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Parliamentary Pensions

Volume 165: debated on Wednesday 17 January 1990

The text on this page has been created from Hansard archive content, it may contain typographical errors.

[Relevant documents: The Review Body on Top Salaries' Report No. 26, Review of Aspects of the Parliamentary Pension Scheme and other Matters (Cm. 362), and the Report of the Government Actuary on the Valuation of the Parliamentary Contributory Pension Fund as at 1st April 1987 (HC 317, Session 1988–89).]

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

4.33 pm

The Lord President of the Council and Leader of the House of Commons
(Sir Geoffrey Howe)

As colleagues will know, I had hoped that it would be possible to hold this debate well before now. Indeed, on several occasions last year, we tried to arrange it, but other business meant that it had to be put back. I apologise for that. Now that we have a chance of considering these important issues, I look forward to hearing the views of hon. Members on both sides of the House.

As the House knows, parliamentary pensions are a matter of extreme technicality. I do not pretend to understand their more subtle aspects, so perhaps my speech will be longer than it should be. I apologise for that.

There are three distinct topics to consider. The first is the Top Salaries Review Body report on the parliamentary contributory pension scheme. The second is the TSRB recommendations on the pensions of certain office holders—the Prime Minister, you, Mr. Speaker, and the Lord Chancellor—and on ministerial severance pay. The third is the Government Actuary's report on the state of the parliamentary pension fund with its recommendation for a reduction in Exchequer contribution.

Before dealing with the recommendations in the TSRB report, I should like to put the matter in context by reminding the House that the parliamentary pension scheme is generally regarded, by United Kingdom standards, as a good scheme, providing a reasonably generous return for hon. Members. I do not claim that it is the best that could be found, but in most respects it is on the right side of the average. As the House is in the position to set its own terms—with a significant contribution from the taxpayer—that is the right position to adopt.

I hope that my hon. Friend will forgive me if I do not give way, but I need to make a coherent presentation and listen to colleagues thereafter.

Under our scheme, benefit accrues faster than under most other public and private schemes. It is right for us to consider the scheme from time to time, as we are doing today, and I attach considerable importance to hearing the views of hon. Members. In July 1987 my predecessor invited the TSRB to undertake a review of the parliamentary pension scheme, the pensions of certain office holders and ministerial severance pay.

The recommendations that resulted fell into two categories—first, those solely affecting the parliamentary scheme on which the trustees were consulted and which are capable of being implemented by secondary legislation; and, secondly, those relating to Ministers and office holders which we accepted in May 1988 but which require primary legislation before they can come into effect. I shall also mention the consequences of the recent Government Actuary's valuation report.

When I do that I shall be honouring a commitment given in 1987 to the right hon. Member for Manchester, Wythenshawe (Mr. Morris) that all reports by the Government Actuary on the parliamentary pension scheme will be debated. The right hon. Gentleman is the chairman of the trustees of our pension scheme. We are all grateful for the work that he and the other trustees do on our behalf. In some respects, the recommendations of the Government Actuary take automatic effect under section 5 of the Parliamentary and other Pensions Act 1972.

In 1987, hon. Members from both sides of the House raised a number of points on the scheme, which were put specifically to the TSRB. They included early retirement arrangements, resettlement grants, service as an MEP and hon. Members' contributions. The TSRB largely restricted its review to those issues. In paragraph 56 of the report, it took the view that the parliamentary pension scheme was basically a good one. However, it recommended two important improvements intended to ensure that it continued to meet the special circumstances of parliamentary life and remain consistent with good practice elsewhere.

First, the report recommended that the death-in-service gratuity should be increased to two years' salary. After consulting the trustees, I am maintaining the proposal of my predecessor that that change should come into effect from 1 May 1988. That date ensures that all deaths during the present Parliament are covered. Although that issue was not originally put to the TSRB, its recommendation brings the scheme into line with practice elsewhere. It also offers practical help where it is most needed. I know that hon. Members from both sides of the House are concerned about the position of widows. I warmly commend that change.

The second change recommended by the TSRB concerns early retirement arrangements. As the House may know, at present a pension may be paid earlier than the age of 65—the normal retirement age—providing the retiring Member is at least 50 years old. The pension paid is less than the accrued pension payable from 65, to reflect the longer period over which it is expected to be paid. If a Member retires at a general election, subject to fulfilling certain conditions, those arrangements may be modified.

Concern has been expressed about what are felt to be anomalies in these arrangements. Differences of treatment can occur in the level of pension arising from small differences in age and length of service, and that is why we asked the TSRB to examine them. The TSRB recommended revised early retirement arrangements for those retiring at a dissolution under which a full accrued pension would be payable. When the pension is brought into payment before the Member reaches pensionable age, it will be subject to an abatement to be calculated on a broadly actuarial basis, and that achieves a desirable and fair tapering.

The TSRB also suggested that the House consider whether those arrangements should apply at times other than at a dissolution. My predecessor met the trustees last year and agreed that there should be a single set of arrangements for those retiring at a dissolution and at other times. I endorse that and believe that this rationalisation represents not just a simplification of but a useful improvement to the scheme.

The TSRB also considered whether service as an MEP should count towards the qualifying period for early retirement. The House may recall that several Members raised that issue during the passage of the 1984 Act. The TSRB noted that although periods of service as an MP and an MEP may be aggregated for the purpose of establishing entitlement to a pension, they may not be so counted for the purposes of the qualifying period for early retirement. It took the view that the essential purpose of the early retirement arrangements for MPs should be to assist those whose parliamentary career had been exclusively in this House, and it concluded that an extension of the arrangements would not be appropriate.

Several hon. Members have made representations to me arguing against the view of the TSRB and arguing that, as service as an MEP can be counted for all purposes except early retirement and that because the nature of the MEPs' and Members' pension schemes are so similar, the current arrangements are anomalous.

That point is reinforced in the minds of those who advance the argument by the fact that the European salaries and pension arrangements for MEPs from this country are consistently kept in line with those of Members of this House, rather than with those of other Members of the European Parliament.

I have gone into the matter in detail because I shall be interested to hear the views of the House on that issue before finally deciding whether, in this respect, to accept the TSRB's recommendation.

The essential point appears to be made on page 6 of the TSRB's report, where it says:

"It can be argued that the occupation of MP and MEP are so closely allied".
That seems to accept that the two jobs are closely allied—that MPs and MEPs are doing similar jobs, are taking similar risks and are working under similar conditions.

