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Ex-Indian Civil Servants (Compensation)

Volume 648: debated on Wednesday 1 November 1961

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Motion made, and Question proposed, That this House do now adjourn. —[ Mr. F. Pearson.]

10.0 p.m.

I desire to raise the question of ex-Indian Civil Servants and compensation. I am sorry that the Financial Secretary to the Treasury is not with us tonight, because I have corresponded with him on this matter over at least twelve months, I have had interviews with him and I have put Parliamentary Questions to him. I think I may say that, as a result of that, he would have been far more familiar than the Economic Secretary with what I have to say. In addition, when the Overseas Service Bill was before the House, a number of hon. Members raised this matter and, as most of us are aware, two days ago there was a letter in The Times from two distinguished ex-governors, Sir Reginald Dorman-Smith and Sir Hubert Rance, which puts what I wish to say very concisely.

Briefly, the facts are that in 1947 large constitutional changes, with which we are all familiar, took place in India. As a result, the old Civil Service there was closed down. Some of the displaced officials received immediately permanent and pensionable employment in the home Civil Service or other Government services. Others, however, were not so fortunate. To compensate them, lumpsum compensation was granted for the loss of what to them was something which they valued and to which they looked forward, namely, a long career in the Indian Civil Service.

The only stipulation made at the time was that should they obtain a post under the Crown, they should inform the Accountant-General, Commonwealth Relations Office, in order that the question whether they should be required to refund their compensation should be considered. Later, however, an arrangement was come to with the First Division Association, which is the negotiating body in the Civil Service for higher civil servants, when the limit of time during which such compensation was to be repaid was fixed at two years.

That announcement was made by me —I happened at the time to be Financial Secretary to the Treasury—in the House on 24th Feburay, 1949. What I said then was that where a person displaced by the transfer of power in India obtained permanent and pensionable employment under His Majesty's Government within two years of leaving India, he should not receive compensation. Here, I emphasise two things. The first is that in that statement, which was made on behalf of the Treasury, the employment had to be permanent, pensionable and acquired within two years of leaving India. Nothing could be clearer or less ambiguous than that. Second, there were no party politics or policy in what I then said. It was an administrative act binding, I should have thought, on any subsequent Government.

One of the reasons for the two-years' rule was that the Treasury at that time felt that after a certain period the compensation money might presumably have been spent. This was not, if I may say so, an idle presumption on the part of the Treasury, because many of those for whom I now speak did not find work for 9, 12 or 18 months after they left India, and undoubtedly much, if not all, of the compensation money they received was then spent. It was also only if they got work under the Crown that this question of returning the compensation arose. If they were fortunate enough to obtain employment elsewhere, they, of course, kept their compensation money and nothing more was said about it.

Quite recently—actually in 1959—it came to light that the Treasury had not implemented its own decision, but no announcement was made of this fact to Parliament, which to me seems astonishing. I think that perhaps looking back now we can understand why; for all down the years since 1949 men who have been given permanent employment have been required to refund their compensation—even today, twelve years after the event. I find that a most astonishing thing. I do not know what would be said of a private employer who went back on his word in this way.

It is not the method which the Treasury employs when dates are prescribed in other directions. At one time I sat for the Central division of Portsmouth, and both in the Navy and in the dockyard men became from time to time entitled to certain payments, if they fulfilled certain prescribed conditions, and I remember quite clearly that if they failed through illness or for any other reason to complete the stated period which entitled them to such a payment they just did not get it. The Treasury was completely adamant in the matter.

What reason does the Treasury give for this high-handed action? It is the reason, I am positive, which the hon. Gentleman will give us when he speaks presently. The reason it gives for continuing to insist upon the return of the compensation money is that, as any temporary employment now counts for pension purposes, if and when a man is given permanent employment it is only right that compensation should be refunded.

Previously, of course, as we all know, temporary service only counted as to one-half, and it is one of the mysteries to me about this new rule the Treasury lays down that the Superannuation Act, as I understand it, upon which this new rule is based, was actually passed and received the Royal Assent in July, 1949. Therefore, in the earlier months, certainly at the time that the announcement was made from that Box by me, towards the end of February, the Treasury was well aware that it was contemplated that the rule as to only half of temporary service counting was to be abrogated. Yet now, although it must have had that knowledge in February, 1949, it turns round and uses it in this way.

