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Foreign Service Allowance

Volume 124: debated on Thursday 10 December 1987

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To ask the Secretary of State for Defence what consultations took place with the Retired Officers Association over the replacement of foreign service allowance from I January 1988 with a cost of living allowance.

Cost of living addition was agreed after extensive negotiations between the official and trade union sides of the national Whitley Council in 1985 and 1986. It was announced within my Department in a Defence Council instruction on 2 May 1986 and is being introduced progressively worldwide. Transitional arrangements were included in the agreement for staff whose allowances were reduced.The Retired Officers Association is not a member of the Council of Civil Service Unions and does not have independent negotiating rights. However, like all civil servants, including non-union members, members of the ROA are subject to such nationally negotiated agreements. The new rates for staff in Germany result from a recent Treasury inspection. They were agreed following negotiations with local trade union and staff representatives. The local representative of the ROA was given the opportunity to present the association's views to the inspector.

To ask the Secretary of State for Defence what is his estimate of how much retired officers filling service appointments as re-employed officers will on average lose in a year as a result of the replacement of tax-free foreign service allowance with cost of living allowance.

Under Inland Revenue rules, overseas allowances can only be regarded as tax-free if they compensate for necessary and actual additional expenditure. One of the major features of the cost of living addition (COLA) provisions is to pay child provision only to officers with eligible dependent children whereas foreign service allowance included an element for a child in the basic rate, whether or not the officer had dependent children.This change will result in any civil servant without children, including retired officers, receiving the basic rate of COLA without child provision. In Germany the new rate of COLA for this category of staff in the grade equivalent to RO3 is approximately £760 per annum less than the old FSA rate, due mainly to this change.

To ask the Secretary of State for Defence what is the average annual payment of foreign service allowance to (a) a young married officer with young children and (b) retired officers filling service appointments as re-employed officers who no longer have dependent children; and what will be the average annual payments of cost of living allowance for these examples after 1 January 1988.

The old and new rates in Germany payable to a married civilian officer with two children compared to that for a married officer with no children, for the grade RO3 in which the majority of retired officers fall, are:

Old £New £
Band 4 Civilian Officers without dependent children2,6301,869
Band 4 Civilian Officers with 2 dependent children at post3,0144,212