Perhaps the right hon. and learned Gentleman will also examine appendix G relating to resettlement grants for MPs. If an MP and an MEP spend 15 years in the parliamentary process and the MEP has spent five years in the European Parliament, he will receive only half the resettlement grant. It seems ludicrous that if two people came into politics in 1979, one should get twice as much as the other.

That may be a valid point, but the hon. Gentleman's intervention and its detailed nature confirms my initial wisdom in deciding not to give way during my remarks. I did so on this occasion only because there appeared to be a natural break in the proceedings. The hon. Gentleman's point deserves consideration, but I wish to deal at this stage with the scheme itself.

A further point, not considered by the TSRB, is the problem of excess contributions. Some Members continue to make contributions even though they have bought the maximum number of years to which they are entitled and thus cannot benefit from their extra contributions. That arises from the 1984 Act, which provides for a limit on the annual amount of pension of two-thirds of final salary. That is the limit with which all non-statutory occupational pension schemes must comply to qualify for tax relief.

When my predecessor met the trustees in June last year, he promised to consider the matter. Several possible ways to alleviate the problem suggest themselves, although I hesitate to define, let alone explain, them. I have examined a number of them and none is without difficulty. Further consideration is necessary, and I propose to pursue the matter with the trustees in search of a satisfactory solution.

Apart from parliamentary pensions, the TSRB was invited to undertake a review of the pensions of certain office holders and of ministerial severance pay. The TSRB recommended the introduction of severance pay for Commons Ministers on broadly the same basis as that already provided for Ministers in the other place. That represents a simple recognition that an abrupt and significant financial adjustment may have to be made by an hon. Member on relinquishing ministerial office in whatever House and for whatever reason.

The TSRB's proposals would involve a single payment of a sum representing three months' net loss of parliamentary income on loss of office for whatever reason except death in service. In cash terms, that will be between £3,000 and about £7,000, depending on the rank of the Minister concerned. It is right to emphasise that that proposal was supported by both sides of the House when it was put to the TSRB as well as by the TSRB itself. As my predecessor made clear in May last year, the Government endorse these proposals.

Three senior office holders—the Prime Minister, Mr. Speaker and the Lord Chancellor—are not members of the parliamentary pension scheme. They have their own arrangements under the 1972 Act. For some time we have been aware that their arrangements contained anomalies. The TSRB has recommended that the pensions of all three of the great office holders should be fixed at half final salary, that the Prime Minister and Mr. Speaker should be able to participate in the parliamentary scheme and that restrictions on pension increases should be uncapped.

We have accepted that package of recommendations, which are not directly part of the parliamentary scheme. Their implementation, along with the proposals for severance pay for Commons Ministers, requires primary legislation, which we shall introduce in the near future.

The main issue in the Government Actuary's report is the recommendation that the Exchequer contribution should be reduced to 4·4 per cent. I shall try to assist the House by sketching out the background to that proposal, although I approach documents prepared by actuaries with considerable foreboding.

Under section 5 of the 1972 Act, every three years the Government Actuary must make a valuation of the assets of the parliamentary contributory pension fund specifically for the purpose of determining the residual Exchequer contribution. The current report, laid before the House on 27 April last, reports a significant improvement in the finances of the fund. On that basis, the Government Actuary has calculated that the notional standard contribution should be 20 per cent. of salary.

On that basis, the Exchequer contribution, after deducting the 9 per cent. of salary payable by Members, would be 11 per cent. That 9 per cent. plus 11 per cent. is not much different from the 22 per cent. recommended by the Government Actuary in his preceding report. It is the long-term total cost of the scheme to keep liabilities and assets in balance.

The Government Actuary is not required to make any recommendation about the level of Members' contributions. The increase to 9 per cent. in 1983 was made to take account of the improved rate of accrual in the scheme and, as hon. Members on both sides will recall, the House approved a rate of 9 per cent. Collectively, we accepted that because we believed it to be a realistic level, given the estimated cost of the scheme after incorporation of the improvements suggested by the TSRB. That level of contribution was included in the 1984 Act and is generally in line with other fast accrual schemes in the public service.

The fund has now accumulated a significant surplus. There are two reasons for that: first, the performance of the fund's investments, for which the skill and care of the trustees and their agents are to be highly commended; and, secondly, the very high level of contributions made by the Exchequer in recent years, for reasons which I shall explain, to a total of 18 per cent.

In determining the Exchequer contribution required, the standard contribution of 20 per cent. can and should be adjusted to take account of the surplus. By long-standing convention—not just in this scheme but in the overwhelming majority of similar schemes—such a surplus is normally used to reduce the employer's contribution—[Interruption.] That is the position. In this case, that is the standard contribution payable by the Exchequer. The Government Actuary has recommended an Exchequer contribution for the year beginning April 1989 of 4·4 per cent. of salary, and has recommended that that rate should be maintained for the next eight years. As a result of the provisions of section 5 of the 1972 Act, the recommendation took effect automatically from that date.

There have been some misunderstandings on this question, and it may help if I explain the background more fully. Section 5 provides for the Exchequer's contribution to be calculated in accordance with the Government Actuary's evaluation. My study of the statute, about which I hesitate, confirms that. Under that section, the recalculation of the Exchequer's contribution takes effect when the Government Actuary's report is laid before the House. In the present case, the Government Actuary's report covered the three years from 1 April 1987, and recommended a lower contribution with effect from 1 April 1989.

As far as I am aware, in previous years there has been no suggestion that the recommendations of the Government Actuary should be altered or rejected. The 1972 Act does not provide for that possibility. However, I acknowledge that we have not previously been confronted with a surplus in the fund—certainly not on this scale—or with a recommendation that the Exchequer should reduce its contribution. With that in mind, my predecessor gave the commitment that the House would have an opportunity to debate the Government Actuary's report before any decisions were taken.

May I just finish my point?

I regret that that may have misled the House into believing that the Government Actuary's recommendations would not take effect in the usual way. It appears that that is not the case and, although we are having a debate on the subject, the recommendations automatically took effect for the year starting April 1989.

Will the Leader of the House give an estimate of how much the Exchequer will save over the next eight years by cutting its contribution?

