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Parliamentary And Other Pensions Bill

Volume 116: debated on Wednesday 13 May 1987

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Considered in Committee

[Mr. HAROLD WALKER in the Chair]

Clause 1 ordered to stand part of the Bill

Clause 2

Power To Provide For Pensions

8.24 pm

I understand that amendment No.1 is not to be moved. Therefore, we shall consider amendment No. 2, in page 2, line 21, at end insert—

'(aa)may provide, in the case of a person who ceases to be a Member of the House of Commons in any year between the ages of 55 and 60, having completed 20 years' service, for the payment of an unabated pension to him from the age of 60.'.
With this it will be convenient to discuss also the following amendments: No. 3 in page 2, line 21, at end insert—
`(aa) may extend the entitlement to full and unabated pension to a person who, having reached the age of 60 and after completing 20 years of service as a Member of the House of Commons, has stood as a candidate and been defeated at a parliamentary election.'.
No. 4, in page 2, line 21, at end insert—
'(aa) may provide for the payment of a lump sum to a person on his ceasing to be a Member of the House of Commons at the age of 65 or over, calculated on the same basis as the resettlement grant payable to a Member who has left the service of the House before attaining pensionable age.'.

I beg your pardon, Mr. Walker. I thought that amendment No. 9 was to be moved by the Government.

No. That amendment now goes into what would be its proper place in the sequence of our proceedings. Therefore, it will come after Government amendments Nos. 5 and 6.

I do not wish to detain the House for any longer than is necessary. It is not our intention to press amendment No. 2. However, we expect to hear from the Leader of the House something about the subject that we are discussing.

I am grateful for that great constitutional innovation. I am unable to comment on what I know would have been powerful speeches delivered on behalf of amendments Nos. 2, 3 and 4.

The merits of these amendments are almost self-evident. They would specify a change that could be made by regulations under the power in clause 2. That power is already wide enough to allow regulations dealing with each of the proposed changes to be made. Therefore, it is not necessary to specify, in this way, individual matters that regulations might cover. Indeed, I do not believe that it is desirable to do so. However, it is clear that the amendments are intended to create the presumption that the scheme will be changed in these ways.

The first amendment would allow regulations to be made to extend the facility for early retirement with a full pension paid at the age of 60 to all Members with 20 years' service, who retire after the age of 55. The intention of the present rule, which allows Members with long service to retire at a general election at the age of 60, or after, without abatement of their pension, is to allow them to retire at the general election before their 65th birthday, rather than waiting until the next election or causing a by-election.

Although I recognise that the rule can cause some hard cases, changing the scheme as envisaged in the amendment would create a whole new set of anomalies. Those who retire at 55 with 194½ years of service, for example, would complain that the new rules were unfair to them. Furthermore, that would exaggerate the distinction between two classes of Member, those who can take their pension at 60 and those who must wait until they are 65.

The second amendment is intended to extend eligibility for immediate payment of a full and unabated pension to a Member who is aged at least 60, with at least 20 years' service, who stands for re-election, but is defeated, at a general election. That point can be dealt with briefly, because the scheme was amended to allow that during the passage of the Parliamentary Pensions etc. Act 1984. However, the fact that confusion has arisen about that provision is a good example of why the Bill is needed. This part of the existing legislation is so complicated, after the series of amendments, that it is not surprising that hon. Members have found it difficult to follow.

The third amendment would allow regulations to be made to provide for payments from the pension fund to Members retiring at the age of 65 and over, which would be equivalent to the resettlement grant paid from the Consolidated Fund to younger Members on leaving the House. In considering this point, I am sure that the Committee will wish to take account of the fact that the scheme already provides for Members to receive by commutation of part of their pension the maximum tax-free lump sum permitted by the Inland Revenue rules in similar private sector schemes.

I recognise that that is not directly comparable with the resettlement grant, which is a straight payment from the Consolidated Fund and is a benefit over and above what is provided by the pension scheme. Nevertheless, the commutation arrangements have clear tax benefits and should not be discounted when considering the means available to Members to secure a lump sum on retirement.

8.30 pm

I remind the Committee that resettlement grants are intended to tide over Members who leave the House before normal retirement age and need to re-establish themselves in alternative employment. Paying resettlement grants to Members past normal retirement age would be a new departure and I am not convinced that it would be justified.

