HL Deb 10 June 2004 vol 662 cc456-96

4.9 p.m.

The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach)

My Lords, I beg to move that this Bill be now read a second time. I declare an interest as an associate member of the Royal British Legion for the Lutterworth and District branch.

This small, but important Bill provides the essential legislative underpinning to allow the introduction of new pensions and compensation schemes for the Armed Forces. We need to modernise current arrangements to meet the evolving recruitment and retention needs of the Armed Forces and to respond to the concerns of existing personnel and of ex-service organisations.

As your Lordships will know, the new schemes have been developed after extensive consultation with serving personnel and with ex-service organisations. We have listened and responded positively to criticisms from the House of Commons Defence Select Committee. Framework documents setting out the detail of both schemes have been published and placed in the Libraries of both Houses, along with documents explaining the new early departure payments scheme. We have, in short, provided a substantial amount of supporting and background material.

I recognise at once that it has taken a long time to develop these new arrangements. However, I consider the time has been well used. It has allowed us to explore and address the concerns of ex-service groups. It has ensured that the outcome properly responds to the views of service personnel and the needs of the Armed Forces. It has been necessary to address recent developments in the Government's wider agenda for pensions, which meant that the MoD's original pension proposals had to be substantially re-thought.

The new pension scheme comes in for new entrants from April 2005. It embraces the Government's wider pensions agenda in three respects.

First, it responds to the Government's move not to allow the payment of pension benefits before the age of 55 by replacing the immediate pension, paid currently at around the age of 40, with a system of compensation payments—the early departure payments scheme.

Secondly, we will defer the payment of preserved pensions from age 60 to 65 in both the new and current schemes, while protecting benefits already earned for those who choose to remain on the current scheme. This responds to the increased cost of people living longer, which all pension schemes are having to address. Scheme members elsewhere in the public and private sectors are contributing to meeting that cost and it is right that members of the Armed Forces should also do so.

Thirdly, by providing benefits for unmarried partners who can demonstrate that they are in a substantial relationship, the pension scheme recognises the wider changes in society and the lifestyle preferences of those who serve already and those we seek to recruit. This will include same-sex partners.

There was some criticism in the other place of the fact that the Bill gives the Secretary of State enabling powers to introduce the new schemes, but that there are no details of the two schemes included in it. I hope that I can reassure the House that this is the normal approach in these matters, consistent with that used for other public sector schemes, such as the police, fire and NHS schemes. In that respect, we see no reason to treat the Armed Forces any differently. Current arrangements have no formal parliamentary scrutiny. By contrast, under the new arrangements described in the Bill, the full scheme rules will be laid before both Houses in statutory instruments and be subject to the negative resolution procedure, giving Parliament the freedom to choose whether it wishes to debate the issues. Future changes will be dealt with in the same way.

We have responded positively to the real concerns that have been expressed by the Commons Defence Select Committee and by members of the Standing Committee that Armed Forces personnel have no representative body to speak for their pension interests.

My honourable friend the Parliamentary Under-Secretary of State, Minister for Veterans, Mr Caplin, announced on 30 April that the Armed Forces Pay Review Body has agreed to provide external validation of the pensions scheme. The AFPRB will compare benefits offered by the Armed Forces Pension Scheme with those offered elsewhere and will consider the extent to which these arrangements meet the recruitment and retention needs of the Armed Forces. We believe that this work fits well within the AFPRB's existing remit to consider aspects of the remuneration package, of which pensions are clearly a significant element. The very high regard in which the AFPRB is held by all its stakeholders should give confidence to service personnel that their pension scheme provisions will continue to measure up to wider good practice.

I turn now, briefly, to the new schemes themselves, which are contained in Clause 1 of the Bill. The new pension scheme remains a defined benefit pension scheme, giving a high level of assurance to our personnel in their retirement or in the event of injury, ill health or death. It will be fairer than the current scheme, with benefits based on final pensionable pay and with common terms for officers and other ranks. Those are two important differences from the present position.

We believe that there are significant improvements to dependants' benefits: first, the death-in-service lump sum benefit is increased from up to one-and-a-half times pensionable pay to four times pensionable pay; secondly, full-career widows' and widowers' pensions are increased by 25 per cent, reflecting the particular demands of service life and their impact on a spouse's ability to earn a pension; thirdly, and I suggest significantly, widows will in future be able to keep their pensions for life on remarriage, whether or not the death is due to service; and, lastly, there is an extension of dependants' benefits to unmarried partners, including same-sex partners, where there is a substantial relationship.

Those changes reflect key concerns raised during consultation and address the need to make proper provision for those who are left behind when personnel die or are killed in service. I have already mentioned the new Early Departure Payments scheme, which replaces the immediate pension in the current scheme. The EDP is a unique and generous mid-career leaver's compensation scheme and will be paid to personnel aged 40 and above when they leave after at least 18 years' service with their excellent transferable skills. A minority of Armed Forces personnel leave at this stage, and, historically, the Immediate Pension has been an extremely expensive benefit for the relatively small numbers who receive it.

I can assure the House that the Armed Forces Chiefs of Staff are content that, although reduced in value, these payments will continue to support effectively their manning needs. Indeed, there is a concern that the present arrangements lead too many people to leave at the mid-career point in a number of key skill areas.

Overall, the cost of the new pension scheme will be broadly the same as that of the current scheme, with the costs of better dependants' benefits and pensioners living longer broadly offset by a reduction in the value of payments for those leaving in mid-career and the delay of five years in the preserved pension age.

The pension scheme will be introduced for new entrants to the Armed Forces on 6 April 2005. Current members of the Armed Forces will be given the opportunity to transfer to the new scheme as soon as possible thereafter but by no later than 6 April 2007. That does not mean that they will be given up to two years to decide; in most cases, they should need no more than three months. If personnel were to be given much longer, it is possible that many would put the decision to one side and lose sight of the timescale.

Our current thinking—of course, we should be interested to hear what noble Lords have to say on this matter—is that the timetable will set a window for decisions of around nine months so that those who are on standard six-month operational deployments have at least three months on their return in which to take the decision, including time, of course, to discuss the issues with their family and, if necessary, with a financial adviser.

The decision to transfer will of course be entirely voluntary for each individual member. The Ministry of Defence will give individuals all the information necessary to allow them to make an informed choice. They will also be given sufficient time to allow them to discuss their decision with their families and, if they choose, with a financial adviser.

I turn briefly to the subject of the new compensation scheme, which will also be introduced from 6 April 2005, for death, ill health or injury resulting from service from that date. The arrangements will replace provisions under the war pensions scheme and benefits under the current pension scheme. I should make clear that the existing arrangements will continue for disablements or deaths due to service where the cause pre-dates 6 April 2005.

The existing war pension arrangements have their origins in the two world wars and are now, frankly, outdated and complex. The current standard of proof used in the war pensions scheme, "beyond reasonable doubt", was introduced in 1943. In fact, for World War I and for the first four years of the Second World War the scheme used tests based on "balance of probabilities", the standard of proof we propose to use in the new scheme. The standard was changed to the current "beyond reasonable doubt" because of the extreme circumstances of the time when it was considered important to be able to deal quickly with the very large numbers of casualties.

The social and medical environments are very different today. The proposed balance of probabilities standard of proof is widely accepted for other occupational schemes and, as noble Lords know, is used in our civil courts. In my view, it is no longer possible to justify the current approach. In combination with the absence of any time limit for claiming, it does not allow evidence-based decision making, properly reflecting the circumstances of an illness, injury or death. The way in which disablement is assessed means that provision is not properly focused; specifically, there is inadequate provision for those who are more seriously disabled. We would be doing service personnel a disservice by perpetuating the current outdated arrangements.

The new scheme reflects modern medical understanding and current practice and thinking on disability. We believe that it is fair, transparent, simple to understand and offers consistent outcomes, with a better focus on the more severely disabled. Importantly, the scheme is evidence-based, with a proper requirement on the department to make available medical and other records that it holds which are relevant to a claim. The MoD accepts that it has an important responsibility in this area and that the burden of providing the evidence for a claim does not fall wholly on the individual. We are confident that no claim would fail where there was reasonable evidence that disablement was due to service. And, for those claimants who feel that they have not been dealt with fairly by the department, all this will be underwritten by an independent appeal process.

Unlike the current arrangements, there will be in-service lump sum awards for pain and suffering where a significant injury does not lead to invaliding from the Armed Forces. Benefits will be provided for dependants where deaths result from service and—as with the new pension scheme—these will be extended to include unmarried partners where there is a substantial relationship. There will be a normal time limit to claim of five years, with discretion to consider claims delayed by ill-health, and an exception for late-onset conditions.

The modernisation of the appeal process for compensation arrangements is the second major element of the Bill. In line with the recommendations of the Leggatt review, the Department for Constitutional Affairs proposes to change the path of appeals from decisions of the Pensions Appeal Tribunal to include a new level of appeal on points of law to a social security commissioner, with a further right of appeal to the Court of Appeal.

Social security commissioners provide a simple and accessible system of justice. It is non-confrontational, low-cost and user-friendly. Individuals could represent themselves, if they chose to do so, but commissioners deal with most cases without the need for an oral hearing. I should also make it clear to the House that commissioners will be known as pensions appeal commissioners when hearing cases from service personnel which are appealed from the Pensions Appeal Tribunal. That will recognise the special status of Armed Forces personnel and distinguish their appeals from general matters of social security.

There is one final aspect of the Bill which I will mention briefly. The Royal Patriotic Fund Corporation, a small charity which helps service personnel and their dependants, needs to modernise its constitution and therefore simplify and reduce its administrative burden. We have agreed that the Bill can make provision for the legislative changes required. The Explanatory Notes give more background to that.

In conclusion, the new schemes are designed to be fairer, to reflect modern good practice and to meet the needs of our Armed Forces in this century. Those schemes were born out of a wide-ranging consultation exercise that included existing personnel, ex-service organisations and last, but certainly not least, the House of Commons Defence Select Committee.

Their comments and concerns are reflected in substantial changes to the final schemes. The proposals have the confidence of the service chiefs and their staffs, with whom they have been closely developed, and the reactions of individual service personnel have so far generally been positive.

At a time when pension schemes are under great pressure more widely in the economy, we have retained a defined benefits structure and we have made major improvements to widows' and dependants' benefits. I make no apology for going against the trend seen more widely in pension provision; that is, towards placing the ultimate risk on the individual through defined contribution schemes. Service personnel can be assured that they are getting a very good package and, specifically and most importantly, that if the worst happens there will be generous financial support for their families. The level of provision is high, but we believe that such treatment in those circumstances is fully justified. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Bach.)

4.26 p.m.

Lord Craig of Radley

My Lords, I am grateful for this early slot in the speakers' list. I am involved with the Constitutional Reform Select Committee that is currently in session. I have already expressed my apologies to the Minister and the Front Benches for my consequent absence for part of the debate.

I am very pleased that the MoD has produced this much needed and long awaited Bill. It has taken years to get here. It will be another year before the new scheme arrangements, many of which I welcome, are in place. I should remind the House that I am a vice-president of the Forces Pension Society. It is appropriate to commend the society's determination and hard work in its many meetings and exchanges with the MoD. They have played an important part in identifying and securing some significant, if overdue, pension and compensation improvements for servicemen and women and their dependants.