I would not like to give an estimate, but I think that I am right in saying that the surplus was £7·4 million. The reduced contribution is not designed to eliminate that, but to bring it back to a level that would sustain a contribution of 11 per cent. from 1989 onwards.

No. The total surplus to be reduced over the next eight years is £7·4 million, after which a normal contribution of 11 per cent. would be introduced. An Exchequer contribution of 18 per cent. for several years generated the balance, and has resulted in the recommendation that its contribution should be lower from now on.

Does the Leader of the House agree that the anomaly is that the Government Actuary can look only at the Exchequer contribution and not at Members' contributions? If the Actuary had been able to consider both contributions, he could have come up with a more sensible proposition.

The right hon. Gentleman is right to say that the Actuary is permitted to look only at the Treasury contribution as a result of the provisions of the 1972 Act. However, I would not want him to conclude that a dramatic change would necessarily result from the scrutiny of both contributions. If the greater part of the surplus was accumulated because of the high contribution of 18 per cent. by the Exchequer, that would have to be reflected in any recommendations from the Actuary.

I readily acknowledge that we are in dangerous waters on this issue. Against the factual background, I shall offer hon. Members some insight into the considerations which I think were taken into account in the most recent redesign of the system. Whatever hon. Members may say now, under the 1972 Act the Exchequer contribution was clearly intended to be the residual. It is normal for valuation changes to reflect on the employer's contribution rate since that is normally regarded as the residual, rather than the employee contribution.

In our case, the employer is the Exchequer, and its contribution was designed by the legislation to be the variable and to take account of any changes in economic trends. The Exchequer contribution has been as high as 18 per cent.—13 per cent. plus a 5 per cent. deficiency payment—since the previous evaluation report. The proposed dip to 4·4 per cent. to keep the fund in balance can be seen—this is the argument behind the legislation—as a temporary compensating relief for the higher Exchequer contribution of earlier years. The contribution was assessed in 1984 with the same aim—to keep the fund in balance.

The Government contribution being reduced 11 per cent. to 4·4 per cent. was a twist.

Unusually, I did not catch the hon. Gentleman's intervention, although I have no doubt that it was an intelligent one.

During contribution holidays—as they are described—the bulk of public and private schemes leave employee contributions unchanged, as it is generally agreed that fluctuations in the employee rate are undesirable because they give rise to uncertainty.

Before I give way to my hon. Friend, I appreciate that the House may argue that the figure of 9 per cent., which was an advance on the originally recommended figure of 8 per cent., suggests that there may have been some over-enthusiasm of judgment on the part of the House.

I accept what my right hon. and learned Friend says about the role of the Government Actuary, and about the 1972 Act. However, the Review Body on Top Salaries has a different attitude. In successive reports it has been suggested what the relationship between the Treasury contribution and the employee's contribution should be. It has recommended the level of Members' contributions, and that level has differed from time to time. Last year's TSRB report was unusual because it accepted 9 per cent. as though it had no power to recommend otherwise. If it had recommended, as I think it should, that Members' contributions should have been significantly lower, which would have been proper according to the Actuary, all would have been well. Perhaps we shall have the opportunity to debate that later.

My hon. Friend draws attention to an issue that I have already foreshadowed. In justice to history and to the previous legislation, I should expand the underlying rationale.

If the hon. Member will forgive me, I should come to a conclusion.

In favourable economic circumstances, it is not unusual for the employer's rate to fall and to be lower than the employee's rate. That certainly happens in the private sector and the public sector. The question is whether the right balance has resulted from the original legislative provisions, and the impact of the Government Actuary's report and the TSRB recommendations.

I have given in full the arguments for following the Government Actuary's recommendations, as we have done in the past. I do not think that they are likely to be set aside, but my mind is not closed. I should be foolishly over-confident if I closed my mind on any aspect of this matter. If the House expresses a clear view or preference for any improvement in the scheme, including changes in the contributions structure, I and the Government accept that the TSRB should be invited to consider all such suggestions for improved benefits.

I emphasise that any consideration by the TSRB would have to include the central question of who is to pay and what is the fair basis for payments in the long term. I think the whole House would wish that.

I hope that the process of considering possible future recommendations in the light of today's debate will not stand in the way of implementing the outstanding recommendations of the TSRB's 26th report. I visualise, after this debate, the relatively early introduction of two pieces of legislation: first, regulations to implement the TSRB recommendations for all Members of Parliament, including the revised early retirement arrangements, the improved death-in-service grants, and any other recom?mendations that result from tonight's discussions—for example, revised arrangements for Members of the European Parliament; and secondly, a Bill to implement the changes affecting the three most senior office holders and severance pay for Ministers and office holders, except for the Prime Minister and Mr. Speaker.

I wish to ensure that, after the passage of those two pieces of legislation, any further changes that might arise from the next round of TSRB considerations can themselves be implemented by secondary legislation to avoid the need for more than one Bill on the subject in the current Parliament. I am anxious that we should give ourselves the freedom to proceed through secondary legislation: it may already be in our power, but I am not confident enough to say so in terms.

We have a good scheme, and we should build on it as the TSRB report recommends. Many right hon. and hon. Members on both sides of the House clearly hold strong views on some aspects of the scheme, and—as I said at the outset—I look forward to listening to those views with care and attention.

5 pm

I thank the Leader of the House for his introductory speech. I remind him and the House that we are discussing a House of Commons matter, not a party-political matter. The House has overturned recommendations and decisions made by past Governments, and hon. Members on both sides of the House have often had to make difficult decisions themselves. Public reaction is often ill-informed, and it is therefore important that we examine this matter in some detail.

I consider the TSRB report disappointing and negative. It does not take account of the problems faced by Members and the staff of the House, and by their dependants. Far from improving matters, the report—coupled with the Government Actuary's report—makes them worse. When I gave evidence to the TSRB, I presented what I considered to be relevant but modest proposals on behalf of hon. Members who are asking not for benefits in excess of those given to other sectors, but to be treated on an equal basis with both the private and public sectors. There is no need for me to apologise for such a request; compared with the salaries and pensions in other European and Commonwealth Parliaments, our proposals are extremely modest.

The Leader of the House said that we had improved our position, and so we have. It was only in 1964, however, that a pension scheme for Members of Parliament was initiated, and we all know of hon. Members on both sides of the House who left after that time and experienced considerable financial difficulty. Slowly, we built on the scheme, and I hope that we shall continue to do so.