However, I acknowledge that there are anomalies in the area where eligibility for immediate pension and for resettlement grants overlaps. I recognise that the area dealt with in the first amendment is also one where anomalies arise. Taking into account this point and the others raised during the Second Reading debate, I now believe that we should refer the scheme as a whole to the Top Salaries Review Body for an early review. In particular, I envisage that the review body would be asked to consider the early retirement arrangements and the anomalies caused by the availability of both a resettlement grant and an immediate and full pension to those who retire between the ages of 60 and 65 with 20 years' service.

May I express the hope, which I trust the Leader of the House will endorse, that if the TSRB finds in favour of changing the existing arrangements, those of our colleagues over the age of 65 who are leaving the House now will not be excluded from benefit.

I am sure that that is a factor which the TSRB will almost certainly consider in its judgment of what adjustments might have to be made to our scheme. Certainly its attention will be drawn to the right hon. Gentleman's intervention when the terms of reference are resolved at the beginning of the next Parliament.

The precise terms of reference for the TSRB would be a matter for discussion through the usual channels. That, again, covers the right hon. Gentleman's point. It would be helpful to set that in hand at an early stage in the next Parliament so that the House and the Government may have an opportunity to consider the TSRB's comments and possible changes to the scheme sufficiently in advance of April 1988 for Members to make an informed choice about whether to opt out of the parliamentary pensions scheme, as they will then able to do.

I do not believe that it is sensible for us to consider piecemeal the anomalies thrown up by the present rules of the scheme in advance of the TSRB's review of the scheme as a whole. To do so would merely create further anomalies. Therefore, I hope that the hon. Gentleman will feel that that is a reasonable response to his formal moving of the amendment.

I had hoped that the minor changes which are embodied in the amendments and which would have a negligible impact on the finances of the parliamentary pension fund, which is in robust health, could be agreed and accepted by the Government.

The anomalies are clearly established. I had an exchange of letters with the Minister of State, Treasury, which entirely satisfied me that my anxiety on the second of the amendments was misplaced so I do not see why that should be pursued or referred to the TSRB. However, I am worried about the two remaining anomalies. The first concerns a person who ceases to be a Member of the House of Commons in any year between the ages of 55 and 60, having completed 20 years of service, and who will not receive an unabated pension at the age of 60. The second anomaly is that while all other hon. Members are entitled to severance pay or resettlement grant if they lose their seats at a general election, the only hon. Members who are not entitled to a lump sum are those who have reached or passed the normal age of retirement. Those anomalies are small, but they so disfigure the features of our parliamentary pension fund arrangements that they should be removed.

While I accept that major changes in the parliamentary pension scheme should await a further report by the TSRB, I am disappointed that the Government take the view that even those minor anomalies should first be considered by the review body. May I at least suggest to the Leader of the House that there should be a two-stage reference to the TSRB? The first stage, which we hope would lead to a swift, short report, would cover precisely the anomalies that have been identified. The second stage, which would deal with more fundamental features of the scheme, would be the subject of a more considered report.

I echo my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) when I say that it is my strong hope that any benefit flowing from the removal of anomalies in the present scheme will be made available to our colleagues in the present Session who will not be with us when the new Parliament assembles.

I wish to add my disappointment to that of my right hon. Friends the Members for Manchester, Wythenshawe (Mr. Morris) and for Bethnal Green and Stepney (Mr. Shore) in relation to the resettlement grant. The reference of that and the other matters to the TSRB is a stalling exercise. I would have thought that the House could decide those matters. As has been said, the sum involved is negligible and, moreover, the fund is healthy.

It is generally recognised that the term "resettlement grant" is something of a misnomer. This has been taking place for many years in both the private and public sectors and is usually referred to as a lump sum on retirement. To designate it as a "resettlement grant" to help hon. Members to obtain alternative employment is a misuse of words. We are talking about hon. Members who have served many years, enduring the usual disadvantages of parliamentary life, such as long hours, and that should be recognised by what should be called a "lump sum", not a "resettlement grant". That is the basic difficulty facing the House.