When I was commissioned aged 21 in the RAF, even with an honours degree in pure mathematics, neither pensions nor compensation arrangements figured anywhere in my personal thinking about my future career. Even today, with much more exposure to the topic, and as a pensioner, I am still far from clear on much of the detail. The whole topic is riddled with complexities. I shall not labour that point other than to stress this important consideration: it behoves the employer—MoD—to make exceptional efforts to ensure that servicemen and women are not short changed. There should be an understanding—an undertaking—that Armed Forces pension benefits will always be at the level of the best in public service and never measure unfavourably with best practice in the private sector.

Service in the Armed Forces has unlimited liability—anywhere, any time, at no notice. When he was in another place, the noble Lord, Lord Rooker, said: Members of the Armed Forces enter into a unique contract with the state. In effect, they agree to die for their country if necessary".—[Official Report, Commons, 24/7/00; col. 816.] I am sure that this House would agree with him.

It is not reasonable to expect young men and women who join the Armed Forces to be pensions "literate". Youth and the spirit of adventure mean that pension and compensation are not something that the recruit weighs in the balance when deciding whether to sign on. It was not the case with my age group when we joined up.

I do not know whether the Minister has any evidence that pension and compensation rates are a significant pull factor and recruiting sergeant for today's youth. The minuscule number of serving personnel who responded to the consultation exercises—a mere 139 on pensions and 22 on compensation—seems to indicate that attitudes have not changed from my generation.

Another of my concerns was that there was no provision for any review, so I was much encouraged to learn from the Minister in his letter of 30 April that the Government would invite the Armed Forces Pay Review Body to carry out quinquennial reviews and assessments. That is good news, but does it go far enough? The AFPRB does not report on remuneration for senior officers of two stars and above. How will their pension entitlements be reviewed?

Will the Minister confirm, as now happens with AFPRB recommendations on pay, that its views on pensions and compensation will be accepted and implemented by the Government? Will the AFPRB be restricted to a review of the new schemes only? That would be unfortunate. I strongly urge that the involvement of the AFPRB is placed on the face of the Bill. This would give great reassurance that the schemes will not be allowed to become outdated and outmoded, as has happened in the past. I press the Government to adopt this suggestion.

It has been MoD practice to argue that the impact of pension arrangements on recruitment and retention has to be considered. In his letter about AFPRB involvement, the Minister referred to that again. I do not like this because it is a cop-out. I am not aware that generous pension schemes for Members of Parliament are dependent on recruitment and retention. I doubt whether private schemes based on best practice are greatly varied to take account of recruiting. Why should this provision, which could be prayed in aid of lower than best practice arrangements when recruitment and retention happened to be good, be allowed? Recruitment and retention rates fluctuate, and to rely on them as a means of settling or reviewing pensions which will run for decades seems wrong. I hope that the AFPRB will not allow it to dominate its advice about pensions.

At the moment, this enabling Bill will allow a Secretary of State to set up new schemes, varying them up or down solely by statutory instrument. The armed services would be reassured if there were some key benchmarks about the new schemes on the face of the Bill. In spite of his opening remarks, I hope that the Minister will consider including some of those, such as the improved rate for dependants' benefits; the new death-in-service benefit; and that defined benefits are to be based on actual pensionable earnings. These and some other key markers drawn from the proposed new schemes and put on the face of the Bill would set a baseline below which pensions and compensation benefits could not fall without primary legislation.

I note with concern a matter the Minister referred to, and one that I know the noble Lord, Lord Morris of Manchester, will speak about as well: that the MoD is proposing to change significantly the standard of proof needed for a claim. The onus will move from the MoD to the individual serviceman. This does not strike me as the action of a caring employer who should be no less willing to treat quickly and sympathetically today those who suffer great trauma, both mental and physical. I do hope that the MoD will think again and agree to retain the present standard of proof in the new scheme.

Finally, I turn to two of the legacy issues. As we have heard, the new scheme, while improving arrangements for future widows and partners, perpetuates a source of great anguish and disgust. I refer to the differing treatment of those who become service widows. The new scheme will withdraw the existing distinction about whether or not the spouse's death was attributable to service. All widows and widowers, and all unmarried partners of either sexual orientation will now be permitted to keep their pensions for life. So far, so good. But the Bill will leave the existing non-attributable widows' rules untouched. These widows will still lose their pensions, should they elect to remarry or even to cohabit.

Why discriminate against a small, discrete group by relying on a long-outmoded rule dating from the days when women were perceived to be totally reliant on their husbands for support? The rule has been dropped for all other widows and widowers, unmarried partners of either sex and their offspring. It is utterly indefensible.

Could not those affected be allowed to opt for the new scheme? Governments have been, recently, much less rigid about holding to past precedent when close family relationships are involved. Once only those married could benefit. Now entitlement has stretched far beyond the confines of a legal marriage. Surely those legally married should not lose out.

A further widows' issue concerns post-retirement marriages. My postbag—as I am sure have those of other noble Lords—has been full of letters from those who will remain assessed by a rule that has now been scrapped for other widows and widowers in the new scheme. I could quote any number of telling points that have been made to me but the underlying message is clear and strong.

A serviceman's pay throughout his career was abated to provide a pension entitlement for himself and for a widow and dependent children of his. That is what he thought he was paying for; the more so when he, along with many others, was given the opportunity and encouraged to pay to increase his widow's pension entitlement from a third to a half of his own pension. Surely, in equity, he has a right to expect that if he leaves a widow she should benefit from his contributions and that the Government should honour that arrangement regardless of when he did get married. Any dependent child should also not be penalised.

We should remember that service rules and customs discouraged early marriage for the generation of individuals who are now affected. The pattern of service life then—many young servicemen were stationed overseas and their chances of meeting a potential spouse were limited or non-existent—meant that marriages were often contracted later than in other walks of life; in many cases only after the end of a military career.

I hope that we do not have to await the debates on the relevant statutory instruments to correct these gross injustices which bring so much justifiable anger and distress to those affected. It would be greatly appreciated if the Government would themselves table the necessary undertaking so that there is not an unseemly battle over the issue. It is too sensitive and too distressful a matter to be a topic for heated debate in your Lordships' House. I urge the Government to do so and I invite other noble Lords to support me in this appeal.

4.37 p.m.

Lord Morris of Manchester

My Lords, I am grateful to my noble friend am delighted to follow the noble and gallant Lord, Lord Craig, whose wise counsel—as I know my noble friend agrees—is always most helpful in debates on the needs of service and ex-service men and women alike.

The Bill is a measure of profound significance for our Armed Forces, as it is, too, for the ex-service organisations and those who work to make life better for war widows. It promises welcome improvements in pensions for service men and women and improved death-in-service benefits for widows/widowers of the future. Cover will be provided for in-service accidents which strangely—one could also say scandalously—is currently available to service personnel only if they take out private insurance. That, too, is most welcome. But there are intended changes—more especially one fundamentally to change the war pensions scheme— that cause the ex-service community deep concern. Again, there is regret that this opportunity to do more to help older war widows is not being taken.

I have two interests to declare: first, as honorary parliamentary adviser over many years to The Royal British Legion—the authentic voice of the ex-service community—and, secondly, as vice-president of the War Widows' Association. I speak also as the son of a war widow and from personal experience of active service with Middle East Land Forces when Israel was still Palestine and our role was to stand between rival terrorist groups that would have had very little to learn from Al'Qaeda.

My friend, the noble Baroness, Lady Strange, president of the War Widow' Association, has been fighting the good fight for war widows for as long as I can remember. I much look forward to her speech in this debate and I honour her today, as I do the noble Lord, Lord Freyberg, and, of course, my noble friend Lady Dean, for the constancy of their commitment to war widows and the ex-service community.

While acknowledging all the difficulties, as a former Minister, I find it sad that the 60th anniversary of D-day could not have been marked by the announcement of some further new help for older war widows. Most of them lost their husbands during or due to the Second World War. Their average age is now over 80 and the attrition of age-related illnesses and disabling conditions reduces their number year by year. In consequence, the cost to the Exchequer of war widows' pensions falls year by year. So more could now be done to help them without increasing the totality of public spending. Was that not justification enough for making last weekend's commemoration in Normandy—and I warmly congratulate the Government on their part in its success—a moment not only for reflection and admiration for those who were prepared to lay down their lives for human freedom but of practical concern for the increasingly needful loved ones of those who did so? We all owe them an immense debt of honour.

Of course, from next April, all service personnel and those widowed after then will be affected by this Bill's hugely important intention to change the rule relating to burden of proof for awards under the war pensions scheme, the principal avenue for compensation for death, illness or injury caused or made worse by service in the Armed Forces. As of now, the scheme's distinguishing feature is that burden of proof rests not on the claimant to show that death, illness or injury was due to service but on the MoD to disprove the claim. Seven years after the death—or the condition being identified—the onus of proof moves to the claimant, but an award may still be made provided "reasonable doubt" would justify the claim. There is no time limit for claiming.

That the placing of burden of proof on the MoD is the distinguishing feature of the war pensions scheme was set in bold relief by my noble friend Lord Bach—whose personal commitment to helping war pensioners wherever and whenever he can is undoubted—when he replied to my Starred Question on 22 January about the case of the late Major Ian Hill. As a lawyer, my noble friend is all too familiar with the much sterner "balance of probabilities" standard of proof used in courts, and he took pains to emphasise the crucially important difference by pointing out that Major Hill's widow did not have to prove that his death was due to service but—and I stress his words—only to a reasonable doubt. I can say", he replied, that war widows' pensions are paid when death is deemed to be due to service, and that the widow has to raise only a reasonable doubt for claims to succeed".—[Official Report, 22/1/04; col. 1138.] Yet the MoD now intends to abandon that safeguard: to dump "reasonable doubt" as the standard of proof and substitute "balance of probabilities", thus transferring the onus of proof to the claimant.

Making the effect of this pikestaff plain, the House of Commons Defence Committee has noted that, under the existing scheme, it is for the Secretary of State to show beyond reasonable doubt that Service has not played a part in causing or worsening the condition for which a claim is made. Under the new proposals, the standard of proof is changed to a "balance of probabilities" with the onus of proof on the claimant to make the case". The Royal British Legion estimates that this change will mean a cut of 60 per cent in claims for service after 2005 that would succeed under present rules. The estimate is based on the Legion's involvement in a vast range of case work. Last year alone, over 1,300 initial cases came its way, and the Legion took scrupulous care in making its estimate.

The Government's reaction has been to cast doubt on the estimate while doing nothing whatever to produce one of their own. Attempting to allay criticism of this negative stance, they told the House of Commons: We have now joined with the [Royal] British Legion to consider the methodology it used". That is not true. They have not joined in discussion with the Legion. And even if they had, it was up to them to produce a valid statistical analysis of their own, based on data available to Ministers, not simply to criticise the Legion's methodology without particularising their criticism.

The Government did attempt a statistical comparison by looking at the Industrial Injuries and Disablement Scheme and the Criminal Injuries Compensation Scheme, but it was a flop because the two schemes and the standards of proof are predicated on entirely different bases. In fact, the Government's own consultants dismissed it as invalid.