Is not one of the most disappointing features of the report its failure to deal adequately with widows' pensions? Many hon. Members do not come to the House until they are in their 30s or 40s, but the widow of an hon. Member who was here for 15 years may be left, in her early 50s, expecting no more than £3,900. The figure should be doubled so that widows receive a realistic pension. That is what worries us most of all.

I agree, and other hon. Members will doubtless develop that point.

I hope that the Leader of the House will take note of the strong feelings of hon. Members on both sides of the House. Before I deal with the more contentious issues, let me say that the proposal to increase the death-in-service grant to two years' salary is a welcome improvement. I agree with the right hon. and learned Gentleman that it should be retrospective to the beginning of the Parliament.

I support the view of the House of Commons trustees that it is not necessary to have two schemes to deal with early retirement: that, in my view, would lead to confusion. A single scheme should apply, whether the retirement takes place during a Parliament or at its dissolution. Again, I feel that any scheme proposed by the TSRB should be retrospective to the beginning of the Parliament. Normally, the TSRB reports only once in each Parliament. In this instance representations were made very early in the Parliament, but only now—when, as the Leader of the House has acknowledged, we are nearly halfway through the Parliament—are we discussing the report.

The limited proposals regarding ex-Ministers, the Speaker and former Prime Ministers are indeed very limited, and should have been part of a package dealing with the central issue of Members' contributions and pensions. I shall say more about that later.

The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) mentioned widows' pensions. Widows' and widowers' pensions are still extremely low—lower than the normal industrial level. I could quote cases of real hardship among hon. Members on both sides of the House, and in some instances that hardship is still being experienced. I believe that the pension should be increased from half the amount of the pension for which the former Member was eligible to a minimum of two thirds of that amount. If my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris)—who is chairman of the trustees—catches your eye, Mr. Speaker, he will no doubt develop that subject further.

The report talks of increasing death-in-service grants and widows' pensions from one to two years' salary but refers to payment of a Member's salary for one year "or" repayment of the contributions made. Does that mean that those who receive the repayment will not receive the increase, or that someone whose spouse receives a lump sum will lose the repaid contributions?

I am afraid I cannot answer that question, but it is important and will no doubt be examined. I also noticed that passage in the report.

We all realise that the pension scheme does not give widows a fair deal. If the Lord President had said at the Dispatch Box that the Government's contributions would not be reduced from 11 per cent. but that widows would be given a bit more, he might have been rather better off. Does my right hon. Friend agree, however, that the staff of the pensions department, Mr. Jim Dobson and Mr. Tony Lewis—whom I welcome back after his illness—are doing a first-class job on our behalf?

I agree, and no doubt when the Leader of the House reviews today's debate he will take into account the points made about widows and widowers.

Severance pay—or resettlement grant, as it is now known—is not affected by pension proposals, although it was discussed by the TSRB. It is funded directly from the Exchequer. Many hon. Members, however, have raised with me questions about both the amount paid to Members with a short period of service and the cut-off point at 65 years of age. Payment at present is equivalent to six months salary for those with less than 10 years' service, rising on a graduated scale to a full year's salary for those aged 55 and over with 15 years' service. The simplest and most socially just solution would be to assist those Members who have completed only a short period of service by making an upward adjustment and raising the cut-off point for all Members.

The modest suggestion that MEPs' pension rights should he treated differently from those of Members of Parliament is clearly unjust and wrong. There is a direct link between the pension contributions of MEPs and Members of Parliament, and the suggestion that they should be able to aggregate their pensions should be acceded to. I note the point about resettlement grants made earlier by my hon. Friend the Member for Houghton and Washington (Mr. Boyes).

Certain problems have caused great distress to the dependants and staff of a deceased Member. It is completely wrong that any payments due to staff should be linked to the estate of the deceased and that the staff are asked to leave the House on the day following a Member's death because no proper structure exists to deal with that eventuality.

When a well-known Conservative Member died fairly recently, his secretary did not receive her salary or her P45 from the executors of his estate until long after his death. She had to take out a bank loan to cover her necessary expenses pending settlement of her salary from the estate. I stress that no blame whatsoever is attached to the family of the deceased, but right hon. and hon. Members will agree that that is a ridiculous system which must be changed.

A number of hon. Members have rightly mentioned the salaries and working conditions of staff in the Palace of Westminster. Although that goes wider than the immediate issues raised by the TSRB, the House must not overlook those important matters.

On Members' pensions, the House will be aware, as the Leader of the House has made clear, that a decision to deduct 9 per cent. of salary was upheld by the review body. However, that brings no increased benefits except for minor adjustments as outlined in paragraph 40 of the TSRB report. Paragraph 32 of the Government Actuary's report makes the startling suggestion that the Treasury contribution be reduced to 4·5 per cent. That flies in the face of what is accepted in industry in the private and public sectors, where the employer normally pays two thirds and the employee pays one third.

The Government Actuary makes that proposal based on the Treasury contribution and the healthy state of the fund. The report of the Government Actuary is extremely one-sided because he is not empowered by legislation to comment on Members' contributions, only on the Treasury contribution. That proposal turns the basis of our pension scheme upside down.

The Exchequer contribution is based on a multiple of two with a 9 per cent. contribution from the Member. That means that the Treasury contribution should be 18 per cent. producing a total of 27 per cent. The Actuary proposes reducing the Treasury contribution to 4·41 per cent. leaving the Member's contribution at 9 per cent., thereby reducing the total contribution to 13·41 per cent.—a dramatic reduction from 27 per cent.—all with effect from 1 April 1989.

To bring the scheme in to line with accepted practice, the Treasury contribution should be 18 per cent. making the total 27 per cent. Given the present state of the fund, nobody is suggesting that. Before the implementation of the Actuary's report, the Member will contribute 9 per cent. and the Treasury will contribute 13 per cent.—well below the usual factor of two.

If some readjustment is needed because of the high level of the fund, either the benefits should be improved or there should be a reduction of the Member's contribution as well as that of the Treasury. For instance, there could be a reduction of 2·5 per cent. in the Member's contribution, bringing it down to 6·5 per cent., and the Treasury contribution could remain at 13 per cent. Alternatively, the Member's contribution could remain at 9 per cent. and widows' and widowers' benefits should be improved accordingly.