We have had helpful private talks with the Leader of the House, who has a reputation for listening carefully. In view of what has been said by three hon. Members tonight, and as many right hon. and hon. Members have approached me as the chairman of the parliamentary Labour party, I hope that the Leader of the House will recognise that this is an annoying and frustrating position. I hope that he will take cognisance of what we have said and see whether we can proceed differently from the way in which he has proposed.

I shall respond briefly to the right hon. Member for Bethnal Green and Stepney (Mr. Shore) about the terms of reference that will govern the consideration of the TSRB early in the next Parliament. Naturally, they must be the subject of widespread consultation through the usual channels. He will appreciate that I cannot say now, indeed it would be a gross presumption to say now, what those terms of reference will be. Certainly they will not be concluded merely by whoever happens to be in Government arid holding the post of Leader of the House. They will be the subject of proper consultation, but the point that the right hon. Gentleman makes is a perfectly fair one, because there should be a two-stage consideration of these matters. I am sure that that will be borne in mind.

I say to the hon. Member for Easington (Mr. Dormand) that the term "resettlement grant" is not an invention of the Treasury Bench. It was suggested by the TSRB in its report, which sought to make clear the purpose of the grant — the payment to an hon. Member who had left the House but who had not reached the age of retirement. It was clearly intended not just to be a supplement to one's position on leaving the House. It was specifically meant for someone who left the House in anticipation of having reached full retirement age.

I have noted what the hon. Gentleman said and he knows perfectly well that what he says, although he will not be here to grace us in the next Parliament, will echo on to inspire those who have to consider the terms of reference for the TSRB, and I hope that he will be consoled by that thought.

Amendment, by leave, withdrawn.

I beg to move amendment No. 5, in page 3, line 8, after 'instrument', insert

'subject to annulment in pursuance of a resolution of either House of Parliament.'.

With this it will be convenient to take amendment No. 6, in page 3, line 12, leave out from 'them' to end of line 14.

On Second Reading several hon. Members expressed concern that the change from primary to secondary legislation, which the Bill proposes, would mean that the House of Commons would have fewer opportunities to debate and amend the scheme.

I agreed to consider that point and I am happy to give an undertaking on behalf of the Government that time will be made available for a debate on an amendable motion before any regulations amending the scheme are made under clause 2. This would allow, for example, the sort of debate that we had in July 1983 on the recommendations of the TSRB which led to the changes to the scheme that were made in the 1984 Act. The arrangements will be similar to the procedure for determining hon. Members' pay and allowances.

In accordance with the procedure which I hope we will shortly enact, through amendment No. 9, the trustees' comments on the Government's proposals will be available to hon. Members for debate. The views of hon. Members expressed in the debate will be taken into account when the regulations are subsequently introduced. If such a debate is always to be held, it will usually be unnecessary to hold a debate on the regulations themselves. This amendment, therefore, substitutes the negative procedure for the affirmative procedure currently provided for in clause 2(7).

On Second Reading on 27 April I expressed my anxieties, which were widely shared, about the central purpose of the Bill, which is to enable further changes in the parliamentary pension scheme to be made not by amending legislation but by regulations issued by the Leader of the House. I think that the House took the point that if we were limited to debates on regulations we could not amend them, we could only vote them down, which is a considerable restriction on our normal freedom of debate and, furthermore, debates on regulations normally take one and a half hours. I thought that that was not a satisfactory way of proceeding and I suggested that changes should be introduced so that proposed changes could be put to the House in the form of an amendable motion.

That was where we left matters at the end of that debate and I was glad to receive a letter from the Leader of the House informing me:
"We intend to give an undertaking that there should be an opportunity for Members to make their views clear, in a debate on an Amendable motion, before regulations are finalised."
That is the background to the Government amendments to clause 2 that are now before us. Having heard the Minister of State say quite categorically that the House will be able to debate an amendable motion before regulations are finalised, I consider that adequate assurances have been given and I am grateful to the right hon. Gentleman and the Minister of State. I agree that we no longer need the affirmative resolution procedure and that we can be content with the negative resolution procedure which is the subject of the amendments.

I should like to add the thanks of Conservative Members for the way that my right hon. Friend the Leader of the House and my hon. Friend the Minister have responded to the sentiments that were expressed in our debate on Second Reading and in the subsequent discussions. It seems that it has been a very constructive process and that the Bill has been much improved as a result.