Again, the MoD claims that the "balance of probabilities" standard of proof is more modern and fairer; but how much fairer would it have been to the late Ian Hill's widow? As my noble friend knows well, there have always been two standards of proof, one applicable to civil law and the other to criminal law. This is not a modern invention.

The Armed Forces accept unlimited liability in defending the interests of this country. Their one safeguard with regard to compensation if they become incapacitated due to their service has been the War Pensions Scheme with its standard of proof strongly based on "reasonable doubt". Removing that safeguard will leave service men and women in an extremely vulnerable and totally unacceptable position.

It must be a cause for very serious concern that the Government now want so fundamentally to change the War Pensions Scheme without, as we have seen, providing any data as to its likely effect, despite being challenged to do so by the House of Commons Defence Committee and the Royal British Legion. It is a change of policy that alters the recognition, over more than 60 years, that there are "specific circumstances" and special factors which apply to our Armed Forces. The Government now seek to place them on the same footing as teachers and other public sector workers, those hurt in street brawls or workers injured in industry, whose employers have compulsory employers' liability insurance. That is demonstrably wrong.

I heard recently of an employee of a British contractor in Iraq earning £5,000 a week who was attacked while working and said that he should have been protected by British troops. It would be interesting to learn how his pension arrangements compare with what is now proposed for our troops deployed there, and the widows and other dependants of those who have been killed in Iraq.

The essential difference between the Armed Forces and almost all other employment, as the House of Commons Defence Committee said in considering this issue, is that Armed Forces personnel can be asked to put themselves in harm's way, indeed to die for their country, which makes compensation for injury an entirely different matter for them than for civilians … There can be no proper basis for comparing the Armed Forces Scheme … with schemes for other public sector workers [civil servants, teachers, nurses and the like] who are simply not exposed to anything remotely similar to the dangers and uncertainties of service factors". That is the ex-service community's case for insisting that the existing "reasonable doubt" standard of proof is retained.

I most strongly urge Ministers now very urgently and meaningfully to consult with the Royal British Legion to end the present impasse. Meanwhile, let us all recognise that for parliamentarians there is no more compelling duty than that of acting justly to those who are prepared to lay down their lives in the service of this country and the dependants of those who do so.

4.48 p.m.

Baroness Park of Monmouth

My Lords, the noble Lord, Lord Morris of Manchester, has put the case in compelling terms for rejecting the new proposed standard of proof in this Bill—the balance of probability which puts the onus on the claimant to prove his case—and for retaining the present system. I cannot do better than to quote from the House of Commons Defence Committee report on December 2003 on Armed Forces pensions and compensation. In paragraph 69, the report said: Because of the special risks that Armed Forces personnel are required to run and because they are likely to be involved in situations of great uncertainty with uncertain effects on their health, we continue to believe that the onus should remain on the government to prove that service will not be responsible for causing or worsening a condition for which a compensation claim is made". The Government claim that the proposal is to bring the scheme into line with civil law and common practice, and "reflect modern practice". The truth, I suggest, is that this is another cost-cutting exercise. Why should those who voluntarily risk their lives to serve their country be treated in the same way as a civilian, however brave and worthy, simply because it would be tidier? The MoD has a duty to prove that their service was not responsible for causing or making worse a condition for which a compensation claim is made.

The Gulf War veterans have had a long and painful experience in fighting this battle, although the MoD did eventually set up a Gulf Veterans Illness Unit. I heard the Minister say on the radio this week that the unit has spent £8 million so far on research to establish whether or not there exists a Gulf War syndrome. The research continues and they are not prepared to make any decisions of principle until the outcome is known. Meanwhile some of the veterans have died and others continue to lead stressful lives. They have been fighting just the kind of battle that the MoD now wishes to make the general rule, paying for legal help and finding it difficult, but not impossible, to make their case because of a serious failure in the MoD at times to preserve vital medical records.

I am not at all cheered to hear that there is a brand new computerisation program planned to provide access to medical records. What went wrong last time was a computer scheme that failed and lost a significant number of medical events. In the case of the Gulf War veterans, they were sometimes refused access to their medical records in any case because the records were said to be classified "Secret". I hope that that will not happen again.

However, I return to the simple but cardinal issues. The "modern" balance of probabilities formula requires a claimant to demonstrate that on balance the disablement is due to service. It is not reassuring that the Government wish to move to this procedure not only because it reflects so-called modern practice elsewhere in society, but also because: The WPS eligibility criteria can no longer be justified either in relation to wider best practice or in relation to the particular demands placed upon Service personnel and how these would be dealt with elsewhere in society". I submit that servicemen are unique in that society because of their commitment of their very lives, if that is necessary, to defend the realm. Yet this Government, who I would have thought had very recent and direct experience in the Balkans, Afghanistan and Iraq of the risk to life and limb that is accepted and embraced by our Armed Forces, wish to tidy things up and have the same standards for them as for, let us say, the insuring of a house or a car or for taking out holiday insurance to go skiing. They are prepared to put a man or woman, already ill or under stress, to further stress to fight their case. The onus should be on the Secretary of State to prove beyond reasonable doubt that the individual's service has not contributed to causing or worsening the condition for which the claim is made. This is all the more necessary since so much turns on the medical record, and the MoD, not the claimant, holds these records and has not been seen to be a very competent record holder in recent years.

The new plan does not strike me as likely to aid recruitment or create confidence because it is so manifestly weighted against the individual and in favour of the state, and all this is said to be in the interests of being modern and, I suppose, politically correct. I am greatly reassured to hear that the AFPRB will be playing a positive role in this issue.

It is not fashionable to recognise that the country owes a special debt to servicemen and women, a debt of which we have recently been reminded, and I do not believe that the ordinary man in the street would wish to see the system changed, because of its inevitable consequences for the individual claimant. The British Legion does much for these people, but the average claimant will not be able to afford legal advice if the case goes to appeal. He will have no right to legal aid, as it is not available for appeals concerning war pensions.

I feel particularly strongly about the need to place the onus of proof on the state, not on the litigant—which would, therefore, protect the litigant—because I have been involved for the past year in trying to do something for ex-servicemen and women in Zimbabwe. The many old age homes are having great difficulty in surviving because formerly the white farmers provided fuel, food, transport and much practical help. In just one of them, there are 44 service pensioners from all ranks and services. Their pensions are nearly worthless because of over 600 per cent inflation and can be reckoned in terms of from half a loaf of bread a month to eight loaves and nothing else. There is no money for medicine or medical care, food, shelter or rent, or for such basic needs as soap, batteries for the radio or new spectacles if they get broken. Unlike pensioners here, these pensioners can expect nothing from the state. Here they would get medical and dental care or social security payments. Their case is unique and it has simply not been known.

I quote them because, thank God, pensioners here are relatively well looked after both by the MoD and by the British Legion but we must not allow the Government to trickle their rights away in the name of modern best practice. These are valuable people who are not good at asking for help for themselves. They will be frail and they will find it difficult to fight battles for themselves rather than for the country.

I have one final point and one question. I do not know how great a part the MoD's medical advisors are required to play when claims are made but the present state of Defence Medical Services is still dire. What impact will that have on the pensions arrangements?

In my question I ask for information, and it is my ignorance that compels me to ask. Has the MoD yet announced the compensation package for those who were improperly taxed? I ask because, in the Defence Committee's report of late December 2003, it had not been announced by late October.

4.55 p.m.

Baroness Strange

My Lords, I apologise in advance to my noble friend the Minister if I am not able to stay to the end of the debate as I have to catch the last train to Scotland, but I hope I shall.

I must declare an interest as president of the War Widows Association of Great Britain, so that what I say will be directly applicable to those ladies. My noble friend Lady Dean of Thornton-le-Fylde took some of us from the Defence Study Group last week to the MoD, where the Minister—the noble Lord, Lord Bach—and his civil servants were most helpful to us all in talking us through the new Bill and answering all our questions. We were all agreed that there was much to be welcomed in this new Bill, particularly for service men and women, and—though I sincerely hope there will be none—war widows after 2005.

It is an enabling Bill, and there is some uncertainty over detail. Because of this we must ensure that the devil does not get in here. We want an assurance, as my noble and gallant friend Lord Craig of Radley, said, that all future revisions and draft regulations will be brought to Parliament under the affirmative resolution procedure, so that we can discuss them, and not just find them shoved away under the carpet in a corner of the Library.

We believe that it is particularly important that the pensions and guaranteed income stream should be index linked to the retail prices index and not to any lower index. This, your Lordships must agree, is particularly important for widows with young children, who have to eat and need new clothes as they grow.

It is possible that widows and young children will be better off under the new scheme, but there is still some lack of detail which we would like spelt out for us.

I should like to thank my noble friend Lord Morris of Manchester, who is a vice president of the War Widows Association and does sterling work for us all, for his delightful and charming compliments. He and the noble Baroness, Lady Park—my noble friend—and the War Widows Association and the Royal British Legion all have many concerns about the change of the burden of proof from the DSS criterion, that an injury must be proved not to have been the result, to the MOD criterion which is that the burden of proof must be on the individual concerned. As the individual is obviously at the time in a damaged state that can be more difficult.

There is the Cheryl Hume case where a lady was awarded a war widow's pension by the DSS criterion; turned down by the MoD, on its criterion; appealed to the ombudsman, who decided in her favour; and then appealed in the High Court against the MoD, and won. There are other ladies in her situation who have not appealed, and are therefore disadvantaged. I think that there is much to be said for having one criterion, so that we do not have all this difficulty, but the decisions must be transparent, above board, and seen and known by everyone, and not just decided hugger-mugger in the MoD with no one having any access to what is going on.

In 2000, members of the War Widows Association were all delighted to achieve the right of post 1973 war widows to retain their attributable Armed Forces pension for life whatever their future marital status. That has been an enormous emancipation for them, although very few of them have in fact remarried. It does however create an anomaly for all service widows—but not war widows, as my noble and gallant friend Lord Craig of Radley said—who would lose their forces family pension if they remarried. After 2005, all service widows on the new scheme will be able to keep their pension for life, so this will once more create a trough. It is possible that not many of these ladies, like the post 1973 war widows, will wish to remarry; so to iron out this glitch might not be as expensive as the MOD fears. It does not represent new money from the Government, merely preventing money which is already being paid out and which could then be clawed back.

All of us at this time are touched and moved by the D-Day memorial services, all those hundreds of old men, in their uniforms and medals, standing in the boiling sun so proudly on the beaches on which they had once fought their way through so horrendous a battle, when they were only 18 or 19, so long ago. I think we all cried a bit, as we saluted their courage. This is a time now to remember also the girls, so many of them left behind. Some of them now, 60 years on, might wish to remarry or cohabit for companionship's sake. One of them wrote to me, We come of a generation that believes in marriage. I am 86 and my husband is 92. People of our vast age do not lightly become what is now known as partners. We decided that, although it would mean a fearful tightening of belts, we would marry. This we did last October. I have now lost my war widows pension and my MOD supplement". Could these ladies not just at least retain their MoD supplement if they remarry or cohabit for companionship's sake? As we remember those brave men who gave their lives on those blood-stained beaches, could we not show compassion to the girls they left behind so long ago?

5.1 p.m.

Lord Hodgson of Astley Abbotts

My Lords, I must begin by declaring an interest as a trustee of two final salary pension schemes, and as chairman of one of them. I suspect that this is a peripheral interest to the matters that we are discussing this afternoon but I should like to put it on the record.

