, possibly, some EU countries in waiting, there have never been any such agreements. Going back to 1946, there have never been agreements to uprate overseas pensions, particularly where those pensioners have chosen to live abroad and have often contributed for many years to the economies of those countries abroad. We believe that there are higher priorities for government spending.

§ Lord Stallard
My Lords, does the Minister accept that I have been raising this question in both Houses since 1980? There has never been an agreement with Australia, Canada, South Africa or New Zealand, but there have been agreements for reciprocal pensions to be paid with some 33 other non-Commonwealth countries. Does the Minister agree that the pensions we are talking about are those of people who may have left Britain for a number of perfectly good reasons and who, as has been said, have worked and earned their money here? I refer, for instance, to a widow who may have gone to Australia to live with her daughter or with her son. She is entitled to her pension, but this Government and previous governments have steadfastly refused to give such people pension increases. At the same time, is it not strange that we are now canvassing for their votes in elections? We have spent thousands of pounds on trying to force these people to vote for us in our elections while at the same time we refuse to allow them the pension to which they are entitled. Is it not time that a government showed a bit of common sense and decency about this issue?

§ Baroness Hollis of Heigham
My Lords, given the debates in the press recently, I hope that the noble Lord is not suggesting payments for votes.

§ Lord Higgins
My Lords, is it not the case that our pensioners in Australia are already in an unfavourable position when compared with those in countries which are members of the European Union? Will not this latest development make their position even worse? Does not the noble Baroness's argument apply equally to those in the European Union? Given the point made by the noble Lord, Lord Shore, is there not a case for going along with the idea of the Social Security Select Committee in another place that the question of whether or not action is taken on this issue should be decided on a free vote?

§ Baroness Hollis of Heigham
My Lords, as to the noble Lord's first point, we have reciprocal arrangements with the EU in order to free the movement of people of working age. Pensions were not the primary purpose of the legislation, but obviously they are a factor. That is not the situation with Australia and Canada. Approximately 17,000 Australians of pensionable age live in the UK; and approximately 215,000 UK pensioners live in Australia. The same disparity applies to other non-European Commonwealth countries such as Canada, South Africa and New Zealand. The arrangements with the EU are part of our obligations and they need to be honoured.
As to the recommendation of the Social Security Select Committee for a free vote, it would not be particularly appropriate to ask the Houses of Parliament to hold a free vote on an issue which involves £⅓ billion of public moneys. I endorse the reply of the previous government; they thought this was an interesting proposal, but it was a proposal that they did not intend to follow.

§ Baroness Trumpington
My Lords, does the Minister agree that there are many war pensioners among expatriates? They are diminishing in number and therefore the amount of money required would, regrettably, get smaller every year. How much will the average expatriate get in English money per week in Australia after the present agreement expires?

§ Baroness Hollis of Heigham
My Lords, it would cost £300 million to unfreeze frozen pensions. The figure for Australia is approximately £125 million. As to the noble Baroness's second point, it may be that she misunderstands what the Australian Government are proposing to do. They are not proposing to uprate English pensions; they have never done that. At the moment, for UK pensioners in Australia to qualify for an Australian pension, they have to be resident there for 10 years and to pass a means test. The current agreement, which goes back to 1953, is that UK national insurance contributions may count towards that 10-year residence period. The same is true in reverse; Australian periods of contribution count towards the English state pension. The removal of the current agreement would affect some 850 people in Australia and some 1,000 Australians living in the UK. So, perversely, the effect of Australia reneging on an agreement which has been in place since 1953 will be to save the Government money.

§ Earl Russell
My Lords, the Minister is aware that we are increasingly living in a global economy. Does she agree that if states, jointly or severally, fail to meet the needs of those who live in a global economy, that could prove as dangerous to the political health of the state as it already is to the financial health of pensioners?

§ Baroness Hollis of Heigham
My Lords, the noble Earl was kind enough to give me notice of his question; I suspect on the grounds that he thought it unanswerable. He is right; it is, but I shall have a go. I cannot conceive of globally co-ordinated social security—if that is what the noble Earl has in mind—between, say, sub-Saharan Africa and Sweden. Our view and the view of the previous government is that it is for national governments to decide the terms of their social security schemes in the light of their national economies.