Amendment agreed to.

Amendment made: No. 6, in page 3, line 12, leave out from 'them' to end of line 14.

8.45 pm

I beg to move amendment No. 9, in page 3, line 14, at end insert—

'(7A) Where the Leader of the House of Commons has made any proposals for the making of regulations under this section, a copy of any representations made to him by the trustees of the Fund about the proposals shall be laid before the House of Commons.'.
Amendment No. 1, which the hon. Member for Blaydon (Mr. McWilliam) did not move, sought to give the trustees a more active role in the process of amending the scheme by regulations. We appreciate the knowledge and expertise of the trustees, which equip them for such a role. We are committed to allowing the House an opportunity to debate the proposals for amendments to the scheme, and it seems right that the trustees should advise the House at that stage, while leaving the final decision to the House. Amendment No. 9 would allow that by providing for the trustees' comments on proposals for amendments to the scheme to be laid before the House so that they can be available for debate. I described the arrangements for this debate when we debated amendments Nos. 5 and 6.

I am grateful to the Government for their response. I think that I went over the top on Second Reading. I think that the Government have understood perfectly the point that I was making and it has been incorporated in their amendment.

Amendment agreed to.

Clause 2, as amended, ordered to stand part of the Bill.

Clause 3

Exchequer Contributions To Fund

I beg to move amendment No. 8, in page 3, line 44, leave out subsection (4) and insert—

'(4) If it appears from the report of the Government Actuary under this section that there is a deficiency or surplus in the operation of the scheme, then, subject to the following provisions of this section, the rates of contribution under this section may be increased, or, as the case may be, reduced in accordance with those provisions or all or any of the rates of benefit may be reduced or, as the case may be, increased in accordance with those provisions.
(4A) An alteration of the rate of contributions may be made by Resolution of the House of Commons.'.
As the House knows, I speak as chairman of the managing trustees of the parliamentary contributory pension fund. My amendment reflects the concern that I expressed when the Bill had its Second Reading about the amendment in 1972 to the 1965 Act, under which benefits and/or Members' contributions could be varied in the light of any surplus or deficiency revealed by an actuarial review of the fund.

The 1972 Act, by contrast, left the Exchequer contribution to the fund to be determined by the Government Actuary at the level necessary to balance assets and liabilities. This means that the fund can never go into surplus, no matter how well the investments perform. At the same time, it means that our prospects of improving the pension scheme, based on successful investment management, are effectively vetoed since the Exchequer contribution to the fund falls in proportion as that management succeeds. That penalises good management and puts the trustees, in the view of some who have commented on the working of the 1972 Act, in the unenviable position of being incapable of acting in the best interests of the members no matter how successful they are in increasing the fund's assets. This, we must all recognise, is the other side of the coin to which my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) referred when he spoke of the fund being in such robust health.

Following a meeting that I attended in the office of the Leader of the House yesterday, he was prepared to amend the Bill so that there would always be a debate on the Government Actuary's report when it was laid before the House. That would have enabled the trustees and other hon. Members to suggest changes in the fund in the light of its assets and liabilities. I now understand that, unfortunately, parliamentary counsel has advised that an amendment on these lines would not be practicable under the existing Standing Orders. Instead of amending the Bill in the way in which the Leader of the House was prepared to do yesterday, I am informed that the Minister will give an undertaking tonight to provide time for a debate on every report from the Government Actuary. I appreciate the Minister's difficulty, just as I know that he understands both my reasons for tabling the amendment and that it is strongly based. I regard the Minister's undertaking as constructive and helpful and will not, therefore, press the amendment.

The amendment moved by the right hon. Member for Manchester, Wythenshawe (Mr. Morris) seeks to provide a mechanism for benefits and Members' contributions to be adjusted in the light of the performance of the fund. It suggests a new procedure for amendments to he made to the scheme by resolution of the House. That would cause conflict with the object of the Bill, which is to enable the scheme to be set out, as far as possible, in consolidated form in regulations.