We had a characteristically persuasive and sincere introduction from the Minister. A Bill that ostensibly at least sets out to update and improve pensions and benefits for members of our Armed Forces instinctively commands sympathy. As many noble Lords said, it may be repetitive and trite to refer yet again to the particular risks that they run on our behalf—it may be trite but it is also true.

Further, when one reads in paragraph 6 of the Explanatory Notes that the Bill is intended to replace or update the Naval and Marine Pay and Pensions Act 1865 and the Pensions and Yeomanry Pay Act 1884, one is bound to conclude that pensions must have moved on a good deal in the intervening 140 years and therefore that an updating is probably well overdue. Similarly, moves to bring up to date the structure of the Royal Patriotic Fund Corporation, to which the Minister referred, seem entirely sensible. So one approaches the Bill with sympathy. However, the closer one looks into the detailed provisions of the Bill, the more inequitable they seem to be and, indeed, the more at odds the proposals seem to be with the Government's own wider pension policy objectives, particularly as regards member involvement, participation and education as expressed in the Government's own pensions White Paper, Simplicity, Security and Choice.

I should like to address my concerns under five main headings: the unique role and position of our Armed Forces; the issues of enabling legislation; the concept of cost neutrality; member involvement and education; and, following the comments of the noble and gallant Lord, Lord Craig of Radley, correction of past inequalities—the "legacy" issues, although not the legacy issue that he raised.

First, I turn to the role of the Armed Forces and the Government's view of them. I have no doubt about the Minister's sincerity. I have heard him speak with conviction and candour about the special nature of service in our Armed Forces and the level of commitment it requires. So what I am about to say is not aimed at him. However, paragraph 11 of the Explanatory Notes to the Bill states: Clause 1 is modelled on the Superannuation Act 1972 which governs the Principal Civil Service Pension Scheme (PCSPS), the Local Government Pension Scheme, the Teachers' Pension Scheme and the NHS Pension Scheme". I do not find that encouraging. As the noble Lord, Lord Morris of Manchester, pointed out, members of the Armed Forces are not like teachers or local government officers or nurses, worthy though such careers are. It is not so much the danger inherent in a service career, though it includes that. More, it is the inevitably shortened career span imposed both by the structure of the Armed Forces—the rapidly narrowing pyramid—as well as by the physical nature of many roles, which means that they cannot be fulfilled by older men and women. So, as was frequently pointed out in debates on the Bill in another place, most servicemen and women serve for much less than a full career. In those debates the Armed Forces Minister tried to argue that this does not matter, because departing members of the Forces find it easier to get civilian jobs, and so can provide for their pension through their second career.

My anecdotal evidence suggests that that is not the whole story. First, while it is true that members of the forces get a job fairly easily, it has proved much harder for them to get a job with commensurate responsibility and therefore commensurate remuneration. Too often, I am told, there is a need to trade down, which has an inevitable impact on pension levels. Secondly, my anecdotal evidence suggests that the longer the individual has been serving, the harder it is to get an alternative job, so that those who have given the most to the country and presumably have been the most valuable to the services, find it the hardest to start another career. They therefore suffer the greatest financial shortfall.

In at least one respect, the Government recognise that service men and women are different from those others employed by the state. If this were not so, why would the Government exempt the Armed Forces from the national minimum wage? The minimum wage applies to local government officers, teachers and nurses, but not to servicemen. The Government further recognise the special position of servicemen by the use of the "X-factor". In answer to a Written Question I asked the noble Baroness, Lady Symons of Vernham Dean, she said: Unlimited liability for duty is essential to operational effectiveness of the armed forces, and, given their unique status, the Services are exempt from the provisions of the National Minimum Wage Act 1998 … An additional element called the 'X-factor' (currently 13 per cent of basic pay) is then added to reflect the overall balance of advantages and disadvantages experienced by members of the armed forces which cannot be taken into account when assessing pay comparability".—[Official Report, 29/11/00; col. WA 133.] So much for comparability with the Superannuation Act 1972—I see no "X-factor" for teachers, nurses or local government officers.

Further, when one studies paragraph 36 of the Explanatory Notes to the Bill, one reads: The long-term pension cost increases are being addressed through the Government's proposals in its paper 'Simplicity, Security and Choice', as well as through increased Departmental contributions for future pension liability". I have looked through this document, which is 167 pages long, and I may have overlooked something, but I can find no mention of the Armed Forces at all. Indeed, when I asked the Minister's colleague, the noble Baroness, Lady Hollis of Heigham, about this in the earlier debate today, she said that Simplicity, Security and Choice did not apply to the Armed Forces. But what I find on page 105, paragraph 59, is the sub-heading "Tax changes to encourage flexible retirement". Paragraph 60 states: Currently, tax rules allow people to work and draw an occupational pension, but only where they no longer work for the company that is paying the pension. Often people who would like to carry on working do not want, or are unable, to change employers at this stage in their career. So they end up retiring when they would have preferred instead to stay in work in a reduced capacity, supported by a combination of earnings and pension". In the Armed Forces, by contrast, there is enforced retirement. So how do the Government square this with the proposals in Simplicity, Security and Choice?

The Minister may argue that there is a proposal under the Bill to replace the immediate pension with early departure payment. Those represent, according to the House of Commons Defence Select Committee report on the subject, at paragraph 50, a saving for the state—or, from the other point of view, a reduction in benefit—of £100 million per annum or 2 per cent of pensionable pay. The Minister owes the House a better philosophical and practical explanation of whether the Government accept that the Armed Forces' position is unique. At present, it looks all too much as though the Government are determined to cram the Armed Forces into pension schemes structured for other very different careers, with the Armed Forces losing out on the way through.

My second area of concern is that this is little more than a framework Bill. We have a skeleton but little flesh and blood. This is a familiar rant, and I do not propose to develop it, except in two regards. The first involves the statement in paragraph 11 of the Explanatory Notes: The Statutory Instruments made under the Bill and any amending instruments will be subject to Parliamentary scrutiny under the negative resolution procedure". I note that the Minister said that that proposal persisted unamended. I accept that the details of a pension scheme cannot be put into primary legislation but, in pensions more than in most areas, the devil is in the detail. The Government must think carefully whether the negative procedure is a good enough safeguard in these circumstances, given our ability—or, perhaps I should say, our inability—to amend statutory instruments.

Secondly, while I accept that the detail of pension provision cannot be put into primary legislation, the Secretary of State is taking powers to do far more than amend details. Under Clause 1, for example, the Secretary of State may by regulation change the whole scheme from "defined benefit" to "defined contribution". That is no detail; it is seismic in its effect and impact on serving personnel. I am not sure that the Government have grasped that. They are taking for granted passive acceptance by servicemen and servicewomen.

Next is the issue of advice, guidance and communication for members of the Armed Forces. I accept that pensions are an issue that make many people's eyes glaze over; young, fit and active servicemen and servicewomen will be no exception. That is no reason not to be open and honest and to facilitate the provision of advice. The Armed Forces pension scheme is described as non-contributory but, as I understand it, there is a 7 per cent abatement in each individual serviceman's pay as a contribution towards the cost of pension. It is not shown on the payslip. I will restrain myself from spending too much time on a semantic argument about whether that can be described properly as a non-contributory scheme.

I doubt whether one could get away with that in the private sector. I will wager that if you asked a serviceman what he paid for his pension, he would say that it was free. It is not; it has cost him a 7 per cent abatement—carefully hidden from his view, perhaps, but a cost to him none the less. I understand that the situation is worse than that, because the MoD hides another little wrinkle from members of the Armed Forces. Normally, in the private sector, pensions are calculated on gross salary before contributions, whereas service pensions are calculated on net pay after abatement.

I refer the Minister to page 71 of Security, Simplicity and Choice, where paragraphs 105 to 107 contain three important proposals that the Government intend to apply to the private sector. I wish to know whether they intend to apply those to members of the Armed Forces.

The Government profess to be very concerned about consultation with members, at least as regards the private sector. Again, the Government's White Paper lists a number of proposals: We are proposing … ensuring that members are consulted about changes to their pension scheme". Perhaps the Minister can say how the Government will fulfil that objective as regards the Armed Forces.

I wish to say a word on the remedying of past inequities—the legacy issue. There are several examples, particularly relating to widows' pensions, but I wish to focus on the pensions trough. My colleague in another place Gerald Howarth has received answers to questions that starkly illustrate the depth of the trough and, still more dramatic, the cumulative impact of RPI uprating. Thus the pension receivable by a member of the Armed Forces of the same rank after the same length of service, retiring in the five-year range 1975 to 1979, could vary from £13,800 to £18,400, a difference of over £4,500 per annum or one third.

The difference has come about because of the chance combination of Government public sector pay policy and the existence of a forced retirement date for individuals. I do not exclude my own party for having failed to grasp this when in government but it does now need to be grasped. The Government accept this in principle. Again, I refer the Minister to Simplicity, Security and Choice. Paragraph 47 on Page 27 states: What income might individuals want in retirement? In planning for their retirement, most people will compare their projected living standard in retirement to that enjoyed during their working life. The ratio of retirement income to income when in work is called the replacement rate". So what about the replacement rate for this unfortunate and unlucky group of people?

To conclude, of course I want to see our Armed Forces properly looked after in their retirement. So I welcome the provisions in this Bill which bring their pension provision up to date. But I cannot conceal from the Minister my concern at the line the Government are following, both in broad approach and in detail. I very much look forward to hearing the Minister's response.

5.15 p.m.

Viscount Slim

My Lords, I cautiously welcome some of the schemes the Government are putting in place. I know that we have been talking about what will happen in the future, but I should like to go back a little to the past. I believe that a grave injustice continues to the widows who receive only a one-third pension.

I take your Lordships to the 31 March 1973. Anyone serving before that was not allowed to pay in to extend his pension to half his final salary and emoluments. I think that was a very grave injustice. That really means that the Government, previous governments, and particularly down the corridor in another place, are all satisfied that the one-third payment is fair.

Of course a lot of flak is put up by governments, politicians, Members of Parliament and civil servants, saying that the issue is a bit of a dead duck because no one has worked on it and particularly that the European Court has ruled against any change on the technical side. But I see this as a moral issue. We are saying that everyone is happy that this bunch of widows are still receiving only one third of a pension. There is no Member of Parliament whose widow will receive one-third of a pension. These days, I cannot think of many widows or pension schemes where one third comes in.

So, I ask the Minister what we are going to do about this. It was suggested—and it is a good suggestion—in December I think by the Forces Pension Society that a little compassion should be shown in this area and that pre-31 March 1973 widows should be given the same advantage of being able to opt in and turn the pension into a half, like the post-1973 widows.

I should have thought that in this year of the veteran—2004–05—something innovative could be done about this. It will not cost the Ministry of Defence anything because it will be getting money in. Some widows will be unable to pay, some will not wish to pay and some will pay. It is really a gesture of opportunity to enable them to feel once more that they are wanted a little more than they have been in the past and that they are thought about and cared for.

When the Ministry of Defence took over the whole panoply of caring for and looking after veterans and widows and their pensions, there was quite a lot of trumpet-blowing about what it would watch and do. However, I still see little sign of compassion in the area. The suggestion that may have been put forward by the Forces Pension Society is a good one. What has the Minister been doing about it since it was made in December, and why cannot we hear some innovative idea? Let us do something.