The Leader of the House raised the matter of excess contributions. The position needs to be examined, because eventually many hon. Members will be making contributions when they can get no increased benefits because they will have reached the limit.

It is worth putting on record the fact that our salary is based on 89 per cent. of a senior principal grade. It is estimated that, when wage negotiations are taking place, civil servants' contributions are based on 6 per cent. Where is the "fair comparison"—the term used in such negotiations—for hon. Members?

A substantial increase in contribution, no increase in benefit and a dramatic reduction of the Treasury contribution, which in the short term, could have a detrimental effect on the fund cannot be right. Therefore, I hope that the debate will make the Lord President aware of the strong feelings in the House. We are asking only for natural justice which has not been obtained through the current TSRB report or by the Actuary's recommendation.

If necessary, some of the issues could and should be referred back to the TSRB. The House will certainly want to discuss the matter in more detail before any final decisions are reached.

5.17 pm

I have read the Government Actuary's reports for 1984 and for 1987. There seems to be some illogicality in our approach to Members' pensions. According to the 1984 report, the Member was paying 9 per cent. and the Exchequer was paying 18 per cent. The 1987 report suggested that the Member paid 9 per cent. and the Exchequer 4·4 per cent. In the meantime, the fund has grown from nearly £42 million to more than £84 million, so it has doubled in the past three years. The real bone of contention is what should be done with the surplus.

In a private occupational pension scheme, if the fund increases in value to more than 105 per cent.—that is a 5 per cent. increase—the scheme must get rid of that surplus. There are two ways in which that can be done. Either the employer can take it out of the pension fund or it can be used to provide a contributions holiday. If the employer takes out that surplus, the company pays 40 per cent. tax—the rate is higher than corporation tax. That is Government fiscal policy which was imposed because, quite rightly, the Government thought it unfair that an employer could take money out of a pension fund—which belongs partly to the employee—without any penalty and do nothing for the employee. Consequently, companies refrain from taking any surplus out of occupational pension schemes because of the 40 per cent. immediate tax liability, which has nothing to do with the company's profits, is payable irrespective of losses and is entirely different from corporation tax.

If that is the logic of the Government—and I am sure that they have not changed their logic—in our pension fund, which in many ways is analogous to a private pension fund, why does the employer or the Exchequer effectively take the lot without any penalty? In many cases, when there is a surplus in the private sector after revaluation, the contribution holiday is invariably shared between the employer and employees. Alternatively, the pension benefits are improved. I agree with the right hon. Member for Salford, East (Mr. Orme) that, irrespective of the Top Salaries Review Body, it would be a good idea for hon. Members to consider increasing widows' benefits. In addition, something should be done to help our ex-colleagues who are suffering hardship.

Figures up to last year show that Members contributed 9 per cent. and the Exchequer contributed 18 per cent. I cannot understand the logic of the Government's argument, because, in those circumstances, one third of the surplus belongs to hon. Members and two thirds belongs to the Exchequer.

I welcome the Leader of the House saying that he will discuss with the trustees the possibility of their contribution continuing after a Member has achieved full entitlement. I remind my right hon. and learned Friend that, under the state pension, if an employee continues working after 65 the employer continues to pay his contribution, but the employee ceases to pay his national insurance contribution. That could be the yardstick for hon. Members who have paid their contributions and reached full entitlement. The Government should follow the same system as the state retirement scheme, whereby, when an employee reaches full entitlement, he makes no contribution but the Exchequer continues to pay.

I pay tribute to the trustees of the pension fund and their advisers for achieving the excellent result of doubling the size of the fund over the past three years. I am sure that all hon. Members agree that they have done an excellent job.

There is an anomaly in how we deal with the fund's surplus. It is funny that, if there is a deficit, one tries to brush it under the carpet, but when there is a surplus, arguments ensue. I am delighted that my right hon. and learned Friend said that his mind is not closed to the possibility of bringing the system more in line with the logic of private pension schemes.

I am listening carefully to what my hon. Friend is saying, but he may be under a misapprehension about the scale of the surplus above actuarial liabilities—I am not challenging the legitimacy of his argument—which was £7·4 million. The fund is much larger than that, but I should not like there to be any misunderstanding about the scale of the surplus.

I agree that the surplus is immaterial. I am asking why we do not follow the example of private occupational pension schemes. What matters is not the amount of the surplus but the principle involved. If a private employer removes the surplus from a pension fund, he is heavily taxed above the rate of corporation tax. Consequently, his only alternative is a contribution holiday, during which the employers' contribution is not always reduced but is usually shared between him and his employees. I hope that my right hon. and learned Friend will consider that.

5.24 pm

I am most grateful to the Leader of the House for referring so kindly to my role and work and that of my fellow trustees on both sides of the House.

The House will expect me, as chairman of the managing trustees of the parliamentary contributory pension fund, to give their views on both the Top Salaries Review Body's proposals—some good, some less so—and the report from the Government Actuary on the valuation of the fund, in which he recommends a cut in the Treasury's contribution from 11 per cent. to only 4·4 per cent.

As trustees who are selected by the House to manage the fund, we try our best to improve its provisions in the interests both of Members, past and present, and their dependants. There have been many improvements over recent years in which the trustees have taken the leading role, including a faster accrual rate, the age-service conditions for early retirement at a general election and the provision for ill-health retirement pensions.

There is, however, a very strong and urgent case for further improvements which are now threatened, notably by the Government Actuary's recommendation that has cut the Treasury's contribution to only 4·4 per cent. I must therefore very strongly emphasise that it is ultimately for the House to decide, not the Actuary or the TSRB, if and when further improvements should be made. The scheme is a statutory one and Members have it within their power to improve its provisions.

The staging of this debate on a motion for the Adjournment does not permit of any amendment by which the House can make decisions today on the TSRB's proposals or the Government Actuary's recommendation. The House may think that this is curiously contrary to the spirit of an undertaking given on behalf of the Government by the right hon. Member for the City of London and Westminster, South (Mr. Brooke), who was then Minister of State, Treasury, during the passage of the Parliamentary and Other Pensions Act 1987:
"time will be made available for a debate on an amendable motion before any regulations amending the scheme are made under clause 2."—[Official Report, 13 May 1987; Vol. 116, c. 371.]
This debate may not be strictly covered by the letter of that undertaking, but I know that its spirit encouraged many right hon. and hon. Members on both sides of the House to hope that today's debate would take place on an amendable motion, preferably with an all-party amendment tabled by the managing trustees.