The action of the Treasury ignores certain facts. It ignores the fact that the employment must be permanent within two years. The date when pension starts is surely quite immaterial. It was not mentioned when the rule was laid down, and there is no reason why it should be taken into account now. In any case, those who have been employed, even if they have been temporarily employed, have done the work, and they are entitled, surely, to such pension as may come to them under the Superannuation Act.

The Treasury also forgets, it seems to me, the long years of insecurity which those who have been temporarily employed have had to endure, the low rates of pay, and the inability to gain promotion—all things which anyone in temporary employ in the Civil Service has to accept. Therefore, it is quite wrong to say, as the Treasury now argues, that temporary service is much the same, if not exactly the same, as permanent service. I asked the Financial Secretary earlier when we were discussing this matter how much longer the Treasury intended to implement this change of rule. I understood from him that it was likely to go on until the last of those who had received compensation had retired or had become permanent. I suggested that after twelve years we should call it a day and that anyone receiving permanent appointment from now on might not have to abide by the new rule, but I was told that because some had had to refund all must.

I ask myself who is responsible. Surely it cannot be the Economic Secretary to the Treasury who will presently get up and read from the brief supplied to him. He was not there when the change was made. It cannot surely be the Financial Secretary whose jolly and rotund frame belies any inhumanity of this kind. It might be the Chancellor himself who, I know, acquiesced in the decision to continue to apply this change of rule, although one would hope that as he has been confessing to having made a number of mistakes he might confess to this one. It cannot be the permanent officials. Dog, surely, does not eat dog. From their comfortable positions they at least must have some sympathy with these unfortunate men, robbed through no fault of their own of an honourable and a useful career.

What worries and disturbs me beyond measure is that a great Department of State can break faith in this way behind the back of Parliament. It is action which plumbs the depths. I beg the Treasury, for the sake of decency in public life and for its own good name, to think again. I hope that it will not only stop the present practice but be big enough to acknowledge its mistake and not only do so but refund to the fourteen, which I understand is the number of those who have received permanent appointments since 1950, the sums which they have had to repay. I believe that it amounts only to about £20,000. I hope the Treasury will think again and will at any rate meet to this extent those of us who feel deeply about this.

10.13 p.m.

As the individual most recently affected by this Treasury ruling is a constituent of mine, and as this raises an important question of principle, I am glad to support everything that the right hon. Member for Colne Valley (Mr. Glenvil Hall) has said. The individual concerned finds himself in the perfectly absurd position that if he repaid the compensation which he received more than 10 years ago the pension he would be likely to earn would be less than the annuity that he could purchase with the compensation money. That is to me a perfectly absurd situation.

The Departmental decision, in my opinion, is a clear departure from the letter and the spirit of a reply to a Question which the right hon. Member for Colne Valley gave in the House on 24th February, 1949. Yet in the Answer to that Question, as the right hon. Gentleman may agree, there appears to have been a slight mistake, since it was said that Cmnd Paper 7116 made some reference to the two-year rule. In fact it did not, since that rule was not made known until 18 months after these compensation sums were decided upon. It seems to me that the Departmental decision also was a clear departure from the agreement made with the Association of First Division Civil Servants.

I should like to ask the Economic Secretary when the decision was made to depart from the two-year rule, why Parliament was not informed, and why the Association was not also informed. I do not know how many officers have suffered under this ruling, but their numbers must be pretty small. My information is the same as that of the right hon. Member for Colne Valley, namely, that if all the compensation repaid was given back to those who originally earned it, it would cost the Treasury only about £20,000.

This seems to me to be a particularly unfortunate time for pinpricks of this kind. We try desperately hard to persuade civil servants to stay overseas in developing countries, and it is little pinpricks like this which undo all the good in the legislation that we had a few months ago, which was so valuable and which is costing the taxpayers several million pounds annually.