5.20 p.m.

Earl Attlee

My Lords, I remind the House of my interest as a serving TA officer. Sadly, I have no MoD pension entitlement. Service pensions used to be DHSS business but have been returned to the MoD, which is why it was the noble Lord, Lord Bach, who moved the Second Reading. I have no experience in pension matters, unlike my noble friend Lord Hodgson, and I do not intend to make a comprehensive response to the Bill.

The Armed Forces are far more joint and PC than anyone in the Westminster village realises. When I refer to junior ranks, I include Royal Navy ratings and RAF airmen. My arguments apply to all three services, and to servicemen and servicewomen equally. When I use the term "TA", I include all volunteer Reserve Forces.

The Minister told us about the time window for deciding to join the new scheme, but the period affected by operational commitments can be quite long and should certainly include the time spent preparing for operations, the time actually on the operations, and the post-operational tour leave period. It might be better to have a substantial period of education for servicemen, and that could include time on operations. The Minister is rightly concerned with having too long a decision-window, because that might result in procrastination on the part of servicemen. The matter would benefit from detailed discussion in Committee, as I think the Minister hinted.

The Minister and others referred to parliamentary scrutiny by means of the negative procedure. We will have to wait and see what the Delegated Powers Committee decides, but it may be preferable to have the first order subject to the affirmative procedure. The noble Baroness, Lady Strange, suggested subjecting all the subsequent amending orders to affirmative procedure, which might be overdoing things a little.

My noble friend Lord Hodgson talked about the challenges of obtaining civilian employment on leaving the services. The Minister told us about transferable skills, but I have seen highly trained warrant officers from my own corps—the Royal Electrical and Mechanical Engineers—struggle to secure a civilian job of equal salary and status. I am particularly worried about the position of junior NCOs and servicemen who are severely disabled on exercises and operations. I urge noble Lords not to forget that bad accidents occur on exercises as well as operations. That is frequently overlooked, but the Minister nods his head; I am sure that he is very well aware of it.

If a junior NCO is severely disabled, he is awarded a substantial lump sum plus a war pension, but at a junior NCO rate. I am not convinced that the scheme will meet the Minister's aspiration for generous financial support for families if the worst should happen. The career expectations of junior NCOs may be to reach warrant officer rank, or even to get a commission and become a captain or major. They may marry on the basis of being young men with prospects. But that career would be stopped dead by a severe injury, along with all of the expectations. It may not be realistic to have any significant civilian career after an injury. Yes, there would be a lump sum payment, but that might be needed to cope with the results of the injuries and it would not cover lost earnings. That would not be a major problem for me if I was disabled as a result of an exercise, because I would receive a major's pension. If one happened to be injured as a "one star" and could no longer work, it would be more like early retirement.

The Minister will point out that the same problem arises in civvy street. But severe disablements in civilian life are unusual and often someone has been negligent and is liable to pay compensation. Many noble Lords have skilfully referred to the unlimited commitment of our Armed Forces. But the Armed Forces are the only people to engage in a mission where it is probable that some will be killed or seriously injured. No other group in our society would do that. However, it is possible for a junior serviceman to have his career prospects taken into consideration if he claims compensation for negligence. But I think that it is highly undesirable for junior servicemen to claim compensation for negligence by their superiors during operations, or even on exercise.

However, we live in an increasingly litigious society. In negligence compensation cases career expectations can be taken into consideration. I accept that it is not easy for the service authorities to make an objective forecast. However, unless a serviceman makes a serious mistake—that is, a career limiting move—he will normally meet the expectations. Often, performance improves with increasing maturity. Casualties often arise on operations through pure bad luck, but also as a result—I put it as delicately as possible—of a poor tactical decision.

I shall give your Lordships an imaginary example, because the real one that I know from Operation TELIC is toe-curlingly and embarrassingly stupid. Fortunately, the price was never paid, but taking that risk without complaint or question is part of the unlimited liability that many noble Lords have talked about. Supposing a commander is leading a patrol in a dangerous operational area and he returns to base by the same route six times through possible ambush locations. Due to weak leadership or possible lack of moral courage, the commander follows the same route back to base yet again. Tragically, the patrol is ambushed and a junior soldier is severely disabled. That could lead to the junior soldier claiming compensation for negligence; and it could easily succeed, as no reasonably competent, responsible officer would have taken such a course of action and made such a tactical error. I believe that it is highly undesirable for junior servicemen to claim compensation; however, he would have to do that to secure the financial position that he would have enjoyed but for his commanders' error.

My final two points relate to Territorial Army pensions for non-mobilised service. When I joined the TA from school I did not realise that TA service attracted any pay at all and my first girocheque was very welcome, because it was several times the recommended pocket money for the term. I have never regarded my TA service as part-time work—in other words, moonlighting. I regarded it as being on Her Majesty's service. I felt that that made it acceptable for my performance on Monday mornings to be a little below par and I am sure that my employer would have accepted that view if I had put it to him.

It has been suggested, as a result of recent case law, that members of the TA are entitled to some form of retrospective pension. I do not accept that view because it was not a deal to which I agreed when I started my TA service. Therefore, I have resisted all suggestions to pursue the matter in your Lordships' House, and I hope that the Minister draws some comfort from that.

However, I believe that the Minister should examine the possibility of some form of pension scheme for TA personnel. The TA has significant turnover and any scheme need not click in until, say, one has been certified as having served efficiently for 12 years. It needs to be remembered that TA personnel forgo significant weekend overtime earnings, and few TA personnel are immediately usable on operations before their third year of service. The training bounty helps retention, especially vis-à-vis the families, but a pension could be a very useful complement.

5.30 p.m.

Baroness Dean of Thornton-le-Fylde

My Lords, this is a very important Bill. It is a small Bill, particularly compared with the Pensions Bill, which we debated at Second Reading earlier and which is about 100 times longer than this one. But I suggest that this Bill is as important as the earlier one.

An analysis of this debate could result in the conclusion that it is an absolutely awful Bill, that our Armed Forces are being treated like Aunt Sallys and that we are not doing enough for them. I want to pick out the areas where I believe that the Bill is deficient, but, in overall terms, I welcome it. I do so having talked to Armed Forces personnel. There is much to be welcomed within it.

It is a Bill that has been a long time in coming. I remember, nearly seven years ago, being asked if I would agree to be chairman of the Armed Forces Pay Review Body and being briefed that one issue that we would be facing, probably within a year or 18 months, was the new Armed Forces pensions Bill which the Government were to bring forward. The present Government have inherited it from the previous one. I remember going to see the then Secretary of State, George Robertson, and asking him directly when we could expect to see the Bill. He said, "We're not sure", and he would not pin himself down with regard to the timing. I started to hear alarm bells ring then.

However, as time has gone on, this Bill has started to look better and better when compared with what is happening with regard to pensions generally in this country. Unfortunately, we are where we are now. In addition, this is an unfortunate year. I shall not ask my noble friend the Minister to comment, but this is not a particularly affluent year in terms of resources for the MoD. Therefore, perhaps the timing could have been a little better; nevertheless, the Bill is here now and I think that it would be sad if it did not, with some changes, receive a fair wind from this House.

The noble and gallant Lord, Lord Craig, who understandably is not in his place at present because he is attending the Constitution Committee, and the noble Lord, Lord Hodgson, talked about Armed Forces personnel not knowing much about their pensions and they questioned the line of communications.

The noble and gallant Lord, Lord Craig, referred to his experience as a young man in the services. He said that, with only 100-odd replies to the consultation exercise, things have not changed much. I suggest that they have changed. Each year the Armed Forces Pay Review Body meets about 3,000 personnel. I can tell noble Lords that, over the past three years in the series of meetings that we have had, pensions have been an ongoing issue for our Armed Forces personnel.

As time has gone by, that interest has increased, and the reason for that is twofold. I guess that it is because of what has been happening in the private sector and the attendant newspaper coverage but also because the Armed Forces at MoD level have been conducting a communications exercise. The problem with that is that our Armed Forces are almost on a conveyor belt—they are never in one place long enough to reach all the people in one group.

Nevertheless, the Armed Forces have been conducting a communications exercise and pensions have been one of the issues raised. One question that has been asked—it is dealt with in the Bill—is: why do officers accrue their pensions at a different rate compared with other ranks? Certainly, other ranks take something like 37 years before becoming eligible for a pension as opposed to officers, who become eligible after 34 years. The Bill deals with that matter and it should be welcomed. I can tell noble Lords that, having talked to personnel, they certainly welcome it.

The scheme is a final salary scheme. If this Bill did not go through now, I am unsure whether we would be faced with a final salary scheme in three or five years' time, considering the way in which matters are changing in the pensions area. Therefore, I would welcome a statement from the Minister about this being a final salary scheme. Indeed, the noble Lord, Lord Hodgson, made reference to defined contributions. The first part of the Explanatory Notes states that there are no plans at present to go to defined contributions. I would like some more beef on that statement. That would be most helpful.

The move from one-and-a-half times to four times pensionable pay in the new scheme has to be welcomed. It is comparable with what takes place in the private sector. The widow's pension changing from 50 per cent to 62.5 per cent also has to be welcomed. That is indeed a welcome move.

I was very puzzled as to why there was so little detail on the face of the Bill. The Minister referred to that in his introduction and I know that it is normal in many public sector pension schemes—perhaps all of them. I understand that. If such details are not to be included in the Bill, we need some assurances in a number of areas that will provide our Armed Forces with a kind of protective coat in relation to the pension scheme. In other pension schemes, where everything is encompassed in the rules of the scheme, members can have a say.

A welcome addition to the Bill would be a reference to the Armed Forces Pay Review Body taking over the monitoring of the scheme. I have declared my former interest—I am no longer chairman—but the Armed Forces Pay Review Body is an independent body, as the Government have found out to their expense from time to time. I know that my colleagues and the current chairman, Professor Greenway, will ensure that that work is carried out thoroughly. It would be good to have reference to that in the legislation.

I would also ask my noble friend to assure me that the reviews that the Government have conducted and the recommendations to the MoD are put in the public domain, just as is the case with the annual report of the Armed Forces Pay Review Body. There is no reference to that at the moment. I believe that that is essential because it would mean that Armed Forces personnel would have access to it and be able to raise issues with the Armed Forces Pay Review Body.

The burden of proof has been mentioned by noble Lords and I understand that. We need to debate that because it is not as straightforward in some areas as perhaps we think, but I welcome the fact that the issue has been raised.

I am very concerned about two other areas, one of which has not been mentioned—the transitional issues. I am not talking about the legacy issues; I am talking about the transitional issues that will arise in April next year when new recruits go straight into the new scheme and current serving personnel join not later than April 2007, should they so choose.

My friend, the noble Baroness, Lady Strange, mentioned the briefing meeting that was held at the MoD. We are indeed grateful to the Minister and to his civil servants for being so open with us and giving us an absolutely first-class presentation. That was very welcome indeed. I also thank the Minister for sending me yesterday a three-page letter dealing with the transitional issue. I am sure that he will not be too surprised to know that it does not answer in full the questions that I intend to ask during debates on the Bill.