That has not been allowed to happen and I shall therefore set out the views of the trustees and also give the House our advice on the response that it should make to the two reports where they affect our remit. I stress the word "our" remit, as some of the TSRB's recommenda?tions go beyond the trustees' responsibilities: for example, those on severance pay for Ministers and resettlement grants for Members.

Soon after they were published, the right hon. and learned Gentleman's predecessor made it clear that he proposed to accept the TSRB's proposals, and to give them legislative effect. It has to be said that he could hardly have done anything else, given the very tightly drawn terms of reference that he had dictated to the TSRB. Nevertheless, the trustees were grateful that the death-in-service benefit was soon to be raised to the level prevailing in most public-sector schemes—two years' salary. This is an improvement which we have advocated for some time and I welcome the right hon. and learned Gentleman's decision to give it retrospective effect.

We also welcomed the proposed further improvements to the early retirement provisions. They will give many right hon. and hon. Members more flexibility over retirement and will mean that more of our colleagues between the ages of 60 and 65, who have fewer than 20 years' service, will no longer face the agonising decision of whether to take an actuarially reduced pension or to defer drawing their pension until they are 65. That is something for which the trustees, with others, have long campaigned. On a personal note, I should like here to pay tribute to the late Brynmor John, who took so informed and constructive an interest in the scheme, and whose loss to the House is still felt very deeply by all his parliamentary colleagues.

The trustees are much less happy about the recommendation that the Member's contribution should remain at 9 per cent. I should explain, for the benefit of those who were not Members at the time, that the figure of 9 per cent. was not the actuarially assessed cost of the revised pension package then agreed, but rather a device to deal with a revolt over parliamentary pay among the Government's Back Benchers in July 1983. In the view of many, the figure of 9 per cent. was not only incomprehensible but reprehensible.

The latest survey of occupational pension schemes, by the National Association of Pension Funds, shows that in 1988, across the board, employees contributed 4·4 per cent. to the cost of their pensions and employers 8·8 per cent.—precisely twice as much. On that basis, in our scheme, Members would pay 6⅔ per cent. and the Exchequer 13⅓ per cent. Yet we have been paying 9 per cent. since January 1987, and to eliminate the fund's surplus—which that needlessly high level of personal contribution has helped to create—the Exchequer's stake is now reduced to less than half of the Member's contribution. That is shabby.

Under the Parliamentary and Other Pensions Act 1972, the Government Actuary is required to determine the contribution from the Exchequer that is needed to balance the scheme's assets and liabilities. This means—and it is essential for it to be very clearly understood by the House as a whole—that the scheme cannot stay in surplus, no matter how well the investments perform.

The House needs to understand, too, a little of the history of the pension arrangements for Members, which were first introduced with effect from 16 October 1964. While contributions had to be made to the fund only from that date, pension accrued in respect of up to 10 years— later increased to 15 years—of service prior to that date. The cost of that concession—and the Act was quite specific—was to be met by a deficiency contribution from the Exchequer, payable over 25 years. It is important to bear in mind that the 1965 Act provided for the review, and the variation up or down as necessary, of Members' contributions and/or of benefits. Under the 1972 Act, which restructured the pensions provisions, the accrued pension rights of Members then in service were improved, at a cost to be borne by the Exchequer.

In his first report, on 27 November 1973, under section 5 of the 1972 Act, the Government Actuary indicated that the deficiency contribution to fund pensions in respect of service prior to 1 April 1972 was to be payable over 25 years from 1 January 1972. It was assessed at 7·75 per cent. in that report, had fallen to 6 per cent. at the valuation as of 1 April 1984, and has now disappeared some eight years early.

When the pension accrual rate was increased under the 1984 Act, the Government promised Members the opportunity to purchase a limited number of added years at a special price—40 per cent. of the cost—which is why the facility became known as "subsidised added years". The balance of the cost—60 per cent.—was to be borne by the Exchequer. I have to report to the House that no such contribution has been made to be fund.

All this means that the current membership is meeting the balance of a deficiency contribution which was intended to be a charge on the Exchequer. It also means that the subsidised element of the added years facility, which the Government said would be borne by the Exchequer, is effectively being paid by the current membership, some of whom did not take advantage of the facility. Others were not even Members when it was on offer. How then, with justice, can the Leader of the House possibly refuse to accept a reapportionment of contribu?tions as between Members and the Exchequer?

The House will wish to note that improvements in the scheme are now effectively vetoed, since successful investment management merely results in a reduction in the Exchequer contribution. The more the trustees succeed, the more they benefit not members of the scheme but the Exchequer.

I appreciate the trustees' work in the matter, but is it true that they could have predicted a surplus accruing over the three years of the review? Would it not have been in order for the trustees to recommend extra payment of pensions, widows' benefits and so on before the three years had elapsed, so that the £7·5 million surplus could have been spent before this Government review?

I am grateful to my hon. Friend. As the fund's performance improved, we made repeated representations in support of improvements. We gave evidence to the TSRB about a shopping list of improvements that we thought were necessary. I shall refer to some of them as I proceed. If I cannot give way again, it is because I want to conclude my speech as quickly as I can although I am, of course, giving the House what is in the nature of a report from the managing trustees.

I ask the House, in considering whether and when to use its own ultimate power to alter the scheme, also to take very careful note of the fact that our scheme compares most unfavourably with others, in terms both of the proportion of its costs paid for by Members and of some of the benefits that it provides.

There are many precedents for sharing the benefits of the contributions holiday that the Treasury is now set to enjoy in relation to our scheme. For example, the Daily Express on 4 May last reported Reed International's proposal to distribute some of the excess funds in its pension scheme, which gave some employees a 90 per cent. rise in pensions.

More recently, it was reported by the Financial Times that, as a result of surpluses in British Rail's pension fund, employees were to pay only a 5 per cent. contribution. In addition, the report states:
"substantial improvements in benefits have been made, in respect of both lump sum payments and of benefits for past service".
The trustees of the parliamentary scheme are acutely aware of the insistence, on both sides of the House, that widows' pensions must be increased. This debate is an opportunity to make the Government aware of that insistence and to offer suggestions for giving it effect. For the trustees, I must point out that, with the present surplus and continuation of a 9 per cent. contribution, we could meet the request by my right hon. Friend the Member for Salford, East (Mr. Orme) to increase forthwith the maximum widow's pension from 50 per cent. to 66⅔ per cent.