I may have got my facts wrong because I have had to be very brief. On the other hand, the facts were very clearly stated in The Times a day or two ago by Sir Reginald Dorman-Smith and Sir Hubert Rance. In a powerful letter they described themselves as having been dismayed by the inflexibility of the Treasury and pointed out how manifestly unjust was the decision that had been made. They stated:
"Compensation was granted not in consideration of the amount of a possible future pension but for loss of a secure, permanent career with prospects of advancement."
I think that puts it very clearly and simply. I hope that my hon. Friend will be able to announce today that he is looking again at this question, bearing in mind that this is not a party matter at all and that there is very strong feeling about it on both sides of the House.

10.17 p.m.

I am grateful to the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall) and to my hon. and gallant Friend the Member for Lewes (Sir T. Beamish) for giving me the opportunity of explaining to the House the Government's position in this matter. The right hon. Gentleman has already referred to the correspondence which he has had with my hon. Friend the Financial Secretary and I am sorry that my hon. Friend cannot be here this evening. I can, however, assure the right hon. Gentleman that not only has this matter been considered by my right hon. Friend the Chancellor of the Exchequer and by the Financial Secretary, but also when it came to me for the first time not so very long ago I went into it with the greatest possible care and I hope I can say with as much care as I know the right hon. Gentleman himself would have given to it had he been in my position.

To get the matter into perspective, I must first give a brief recital of the facts. The White Paper on Compensation for the Indian Services referred to was published in 1947, and stated that His Majesty's Government accepted the obligation to see that European officers of those services should receive compensation for loss of their careers and prospects consequent on the transfer of power. It added that where British officers of the Civil Service accepted appointment to another Civil Service under His Majesty's Government on a permanent, pensionable basis, they would receive no compensation but would be eligible for a resettlement grant of £500.

Similar arrangements were announced for British officers of the Burman Services. I believe that the constituent of my hon. Friend in fact served in Burma. These arrangements were applied, as I think the right hon. Gentleman knows, to a large number of officers who accepted permanent and pensionable appointments under His Majesty's Government in the period shortly after the transfer of power in India and Burma. Those who had already received that compensation were required to refund it as a condition of establishment, and I do not think anybody would deny—presumably not the right hon. Gentleman—that that was reasonable within the period of two years.

Did previous service in India count for superannuation when these officers were given fresh permanent and pensionable jobs, or did they lose that?

I think I am right in saying—I cannot be quite certain without checking this—that they received their pension in respect of their Indian service even while they were serving as established officers in the home Civil Service and were in that respect in a different position from those who served with the Armed Forces.

The next event was the statement by the right hon. Gentleman on 24th February, 1949, when he was the Financial Secretary. He announced then what I think he meant to be a concession. Certainly it was I think taken as such at the time. He said in answer to a Question that if individuals obtained permanent and pensionable employment under His Majesty's Government—those words are very relevant—within a relatively short period, an alternative career had been provided and compensation for loss of career became inappropriate.

He went on to say that
"where a person obtained permanent and pensionable employment under His Majesty's Government within two years of leaving India, he should receive not compensation but only a resettlement grant of £500."—[OFFICIAL REPORT, 24th February. 1949; Vol. 461, c. 2025.]
My hon. Friend is quite right in pointing out, as I think the right hon. Gentleman would be the first to admit, that the right hon. Gentleman was in error in suggesting that the two-year period had been referred to in the White Paper.

Perhaps I might point out that I was so briefed by officials of the Treasury.

Yes, Sir. I do not wish to be disrespectful to the right hon. Gentleman, but he will know as well as I do that it is up to a Minister to ensure that the answers that he gives are correct.

At any rate, that statement represented what has been called the two-year rule. The point raised by the right hon. Gentleman and also referred to by my hon. Friend tonight has really centred round the application of that rule. I do not think that anyone has seriously questioned the reasonableness of the rule itself or of requiring officers who accepted permanent and pensionable posts in the home Civil Service within two years to refund their compensation. Indeed, all officers who accepted permanent posts in the home Civil Service within that period were treated alike.

In the letter which has been referred to, which appeared in The Times on 30th October, it was suggested that until the right hon. Gentleman made his statement on 24th February, 1949, the existence of the rule had been kept secret for some ulterior motive. I have looked into this and am quite satisfied that any such aspersion upon the right hon. Gentleman or his colleagues is unfounded.