Let us imagine a situation such as Iraq. Next year we shall have personnel in Iraq—I doubt we shall be out by next year. Suppose in June next year new recruits are working in operations on the ground and someone who has just joined the services is killed. His widow and his family would receive four times the pensionable pay and, if he is not legally married, his unmarried partner would also receive recognition in respect of widow's pay. However, if he or she had been in the services under the current scheme, the amount would be one-and-a-half times pensionable pay and, if he or she is not married, the unmarried partner would not be recognised.

As regards the pension, the spouse pensioner of a new recruit will receive 62.5 per cent whereas, currently, a widow receives 50 per cent. It might be that a new recruit who gets killed has got two months' service and another person who gets killed in the same action might have 15 years' service. That situation is absolutely untenable. This is a priority issue for the Bill. It is a transitional situation, which probably needs a transitional arrangement. I am not suggesting that the Bill is changed indefinitely or that there is any extra cost to the base cost, but we need to deal with that issue because it sends out a very bad message for serving personnel.

Last weekend we saw the D-day commemorations. In departing from the issue before us today, I wish to pay tribute to the BBC, which for a whole week was at its best. I am not referring to the English language; but the BBC talked in many kinds of languages. During last week, the BBC broadcast something for everyone in the United Kingdom; that is, young people who do not know very much about D-day, elderly people, and all other age groups. It did a marvellous job.

On Sunday, if we had asked the people of Britain if they thought that we should triple what we give our Armed Forces, there would have been a unanimous "Yes" vote. A referendum would have obtained a 99.9 per cent "Yes" return. However, it brought home the issue to which the noble Viscount, Lord Slim, and the noble Baroness, Lady Strange, referred. It is a diminishing issue, but it is still an issue of unfairness; that is, the war widows' pensions pre-1973.

When we were discussing the 1995 pensions Bill—not Armed Forces pensions—I sat on the other side of the House because we were in opposition. I was number two to my noble friend Lady Hollis. The Opposition were supporting the Conservative government of the day by refusing to lift the war widows' pensions. The noble Baroness, Lady Strange, courageously put forward an amendment. I am not suggesting that I was courageous, but I risked being thrown off the Bill team. I thought, "Technically, the government of the day are right and the Opposition are right. But actually, in fairness terms, they are wrong". I suggest that that is still the case.

Technically, it may be right to do nothing. Retrospection is very difficult in a whole range of areas. Widows' pensions pre-1973 is an area where we have to say that fairness and morality must come first, rather than give technical reasons about why they do not. Such considerations would not cost a lot of money. That may sound mercenary, but the blunt fact is that they would not. They are also a diminishing issue as regards cost. Would the Government please consider what they can do about this small number of people?

When I saw those veterans on the television and heard them talking on the radio, I was absolutely convinced. I had all the facts before me and I was already convinced, but that moved me to think that we will not see the likes of those people again in such numbers, many of whom are more than 80 years-old.

As I said, this Bill is a long time coming. It is not often that we get the chance to discuss Armed Forces' pensions, so we must try to get it as right as we can, although it will not be perfect. This is important for our Armed Forces, not just for the personnel serving but for their families. When the Armed Forces serve in operations, it is important for them to know that their families are well looked after. This is one aspect of their commitment to the nation. Accommodation for families and welfare packages are important. I suggest that pension provision is equally important.

5.43 p.m.

Lord Freyberg

My Lords, I should like to go back to one of the legacy issues mentioned by my noble and gallant friend Lord Craig of Radley, which currently is not in the Bill. But it is my belief that it should be. It is the result of a loophole which began to be closed more than 25 years ago, but which has subsequently left a very vulnerable group in its wake; that is, service widows who receive some, or in many cases no, pension regardless of how long their husbands served. I refer to the service widows of post-retirement marriages.

The women who receive no pension at all are widows who married their husbands after they retired from the services and whose retirement occurred prior to 6 April 1978. Servicemen who served through 6 April 1978 and married post-retirement are able to hand on only that part of their pension earned after that date. Servicemen who served solely after 6 April 1978 and married post-retirement are able to hand the usual 50 per cent of their pension on to their spouses. I am of course aware that there is a far smaller number of widowers in these groups, and they need to be included in the whole argument.

It is particularly urgent for such an inadequacy in pension provision to be dealt with here and now because most of those affected are old, infirm and living in unfairly straitened conditions. It will be too late to help these many women and a few men once they have died, and inevitably their numbers are dwindling. Subsequent governments have rightly ensured that future generations will not be afflicted by the same problem, although I would add that this anomaly will not be completely eradicated until 2015. The worst affected are of course the widows of those who served pre-1978. We should therefore take some responsibility for those who were penalised through no fault of their own and actually discriminated against because the scheme implemented in the past made no allowances for the uniqueness of their husbands' employment.

This Government certainly recognise that our Armed Forces are special in the circumstances in which they work. They acknowledge that these should affect future pension provision. Yet when it comes to looking at legacy issues, the Government mysteriously choose to ignore the uniqueness of service conditions and to assume that lumping the armed services together with other public services was equitable at the time; for example, when the provision for pensions for post-retirement marriages was laid down. Yet that was not the case at all.

Yes, the Social Security Act 1975 did lead to an improvement in pension provision for all public service workers. But even at the time the Armed Forces were given a raw deal because of their enforced early retirement, which made a post-retirement marriage so much more likely than for other professions in the Act. While the retirement age for the vast majority of those in the public service is 65 for men and was until recently 60 for women, the majority of service people have to retire at or below the age of 40, while even for officers the normal retirement age is 55. However, fewer than 15 per cent serve to that age. These and many other factors such as long overseas postings, which reduced the likelihood of meeting a suitable partner, have applied and apply only to the Armed Forces. It is only reasonable for the Government to recognise that these differences were inadequately addressed. Our Armed Forces deserve nothing less.

One of the areas that is a mystery to those of us who have studied this problem is how much it would cost to give provision to the widows stranded with no pension. Government Ministers in 2002 and 2004 have stated that it would cost £50 million to provide for widows of post-retirement marriages, and between £300 and £500 million to extend the post-retirement marriage concession to survivors of members of all public service occupational schemes.

As I have explained, the conditions that make pensions for armed service post-retirement marriages so urgent do not exist outside the armed services, so it should be possible to ring-fence the provision. Moreover, how accurate is the estimate of £50 million? In a Written Answer in another place on 22 March 2000, the Minister of State for the Armed Forces at the time, Mr John Spellar, informed Gordon Marsden MP that: No records are kept of the numbers of spouses of deceased service personnel who are not eligible for a Forces Family pension … it is also impossible to calculate the notional total value of pensions which might be paid to the spouses of deceased ex-service personnel who at present do not receive them".—[Official Report, Commons, 22/3/00; col. 567W.] Is it not possible that the Government have overestimated the cost?

Until now, the MoD has refused even to contemplate looking at the plight of those affected. People who write in to express their concerns are sent virtually identical letters to those sent out in 1981. This week, as the noble Lord, Lord Morris of Manchester, my noble friend Lady Strange and the noble Baroness, Lady Dean, have already mentioned, we have been honouring the bravery of those men who attacked the beaches of Normandy 60 years ago to secure this country's continued freedom and democracy. And yet it is quite ironic that it is the post-retirement widows of such men who are more affected by this anomaly than any other.

In conclusion, I should like to reiterate my conviction that the 1978 legislation was particularly unsatisfactory for those serving in the Armed Forces. If the Armed Forces' service conditions were the same as those for other public services, I would respect the Government's position. However, they are not and never have been. That is why the Government should act now to introduce a modicum of support to those whose spouses depended on the Government for equitable treatment, which has so far been denied.

5.51 p.m.

Lord Redesdale

My Lords, this has been an excellent Second Reading debate, which rarely happens in this House. I was told when I joined the House that Second Reading was the time when you flagged up the issues over which you were going to give the Government a hard time. Your Lordships have certainly put up many flags today.

We welcome the Bill and the fact that the Minister will move that it should be dealt with in Grand Committee at the next stage. We have no difficulty with that; we believe that it will be a good forum for the Bill. However, given the number of issues that have been raised, I should warn the Government that although we cannot vote at the next stage unless the Government take a slightly more conciliatory attitude than they did in the Commons and some movement is achieved, the Bill may have a much stormier passage in its later stages.

Like almost all noble Lords and almost everyone in the country, I am not an expert on pensions. I do as much as I can to avoid reading about pensions or any issues related to them. However, one aspect of the Bill caused me immediate concern when I read it. As with most Bills, I turned to the financial effects section in the Explanatory Notes, which shows who will be paying the bill, and noticed the strange and strangely worrying line that, The new Armed Forces Pension Scheme is designed to be cost-neutral in comparison with the current scheme". This causes me to worry because the Minister, having read through the many amendments brought forward in another place, referred to the benefits that the Bill will bring about. I know that there are alterations in the very nature of the scheme but, as with everything, if there are winners there are bound to be some losers. We understand that.

The noble Baroness, Lady Dean, said that in comparison to other forms of pension schemes the one in the Bill could be seen as far better than those in the private sector. I agree with her. One of the reasons we welcome the Bill is that it will give a degree of confidence to those in the Armed Forces. However, it also perhaps shows up the state of pensions outside such schemes. Indeed, the noble Baroness, Lady Strange, said that some widows might be better off under this scheme.

However, a great number of problems have been raised, many to do with the very nature of this unusual pension scheme. The early retirement date of soldiers is a factor in the job. One of the extreme problems that is taking effect within the services themselves is that whereas in the past if you served your term with the Army you were almost guaranteed a post outside of comparable pay and status, this now is often not the case. I have spoken to a number of army officers and non-commissioned officers who are considering leaving the Army early because their skills within the Army are non-transferable. Therefore, having considered their pension and job prospects, they have decided to leave the Army far earlier than they would want to in order to enter the job market. This is affecting some of the best talents within the Army.

Army pensions also have a different status because of the nature of the job, and that is being looked at. This is one of the few jobs in which the participants put themselves in the way of danger as part of their job.

I shall not go into great depth into each of the issues raised because I am sure we will be debating them for many an hour in Committee, but I plan to touch on them. The noble Lord, Lord Morris of Manchester, raised the issue of burden of proof, which I find iniquitous. The noble Lord, Lord Morris, has been a great advocate and champion of the Royal British Legion, and we should all recognise the work that the legion has undertaken.

One of the issues concerning burden of proof that the noble Lord did not raise is of great concern to me, with a sceptical eye from the outside. Burden of proof could be seen as a form of means-testing. There would be cost implications for widows, who have to deal with so many issues in a time of stress, if they had to establish the burden of proof. I worry about that, because it might deter many from embarking on claims.

The alternative is for the Royal British Legion to take up those cases; however, there will be great financial strain on the Royal British Legion if the number of cases increases and it has to take on the burden of proof. The situation has changed from that which applied earlier, because the MoD used to have to bear the costs of the burden of proof system.

Non-attributable pensions have been mentioned. Another issue which has exercised many is that of post-retirement marriages. That is an unfortunate situation, as many noble Lords indicated. It was particularly well put by the noble Baroness, Lady Strange. We tend to look at the technical details, but the MoD will save money only if the widows do not remarry. It is almost a form of social engineering. I know that it is a trend for many people in later life not to remarry but simply enter into relationships, but for those who find it important—and I think marriage is important—to be denied that possibility because of financial consequences seems particularly unfortunate.