Such an increase ought certainly to have the wholehearted support of the Chief Secretary to the Treasury who, in the debate on the Finance Bill on 12 July, said:
"The really unsatisfactory feature of pensions provision is the millions of ordinary scheme members who do not receive a pension anywhere near the maximum allowable under the tax rules".—[Official Report, 12 July 1989; Vol. 156, c. 1074.]
The widows of our former colleagues, many of whom live in straitened circumstances, can be added to those millions.

As of now, the maximum widow's pension that can be awarded is of the order of £8,000, but I must stress that very few, if any, widows of Members can expect anything like that sum. For anyone to do so, until relatively recently, her husband would have had to serve continuously in Parliament for 40 years. Given that the average parliamentary career is no more than 17 to 18 years, a widow's pension under our scheme will average no more than £3,000. At his death in 1984, the widow of a former colleague and very close friend of mine, with total service of over 20 years, was entitled to less than £50 a week. That, too, is shabby.

Referring to the pensions paid to Members' widows in a debate on 27 April 1987, Sir Anthony Kershaw, then a trustee of the fund and the Conservative Member for Stroud, said:
"It is an absolute disgrace that this should be tolerated and even to speak of it ought to give one a sense of shock.—[Official Report, 27 April 1987; Vol. 115, c. 104.]
That is but one compelling reason for resisting the reduction of the Exchequer contribution to less than half that paid by Members.

As the House knows only too well, Members do not enjoy security of tenure. The nature of the job in today's world is stressful and imposes a very heavy strain on family life. It is for these, among other reasons, that the trustees want the TSRB now to be asked to look again at the basis for determining widows' pensions. The trustees are advised—and here I pay tribute to my fellow trustee, the hon. Member for Horsham (Sir P. Hordern), who has worked long and very painstakingly on comparisons with other schemes, and who I know, Mr. Deputy Speaker, hopes to catch your eye—that current best practice in private sector schemes is to provide a widow's pension of up to two thirds of the former employee's pension.

That is what we seek and we urge the House to support a two thirds pension for widows. But it will require a re-examination of the basis upon which our scheme is funded and administered. There is evidence, as I have shown, taking occupational schemes as a whole, that costs are borne in the proportion of 2:1 as between employers and employees. On that basis, even at 11 per cent. the Exchequer is already paying far too little. The TSRB has on three occasions recommended that Members' and Exchequer contributions should be fixed in the ratio of 3:5—and the trustees see no reason why that ratio, given in response to references made to the review body by successive Leaders of the House, should not be accepted.

We must ensure that, when the fund is in surplus, the Exchequer is not the sole beneficiary. It must surely be only fair that the membership of the fund ought to see some benefit, whether by way of higher benefits or reduced contributions. I am mindful also of the claims of existing pensioners.

In a further reference to the TSRB, the trustees want the review body to be asked to consider the following changes to the fund. First, contributions to the fund should in future be shared between Members and the Exchequer in the ratio 3:5.

Secondly, the Actuary's triennial report on the fund should in future recommend what the percentage rate of the Member's contributions should be for a further period of three years, on the assumption that benefits continue unchanged.

Thirdly, it should be for the House to decide, if the triennial report shows the fund to be in surplus or to have an emerging deficit, whether there should be a variation in the benefits provided, in the rate of the Member's contribution, or both.

Fourthly, if the House decides on a variation in the benefits provided, the Actuary should recommend what the percentage rate of Members' contributions should be for a further period of three years, having regard to that decision.

Fifthly, regulations to give effect to any decision of the House as to benefits, and to the appropriate recommenda?tion of the Actuary as to contributions, should be made under the Parliamentary and Other Pensions Act 1987.

Given these changes in the scheme, Members would be much better served and their dependants much better protected. At the same time, the trustees would no longer be placed in the position of seeing all their work to improve the scheme's assets result in a lower contribution from the Exchequer alone.

The TSRB might well also be asked to compare our scheme to other parliamentary schemes across the world. To give but one example, Australia has a parliamentary scheme which is infinitely better than ours.

I am glad to have been able to indicate both the current restraints on the trustees of our scheme and the way forward if we are to achieve the improvements we seek, not least for Members' dependants. I hope not only that my proposals will be given due attention by both sides of the House, but that they will soon be translated into practice. The House has the power to make that happen.

To conclude, I must place on record, on behalf of the trustees and, indeed, all Members and their dependants, our appreciation of the quiet and painstaking, but unseen administrative work of Jim Dobson, Tony Lewis, Moreen McColl and all who work and have worked with them so unstintingly to help members of the scheme, past and present, and their dependants. The House as a whole owes them its gratitude.

The debate must conclude at 7 o'clock and as I understand that at least a dozen hon. Members will be seeking to catch my eye, I very much hope that we can have brief speeches.

5.45 pm

I start by congratulating the right hon. Member for Manchester, Wythenshawe (Mr. Morris) on his work as chairman of the parliamentary trustees. We have met often and have thought carefully about the recommendations that we have made. We have met my right hon. and learned Friend the Leader of the House on a number of occasions and have made proposals to strengthen and improve the existing provisions of the fund.

I begin by saying something about the nature of our fund because outside this place it may be thought that we are concerned only with improving our own conditions at taxpayers' expense. It is important to recognise the distinction between a funded scheme and a pay-as-you-go scheme. The Civil Service has a pay-as-you-go scheme and the benefits are paid according to need. It is not a funded scheme; it does not come out of the investments that have resulted from contributions made by the employer and the employee. That is an important distinction, because we are not asking for more money from the taxpayer. We are talking about how best to reduce our demand on the taxpayer—whether that should be done by reduced contributions from hon. Members or by improving and increasing the benefits available to hon. Members and their dependants. As I have said, it is an important distinction.

I welcome very much what my right hon. and learned Friend the Leader of the House has said and his proposal to refer the debate to the TSRB. We should bear it in mind not only that the fund has done very well under the investment advisers and managers whom we are happy and fortunate to have, but that when it was last valued —the subject of the Government Actuary's report—it stood at about £87 million. However, the latest valuation is £104 million. It is a triennial valuation and as the last one was made in 1987, the next is due this year. We should ask the TSRB to look again at this whole business, because it is clear that the substantial surplus upon which the Government Actuary reported has been exceeded by recent movements in the value of the fund. That appears a good reason for an urgent review of the fund and of our benefits.