Shortly after that statement was made by the right hon. Gentleman the Superannuation Act, 1949, was passed, and Section 38 of it had the effect of making temporary service rendered since 14th July, 1949, reckonable in full for pension with retrospective effect if followed by permanent service. It was clear that if the former officers of the Indian and Burman Service in temporary employment under His Majesty's Government became established, they would count their temporary service in full for pension from July, 1949, a date within the period of two years in which refunds of compensation were required.

There were really two alternatives open to the Government of the day as a result of the passing of the 1949 Act. One was to allow such officers to keep their compensation on the ground that they actually became established after the expiry of the two-year period, but this would, of course, have been to ignore the effect of the 1949 Act, which was retrospective.

I am sorry to interrupt, but the hon. Gentleman has made one or two errors of fact. They were not established before that. All they got was restrospective pension.

That is exactly what I have just been saying. I repeat that this would have been to ignore the effect of the 1949 Act, which was retrospective in so far as the pension was concerned. Of course it was retrospective, because the Act put an officer who was subsequently established in the same position for pension purposes as if he had been established in 1949.

The right hon. Gentleman shakes his head, but that is so. I have looked into it myself.

The second alternative which, I must point out, was adopted by the Government of the day in 1950, was to look to the date from which service became effective for pension purposes. If that date was within the two-year period, the officer should be treated in the same way as an officer who secured establishment within the two-year period, and, consequently, if a temporary officer wished to become established, but only if he so wished, he should be required to repay the compensation.

I am sure that this decision was not taken without careful consideration at the time. The matter was discussed in the National Whitley Council in 1950— and the First Division Association to which my hon. and gallant Friend the Member for Lewes (Sir T. Beamish) referred is a constituent part of the national staff side—and the staff side agreed to the present arrangements.

The right hon. Gentleman talks about people going back on their word and about a new rule and so on. He referred to the fact that I was not there, and he is absolutely right. This was a decision taken in 1950 and I do not think he appreciated that. Nevertheless, this did not preclude me, nor my right hon. and learned Friend, from looking at the matter again, because, after all, there has been a considerable passage of time. But I think that it is important to know that the national staff side agreed that the compensation should be refunded in all cases where Civil Service employment came to be reckonable in full for pension within the two-year period, even though it was not actually made permanent until later.

It has been suggested that there was something clandestine about this interpretation of the two-year rule. That is not so. The rule applied to a number of officers who had taken up temporary employment under His Majesty's Government during the two-year period and who subsequently had the opportunity of being established. In all such cases the officers were informed quite openly that it would be a condition of establishment that they would be required to refund the compensation. Such a statement has been made in every case in which it has applied.

The gentleman in the case to which my hon. and gallant Friend referred was offered establishment in 1949, a year after he had gone to the Colonial Office as a temporary civil servant. He declined to be established. I do not know his reason. It may have been that he did not wish to return his gratuity.

I should like to have said a great deal more but I must now be brief. One point I should add, however, is that there are still twelve people making refunds by way of instalments. They chose, quite voluntarily, to become established on the basis that they returned their compensation, but because their cases were a little hard they were allowed to make instalments over a period of years.

Would my hon. Friend make it clear that this rule does not apply to those receiving compensation from some of the newly independent Commonwealth countries?

I cannot go beyond this case, but perhaps I may write to my hon. Friend on that point. I do not wish to mislead him in any way.

The argument now advanced is that these officers have remained in the employ of the Government for twelve years or more. The main point is that if they now secure establishment they will count their service from 1949 in full for pension in accordance with the provisions of the 1949 Act. In short— although there is a good deal more I should like to have said about the letter in The Times —I think that this application of the two-year rule in cases of temporary employment is reasonable in itself. It certainly appeared so to the National Whitley Council in 1950.

Furthermore, the position has been made quite plain to the officers concerned, and many of them have accepted permanent and pensionable employment on condition of the refund. As I have said, my right hon. and learned Friend, my hon. Friend the Financial Secretary and I have considered this matter with great care and have given particular weight to the points raised by the right hon. Gentleman, although I do not think that he was fully aware of the way in which the decision was reached in 1950. I must tell the House that we are satisfied that the present arrangements are fair.

The Question having been proposed at Ten o'clock, and the debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.