The Minister raised the rights of same-sex partners, which shows that the scheme is moving forward. That is a welcome contribution, considering the many debates we have had over the years about the nature of relationships within the Armed Forces. I believe that the relevant provision will be put in place by the Civil Partnership Bill, and we welcome that.

We would like to look at full career pensions. I very much hope that at a later stage we can explore whether the situation can be improved.

As with many of the Bills that come before us, many of the provisions will be set up by secondary legislation. One issue that I hope will be strengthened on the face of the Bill, although I know that it is affected by secondary legislation, is the provision of medical expenses from one place to the other. At present, if the NHS does not provide certain medical expenses in one area, they are not met by the MoD. It is seen as an unfortunate aspect of the NHS.

The noble Earl, Lord Attlee, referred to the question of secondary legislation and said that we should move to the affirmative rather than the negative resolution procedure. I cannot count the number of debates I have had over whether secondary legislation should be affirmative or negative. I remember a particular debate when the Law Lords got involved, when I moved the amendment. The situation was so difficult that I lost the legal aspects of the argument and found it difficult to sum up. However, it is important for noble Lords to consider carefully whether secondary legislation should be allowed to do all the work or whether certain aspects should be mentioned in the Bill itself.

I mention that matter because of recent events. On Tuesday night I called a Division in this House on a Motion of regret on the Licensing Bill. It was a shot in the dark—it was not an important Division, as all noble Lords who were there knew. But it highlighted the fact that it is almost impossible to alter secondary legislation. The noble Lord, Lord McIntosh, when summing up certain aspects of secondary legislation said, "Ah well, it is unfortunate that because it's not in primary legislation, we cannot deal with it in secondary legislation". I give fair warning that we shall push for certain aspects that would be considered areas of secondary legislation to be mentioned in the Bill itself.

Finally, I turn to the issue of deterioration of disabilities. The MoD made some conciliatory noises at an earlier stage that it would reconsider the acceptance of ongoing review rather than factoring average or standard deterioration. That is an important point, especially with the ongoing nature of medical disabilities. I know that amputations have very different effects on different cases and to call them average would be almost impossible. In addition, although the Minister will say that the case of Gulf War syndrome is not applicable because the MoD does not accept it, if it were ever accepted in future it would have to be reviewed on an ongoing basis.

I end with a question, which was highlighted by the noble Baroness, Lady Dean. It is one of those questions to which I did not know the answer; in debate, one should pick up those points and ask the Minister. Paragraph 17 of the Explanatory Notes says: There are no plans at present to introduce a defined contributions scheme". The Minister will say that because there are no plans at present he cannot comment but, if such a scheme were brought in, could it be done through secondary legislation or would it need primary legislation?

6.3 p.m.

Lord Astor of Hever

My Lords, I declare an interest as President of the Earl Haig branch, and the Kent branch of the Royal British Legion. Also, as a former Regular Army officer, I was awarded a war disablement pension for service-attributed hearing loss in the form of a gratuity payment.

Our country takes great pride in its Armed Forces. As other noble Lords have said, that was very evident last weekend with enormous public support for, and interest in, the D-Day commemoration. I congratulate the Normandy Veterans Association, the Royal British Legion, the MoD and 102 Logistic Brigade on their outstanding organisation. Having spent most of the weekend in front of the television, I join the noble Baroness, Lady Dean, in complimenting the BBC.

We owe the people of our Armed Forces a debt of honour. So far as that debt can be met in monetary terms, Parliament must make that possible. The Armed Forces are a special case. They are expected to fight, and sometimes to die, for their country. It is vital that they serve confident in the knowledge that they will receive a pension that is up with the very best of modern good practice pension conditions and, should anything happen to them, that their families will be provided for.

This is essentially an enabling Bill. It is indeed the barest of enabling Bills and little more. It includes some minor specific provisions. The main focus of what I say will be on mainstream points that the Bill should address but which, as the text stands at present, it avoids.

First, the Bill says nothing about the particulars of the schemes that it will enable the Secretary of State to establish. The noble and gallant Lord, Lord Craig, pointed out the need to reassure the Armed Forces by entrenching key benchmarks about the new schemes on the face of the Bill. We support that. We cannot sign a blank cheque and give the Government powers to do something not adequately defined.

Secondly, although the Bill includes the reserves within its Long Title, it does less than it could, and should, for those who serve in the reserves. That is a service that is willingly given but which disturbs personal financial planning. My noble friend Lord Attlee gave the example of forgoing weekend earnings. The House has given considerable time today to debating, in the Pensions Bill, what can best be done to help people generally to save for their retirement in a secure manner. I congratulate my noble friend Lord Hodgson on his stamina in speaking in both debates. If what the Government are doing in that Bill is right, they should specifically recognise and protect the reserves in this Bill. In Committee, we shall certainly propose the inclusion of specific enabling powers for the Secretary of State to protect the personal financial planning of reserves.

Another issue that is seemingly omitted is the matter of effective oversight of the working of both the pension and compensation schemes to be set up under the Bill. The assignment of responsibilities to the AFPRB is a step in the right direction but the noble and gallant Lord, Lord Craig, questioned, rightly in our view, whether it goes far enough. We believe that it does not and we will return to this in Committee. We agree with the noble and gallant Lord and the noble Baroness, Lady Dean, that the AFPRB's involvement should be on the face of the Bill. Unlike in other pension schemes, the interests of participants are not represented by trustees, nor are they, or can they, be represented by trade unions. As a result, they look to us as parliamentarians to protect their interests.

The legacy issues, which will still remain in effect for so many beneficiaries, have been raised by many noble Lords. The noble Viscount, Lord Slim, highlighted the widows who get only one third of the pension. My noble friend Lord Hodgson and the noble Baroness, Lady Strange, mentioned the pension problems faced by many widows. The Royal British Legion, the Forces Pension Society and the War Widows Association of Great Britain—to all of which I am grateful for the mass of briefing that I have received on the Bill—have pointed out the demonstrable unfairness that no attempt has been made to correct past injustices, leaving many of today's pensioners severely disadvantaged. These have accumulated over time, unremedied and often unrecognised. We need to prevent such a situation from recurring and to be able to remedy such injustices piecemeal as opportunity offers.

The noble Baroness, Lady Dean, who until recently was such a vigorous and effective chairman of the AFPRB, largely welcomed the Bill. There are aspects of the Bill that we also welcome. Like the noble Baroness, we welcome the equal treatment given to officers and other ranks. We particularly welcome the increase in death-in-service benefits from 1.5 to 4 times pay and the improvements to dependents' benefits, which will come much closer to good practice.

I turn to two specific issues that are addressed in detail in the Bill and its schedules. Like my noble friend Lord Hodgson, we accept the Government's view that the future of the Royal Patriotic Fund should be settled by primary legislation and that this Bill is an appropriate route to that.

The second issue is the appeals procedure. Schedule 1 has a provision that alters the appeals procedure that has been in place for more than 60 years. It has stood the test of time and provides an efficient, accessible and cheap method for fairly determining appeals on time. What is proposed is an added layer of complexity which is likely to cause delay and leave claimants aggrieved that they have not had the legal issue determined by a High Court judge. We see no reason to change a well established procedure. The greater mischief is that the Bill makes no provision for the claimant's legal representation to be met.

The noble Baroness, Lady Strange—the wonderfully proactive president of the War Widows' Association—raised some of the concerns and problems of the war widows. The War Widows' Association has also raised with me the point that pensions and the GISW should be indexed to the retail prices index and not any lower index. That is particularly important for war widows, many of whom are widowed with young children and remain widowed for a very long time. The impact of low indexation is particularly punitive for them. We look to the Minister to give a firm assurance on that.

At Committee stage we will be confronting the problem faced by existing widows who are not benefiting from the Bill, extending to widows with non-attributable pensions the same level as that received by those with attributable pensions. Thus the MoD is about to create wilfully and unnecessarily a new group of disadvantaged people. Quite rightly the MoD has conceded the principle that widows' pensions for life is an appropriate policy. It introduced it in 2000 for attributable service widows and included retrospectively existing widows—the amendment of the noble Baroness, Lady Strange.

The noble Baroness, Lady Strange, and the noble Lords, Lord Freyberg and Lord Redesdale, rightly highlighted the problems of post-retirement marriages. My noble friend Lord Attlee raised the compensation problems faced by junior NCOs and servicemen. The noble Lord, Lord Morris of Manchester, highlighted very eloquently the problems raised by the proposal to change the burden of proof for compensation from "reasonable doubt" to "balance of probabilities".

As the noble Lord said, the Commons Defence Committee was sceptical of a change that appears to make the Government's job appear easier and the claimant's harder. As my noble friend Lady Park pointed out, the committee also said that because of the "special risks" those personnel undertake, the onus of proof should remain with the MoD. That has been law for 60 years and for very good reason. It has hitherto been government policy to ensure that no valid claim is likely to be rejected. We will be very strongly supporting the noble Lord, Lord Morris, on this issue at Committee stage.

The noble Lord, Lord Redesdale, mentioned the five-year time limit for claims under the compensation scheme. My honourable friend the Member for Ruislip Northwood pointed out at Second Reading in the other place that radiological illnesses often take a number of years to develop; similarly with cancers and various pathological conditions arising from severe trauma.

The brief given to those conducting this review was in important respects the wrong one. They were told to come up with something that would be cost neutral, not something that corrects past shortcomings and sets a fair structure for the future. There are indeed some improvements and I have welcomed those, but essentially money is to be saved by particularly deferring payments from 60 to 65. There is one winner—the Treasury. The Royal British Legion pointed out that the majority of ex-service people will be negatively affected. The costs of the present scheme show up in the defence budget at more than £4.5 billion a year—one-eighth or more of the total defence budget. No one can grudge those payments as such but there must be questions whether better benefits could be provided if the systems were organised in line with best modern practice. The Bill must provide a mechanism for getting these things right for the future. It is in that spirit that I look forward to working constructively to improve the Bill in Grand Committee and thereafter.

6.15 p.m.

Lord Bach

My Lords, we have had a very good debate. As other noble Lords have mentioned, it has been extremely well timed, occurring in the week of the celebration of the 60th anniversary of D-Day. That event should quite rightly affect us all in what we have had to say.

These are proposals of very major importance to the Armed Forces and to the country which they serve. I should like to start by saying how grateful I am for the contributions from all noble Lords. The noble Lord, Lord Redesdale, talked about flags being raised. Certainly, a number of them have been raised on a rather wide range of topics, some of which are perhaps more relevant to the Bill than others. However, I look forward to seeing how they develop in the weeks ahead.

The debate demonstrated very well the knowledge and concern that this House traditionally has to uphold the interests of the Armed Services. I do not believe there is fundamental disagreement about the basic objects of the Bill. The arrangements that we put in place for pensions and compensation should be fairer and more responsive to the concerns of serving personnel and should be properly in line with wider good practice. My view is that the plans that we have debated today will achieve that.

