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Volume 929: debated on Monday 4 April 1977

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asked the Minister for the Civil Service by what percentage the pensions of civil servants whose pensions are index-linked have risen since March 1974.

Since March 1974 three annual increases, payable from 1st December each year, have been awarded to public service pensioners under the provisions of the Pensions (Increase) Act 1971. These give a cumulative increase of 67·2 per cent.

If, as is rumoured, the scheme is amended or scrapped, will not the sufferers be carrying the can for the social contract, which has been responsible for unemployment and inflation? Does not the Minister agree that the main task is somehow further to increase incentives for skilled workpeople and entrepreneurs, without whom the country will not recover its prosperity and recover from three disastrous years of Socialism, to which has now been added the Liberal seal of good housekeeping?

The indexing of Civil Service pensions arises from the Pensions (Increase) Act 1971, which was placed on the statute book by the Conservative Party, to which the hon. Gentleman belongs.

Will my hon. Friend refute the suggestion in today's Daily Telegraph that the scheme is to be scrapped? Will he also remind the House that if any action were to be taken to amend the scheme legislation would be necessary, since public service pensioners have a statutory right to their pensions? Is he aware that many of us on the Labour side of the House would be vociferously opposed to any such move? Will he also remind the House that policemen, teachers, firemen and other public servants—as well as civil servants—are affected by the legislation?

I can assure my hon. Friend that he is absolutely right in his interpretation of the provisions of the 1971 Act. Civil servants have a statutory right to the indexing of their pensions. I accept that there has been appreciable public expenditure involved in the indexing of pensions for civil servants and public servants generally. As regards civil servants, during the three increases referred in the answer, in 1976 the increase amounted to £31 million, in 1975 to £41 million and in December 1974 to £21 million.

Does the Minister agree that when the scheme was introduced no one contemplated the present high rate of inflation? The nation as a whole has to bear the cost of index-linked pensions. Would it not think it much fairer if the pensions were linked to the rise in average earnings or the cost of living, whichever was lower?

Let me reiterate the point made earlier in an intervention with regard to a review of Civil Service pensions. The review of Civil Service pensions increases is under constant scrutiny by the Government. We invariably announce the outcome of that review each July. The hon. Gentleman is, however, absolutely right when he refers to the alternatives facing the Government by way of the retail price index or earnings. He might be interested to know that, as far as earnings are concerned, the figure I have given represents the rise in the cost of living from June 1973 to 1976. Over the same period the earnings index rose by 70·2 per cent. and the wages index by 86·4 per cent.