Nevertheless, I recognise the concern expressed by hon. Members, both tonight and on Second Reading, that the performance of the fund should be reflected in their contributions or benefits. I recognise that they would welcome the opportunity to consider the scheme from time to time, in the light of the state of the fund. On behalf of the Government, I am happy to undertake— as the right hon. Member for Wythenshawe foreshadowed—that a debate will be held on each future report from the Government Actuary.

In considering whether to go further we should remember that in the past Members have benefited from the arrangement— common to all public service schemes and many private sector schemes — whereby their contributions are fixed as a percentage of salary while the Exchequer meets the balance of the cost, which will therefore vary with the performance of the fund's investments. We should be cautious about proposing alternative systems linking Members' contributions to the state of the fund. That might offer benefits in the short term, but it would, in the longer term, shift the risk of fluctuating contributions from the Exchequer to Members. Such an arrangement may also hinder improvements to the scheme at times when the fund was not performing well.

I am grateful to the right hon. Member for Wythenshawe for stating that he will not press his amendment in the light of the undertaking that I have given on behalf of the Government. I know that hon. Members greatly appreciate the knowledge, expertise and services of the trustees, of whom the right hon. Member for Wythenshawe is so distinguished a chairman. I hope that that is a suitably happy note on which to conclude the Committee stage.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.

Clause 4

Amendment Of Mr Speaker King's Retirement Act 1971

Question proposed, That the clause stand part of the Bill.

I wish to make known something that is not generally appreciated by hon. Members.

In 1968, shortly after I was elected, I won first place in the ballot for private Members' motions and chose as a subject for debate the protection of the pension rights of early leavers. Mr. Speaker King, as he then was, asked me to talk to him before I made my maiden speech. I was glad to do that for the benefit of his advice. I told him that I had suffered the loss of my pension rights after 14 years' service in the company in which I was first employed. In exchange I had received only a small return on my contribution. I told Mr. Speaker King that, in due course, I hoped to be able to persuade the House to amend the law in relation to the rights of early leavers so that early leavers received fair compensation for their pension rights. Unfortunately, I have not yet been successful in that.

Mr. Speaker King told me that his circumstances were worse than mine. At the time of his election he had completed nearly 20 years' service and contributions to the teachers' pension fund. However, because he had not quit; completed those 20 years' service when he was elected to the House. he lost the whole of the benefit of those years of service. I believe that circumstances would be different now. However, I recall very well the statement he made to me as to his personal loss when he became a Member of the House.

I suggest that that is a particular reason why the House should view with sympathy the circumstances of Lord Maybray-King and make suitable provision for his surviving spouse.

I said, prematurely, that we had finished the Committee on a happy note, but, by the remarks he has made, my hon. Friend the Member for Kensington (Sir B. Rhys Williams) has provided an even happier note.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.

Clauses 5 to 7 ordered to stand part of the Bill.

Schedules 1 to 4 agreed to.

Bill reported, with amendments; as amended, considered. Order for Third Reading read.

Motion made, and Question proposed, That the Bill be now read the Third time— [Mr. Biffen.]

8.56 pm

The nature of this evening's debate and indeed all other debates on pensions have shown us all how complicated pensions matters are. That applies to all previous debates on pensions. In those circumstances, and in view of the fact that I shall not be returning to the next Parliament, that demonstrates the difficulties of administering the scheme.

Tonight, I should like to pay tribute to the accountant, Mr. Dobson, his deputy, Mr. Lewis, and all the staff of the Fees Office for the splendid way in which they administer the scheme. If I may stray slightly out of order, that praise is not only for the way in which they administer the fund but for the way they deal with Members' allowances, expenses, and so on.

I know I speak for the whole House when I say that the service we receive from the Fees Office is extremely efficient. We receive unfailing courtesy from all the members of the Fees Office. It gives me great pleasure to place that tribute on record tonight.

I am sure that the whole House will wish to endorse the generous sentiments that my hon. Friend the Member for Easington (Mr. Dormand) has expressed in relation to the work that the Fees Office does on the complicated matter of the parliamentary pensions fund. I think it is also right for me to thank my hon. Frienf for his intervention and to say how greatly we shall miss him in the future. Tonight, we have listened to him with interest, as we have listened over many years to his many remarkable contributions to the proceedings of the House.

Question put and agreed to.

Bill accordingly read the Third time and passed, with amendments.