I shall try to address as many of the points that have been raised in the debate as I can. Some I shall deliberately not reply to because of time constraints and because I believe they concerned topics that will emerge when amendments are tabled. The noble Earl, Lord Attlee, made a number of very interesting points from his great experience as someone who serves in the Armed Forces as a reserve. I believe—I think that he said this in effect—that many of his points may be dealt with at a later stage.

In the same spirit I shall not deal tonight with the points that my noble friend Lady Dean made about transitional issues, if she will forgive me. It would take too much time and I am sure that they will emerge at a later stage. However, I should like to try to get some points out of the way, if I may. The first is one that was made by my noble friend Lady Dean and the noble Lord, Lord Redesdale, regarding what assurance I can give that the scheme will remain a defined benefit scheme. Of course, I welcome the recognition from around the House of the value of a defined benefit scheme. As Ministers we were aware of the broader trends in the economy when we decided that we should go down that route. We are confident that that was the right decision and noble Lords' comments backed us up in that. The scheme provides the high level of assurance that Armed Forces personnel deserve. Of course, we cannot guarantee that future generations will maintain that position for all time. What government can ever do that? A government cannot bind their successors. However, we do not consider that a defined contribution scheme would be the right course for the new scheme. I think that we have made that clear.

I turn to a smaller but important point made by the noble Lord, Lord Astor. He wanted to know about the guaranteed income stream in the Armed Forces scheme. That income stream will be uprated by the retail prices index.

The noble Baroness, Lady Park of Monmouth, asked me a direct question about the incorrect taxation of ex-service personnel. We recognise the error, which dated back to before World War II. We have received all the files at risk and identified all those affected. Refunds have been made, including simple interest. At the end of last year, we announced a generous compensation package to cover the effects of inflation on the refunds, and the first payments have now been made. The process should be completed before the end of the year. I am sure that the noble Baroness will check with me to see that it has.

Some issues were raised that go under the heading of "legacy issues". The siren calls for dealing with legacy issues were made with incredible skill and persuasiveness today. Of course, those who make them have lots of experience in making them. Any government must be prepared to listen carefully and consider such calls, but they must also sometimes steel themselves against giving way too easily to what, on the face of it, sound like extraordinarily attractive arguments. One overrides the principle of retrospection only in very extreme cases, if at all. The noble Lord, Lord Astor of Hever, would say that, if he were standing here, as would the noble Lord, Lord Redesdale. Governments of all parties and shades have stuck with the view that to change the law retrospectively is, for the most part, an error.

I have no doubt that some of the issues will arise again at later stages, and I hope to deal with them as sympathetically as I can. However, I do not want to give the House any impression that I am in a position to offer any alleviation of the real issues that have been raised.

My noble friend Lord Morris of Manchester made a point about non-attributable widow's pensions for life. I must point again that one of the great benefits of the Bill is the fact that we have taken forward what the noble Baroness, Lady Strange, succeeded in doing in what I can only describe as a tour de force a few years ago, effectively changing the position for widows. Under the Bill, widows will be able to keep their pension for life on remarriage, whether or not death is due to service. I am not sure that that change has got the praise that it deserves.

The rules on remarriage were common across public service pension schemes. The changes made in 2000 were exceptional, for a special group of war widows. To grant pensions for life in the current pension scheme to existing non-attributable widows is not affordable and would be in breach of the policy of successive governments on retrospection.

Lord Craig of Radley

My Lords, the Minister says that it is not affordable. Can he give the House any indication of the sums involved?

Lord Bach

My Lords, I am about to do so, in general terms. The Government believe that it is not possible to distinguish between the widows of doctors, policemen or firemen whose spouse dies from natural causes not due to their employment. The financial implications of making a change throughout the whole public service would be very high, running, we believe, to several billion pounds. I mention the figure of £3 billion—in very broad terms.

A plea was made for the pre-1973 widows, who receive a one third-rate pension. Effective pleas were made by my noble friend Lord Morris of Manchester and the noble Viscount, Lord Slim. Half-rate widows' pensions were introduced without retrospection to most public sector pension schemes in 1973. To uprate the provisions of this group of widows would be unaffordable and in breach of the policy of successive governments that there should not be retrospection.

Those serving in the Armed Forces when half-rate widows' pensions were introduced were given an option then to buy back the extra pension provision to increase their widows' pension to half-rate. I do not know how easy that was for them to do. In the gloom of what I have had to say, perhaps I may cast a little light: we are currently investigating whether it might be possible to offer a buy-in option for those now retired to improve widows' benefits from one third to a half rate. No doubt, we will discuss that again.

On legacy issues generally, I fully accept that former service personnel and their families feel aggrieved that they have not always benefited from subsequent improvements to pension provisions, but that must not delay or deter us from bringing about improvements for future pensioners. I have taken on board the points made by the noble Lord, Lord Freyberg, and others about post-retirement widows' pensions. I have no doubt that we will return to the issue.

Perhaps I may make a couple of remarks on what the noble Lord, Lord Hodgson, and others have said on a number of issues. Like the noble Lord, Lord Astor, I congratulate the noble Lord, Lord Hodgson, and my noble friend Lady Dean on having the perseverance—I know that the noble Lord, Lord Astor, meant to do that—to spend a whole day on pensions in this House. It is beyond the call of duty. I recognise their expertise in this sometimes arcane field.

The noble Lord, Lord Hodgson, asked about those leaving mid-career and having to accept lower salaries with lower pensions. I recognise that there can still be career penalties for those leaving the Armed Forces before a full career. Obviously, that can affect later pension earning capacity. However, our resettlement work shows that the majority of servicemen and servicewomen leaving the Army mid-career get good, sustainable jobs, not least because of the skills training that they have had, most importantly the skill of having been a successful member of the Armed Forces. In many cases they choose to leave earlier than we in the Ministry of Defence would wish, but we are confident that the new early departure scheme, which gets more generous the later the departure, provides security for those entering a second career.

The noble Lord, Lord Hodgson, and others made the point about communication. We do not underestimate the challenge that we face in ensuring that all servicemen and servicewomen, wherever they are serving are sufficiently informed about their options. As my noble friend Lady Dean mentioned, we have begun work on our communications exercise. We will build on the experience of those who introduced the new Civil Service pension scheme and our own exercises in relation to ethnic monitoring in the Armed Forces and pay legislation of 2000.

Lord Hodgson of Astley Abbotts

My Lords, perhaps I may intervene briefly. The noble Lord might like to look at Ministry of Defence Policy Paper 6, which has just been sent out to us all, on individual training and education in the Armed Forces. It does not mention pensions anywhere.

Lord Bach

My Lords, I am grateful to the noble Lord; he will understand that it is, of course, my bedside reading. The choice between pension schemes will be determined by individual circumstances. Service personnel will need to make a judgment; they will be given a window of opportunity. Accessible information about the new scheme will be made available in booklets, briefing material, road shows and on our websites. We will also target service personnel and their spouses through magazine articles. We are examining how we might best facilitate access to independent financial advice, but it must be independent, as the noble Lord will understand clearly, which makes life slightly difficult.

I have heard the extremely powerful remarks of the noble and gallant Lord, Lord Craig, the noble Lords, Lord Hodgson and Lord Redesdale, and many others, about wanting to see more on the face of the Bill. We have looked carefully at that. We believe that it would be impractical. It is not possible to include principles in primary legislation without getting into considerable detail because the commitments would need to be legally clear. For example, a clause on the rate for dependants' benefits would need to cover accrual rates and the definition—and it is not an easy one—of pensionable pay, including arrangements for dynamisation.

Many other public service schemes are drawn up on the basis of enabling primary legislation with rules in secondary legislation. It follows that if we saw that principle through, we should end up putting everything in the primary legislation that is in secondary legislation.

I have to say that just for a moment I slightly resented the noble Lord's suggestion that the Ministry of Defence was hiding the fact that there is an abatement of pay each year because of pensions. I do not think that the Ministry of Defence have ever hidden that away. Many members of the Armed Forces know precisely how their pay is made up. It would certainly be possible for them to find out. There is no hiding away here. I am sure that is not what he meant.

A powerful point about the Armed Forces Pay Review Body being mentioned on the face of the Bill was made by my noble friend Lady Dean and the noble and gallant Lord, Lord Craig. I am afraid that we disagree about that. We see no reason to include the role of the AFPRB in primary legislation. We understand that it has performed its role on pay with great ability—not least under the chairmanship of my noble friend—for many years without provision in primary legislation. If its role and remit were now to be placed in primary legislation, that would reduce the flexibility with which it could be used in the years ahead.

One reason we do not want to put too much detail on the face of the Bill is because every time we need to change it in any regard we have to move primary legislation in this House. That is a problem. I am sure we shall return to the issue in due course.

We believe that there is a special status for the Armed Forces. We think the Bill shows that in two ways. In overall design terms, this measure is well up to good practice outside. I remind the House that we commissioned independent reviews before finalising our designs which confirm that, and we have included featured designs specifically to address the special demands of hazards of a service life. These include the exceptionally early age for a full pension, retention of a defined benefit scheme, still generous benefits for those who have to leave in mid-career, valuable lump sums and income paid to those injured as a result of service—with improved focus in this Bill on the more severely disabled—and the major improvements to dependants' benefits reflecting the particular risks of military service. So we believe that the special status of current and ex-servicemen is recognised in the Bill.

I conclude with the standard of proof. I know this is an important issue for a number of noble Lords. Balance of probabilities is used widely elsewhere, including in the civil courts. My noble friend said that in our legal system there were two standards of proof—beyond reasonable doubt and on a balance of probabilities; one for the criminal system that we enjoy and one for the civil system that we enjoy. I have to remind him, as he knows very well, that the balance of probabilities standard is adopted in civil cases in this country. The issues we are talking about are civil rather than criminal in nature. That is one reason we believe that this change, which was the law for many years, is the right one to continue with.

We have listened carefully—we will continue to do so—to the concerns of the Royal British Legion and others that a large number of claims will fail as a result, but we do not believe that to be right. We have explained carefully why we think that that is based on a misunderstanding. The basic issue for us is that we will ask claimants to offer evidence on why they think that a condition is more likely than not to have been linked to service. In today's world, that must be right. Many injuries arise at home in private social life. The department simply cannot have visibility of those.

The responsibility to furnish evidence is not all one-way, however. As a department, we must disclose the medical and other service records that will help to reveal whether a condition has a history arising from service. We make it clear again that we recognise the seriousness of our role in that respect. We also accept that there have been errors in the past in medical records; we believe that that position has improved. If there is a lack of medical records in any such matters when they arise, it certainly will not do the department's case any good at all in the real world. I am confident that no claim would fail where there was reasonable evidence that disablement was due to service.

I have spoken for quite long enough. We have a further opportunity to discuss the issues during the remaining stages of the Bill's passage. Believe it or not, I actually look forward to that. Some of the issues are complex and all are important. They raise strong emotions, touching as they do on the lives of a group of men and women to whom we, in this House and in the country generally, owe a very great responsibility. I have commended the principles behind the Bill to the House enough times already this afternoon. We believe that the schemes are good, so I commend the Bill to the House for a final time today.

Lord Astor of Hever

My Lords, before we conclude, I apologise to the noble Baroness, Lady Dean, for not being eagle-eyed enough to pick up the fact that she had spoken in both debates.

On Question, Bill read a second time, and committed to a Grand Committee.

House adjourned at twenty-three minutes before seven o'clock.