Our scheme is a funded one and hon. Members contribute 9 per cent. That is the highest rate of any funded scheme in the country. I may be wrong, but I have made extensive searches and I have not yet come across a funded scheme in which the employees pay such a high contribution. I shall return to the comparisons later because some of those other provisions are more in line with what we should be doing.

It is important to view the 9 per cent. employees' contribution in relation to what the employer pays. I agree with what the right hon. Member for Wythenshawe said about how we reached the figure of 9 per cent. in the first place. It was a great mistake. It was done rather quickly, and probably rather late at night, without anyone fully realising the consequences.

Even though 9 per cent. was decided in a moment of aberration, it is curious that the TSRB did not consider the matter seriously in the context of the total contribution made. The TSRB's latest proposal was that the total contribution required was 20 per cent., not 22 per cent. On all previous occasions, the TSRB said that the relationship between the Government's contributions and Members' contributions should be three eighths—that is, three parts Members' contributions and five parts Government contributions. That was the case in 1976 and 1983.

Only on this latest occasion did the TSRB accept the 9 per cent. contribution from Members' as correct without considering its role. That is regrettable. The role of the TSRB was to decide what contributions were appropriate for employers and employees. I hope that when it considers the position again it will revert to its former responsibility for judging what contributions should be made by Members and the Treasury.

I agree with my right hon. and learned Friend the Leader of the House that in some respects our scheme is good. We have an accrual rate of fiftieths rather than sixtieths. That is right because in general new Members of Parliament join the House in their early 40s. Sometimes they join earlier, but that is the most common age. A large number of accruals need to be made in a comparatively short period. Our scheme is not like an ordinary company-funded scheme which members can expect to join at 20 and have a long period of service. As we mostly join at 40, it is right that we should have special consideration. Fiftieths are a proper proportion.

Regrettably, there is a great deal of difference in the experiences of hon. Members. Some of us have a long period in the House and others have a short time. The turnover is significant. I asked one head of an actuarial department of a large insurance company his opinion of our starting rate of 9 per cent. He said that he could not advise any new member of any scheme that he ran to accept such a large contribution. That is a fact worth knowing.

Our scheme should reflect the nature of its membership. On the whole, we enter it late and, for some at least, there is a rapid turnover. It is important to ensure that our scheme does not provide any advantages that are not available to others in the private sector. The difference is that we pay for our contributions and we have a separate fund to which we have contributed. It is in every way our fund. The benefits that we receive come from our contributions. That is not the case with civil servants who do not have a funded scheme. However, like us, they have guaranteed index-linking. That is another advantage of our scheme.

Civil servants have some prospect of promotion. We live in a curious place which can be described only as a beehive. One spends one's early years here as a drone. Then the queen bee picks one up and one becomes a worker. Then, before one knows what is happening, one ceases to be a worker and becomes a drone again. What sort of basis is that on which to evolve a properly run pension scheme? It is difficult to keep up with the whole business. That would not be acceptable in the Civil Service. It would not be allowed for one moment. Nor would the prospect of total extinction by an ungrateful electorate be acceptable in the Civil Service.

We have real problems in adjusting the scheme to what is proper and fair. It is fair to compare our contribution rate with the high contributions paid by firemen and the police. As I said, ours are the highest contributions to any funded scheme that I can find. It is true that firemen and the police make a higher contribution.

As the right hon. Gentleman says, the reason is that they have early retirement. For example, the police retire at the age of 50. If people retire early, they can look forward to another career but for hon. Members who retire at 60 or over, the market for employment is strictly limited. Their case is not the same.

Some of us may not have the chance to speak tonight. The hon. Gentleman has not mentioned severance pay, about which he is an expert. What about the peculiar circumstances of a person aged 49 with 15 years' service who receives six months' severance pay and has to look for another job? That is ludicrous. Have the trustees considered that and decided to increase the severance pay?

We have indeed considered that, and we have made recommendations. I have no doubt that we shall do so again.

I now come to the proposals that are appropriate to our scheme and those on offer in comparable public sector schemes. The police pay out sixtieths. After 20 years that is reduced to thirtieths. Policemen and women gain a particular advantage from staying in the police for over 20 years. They reach a smaller proportion than we do.

The previous proposals of the TSRB were that Members' contributions should be about 7·5 per cent. and Treasury contributions 12·5 per cent. That is the range that the TSRB normally considers. I hope that it will reconsider the matter and perhaps revert to that range. If not, we could consider what improvements could be made to the benefits and retain our 9 per cent. contribution. I believe that we should adopt that course. We would still make the highest contribution of any funded scheme.

The benefits paid under our scheme should be a model for other privately funded schemes. I shall refer to other more or less comparable schemes. British Airways has a scheme which, like ours, is fully index-linked. Members contribute 5·24 per cent. The employer pays 2·5 times as much. The retirement age is 60. The death-in-service benefit is three times the salary. We propose, as the House knows, a death-in-service benefit of twice the salary of the person who dies.

In the British Airways scheme, widows will receive two thirds of the full retirement pension of the member. In the British Gas scheme, the employee pays 6 per cent. and the employer pays 6 per cent. Again, it is index-linked and the death-in-service benefit is two years' salary. There are good provisions for ill health in service, too. Widows receive only half the pension but there are early retirement provisions. The same is true of British Telecom. At British Coal, the contribution by members of the staff salary scheme is 6 per cent. At present the employers are having a five-year holiday, or it would be 12 years. The House will note that the Treasury is to have an eight-year rather than a five-year holiday. Mineworkers' contributions are 5·25 per cent. of salary, and the employers pay the same. At British Telecom, the employee pays 6 per cent. and the balance of the costs paid by the employer is between one and a half and two times the employee's contributions.

It is clear that our 9 per cent. contribution is high compared with all the other schemes. I suggest that the TSRB undertakes a serious comparison with other sectors which have fully funded schemes—for example, the local government service scheme where the contributions made by the employees are substantially lower than ours and where the benefits are significantly better.

It is important that our scheme demonstrates, in relation to our contributions, that we care to provide benefits, especially for those widows and widowers who come after us. Given the nature of our careers in this place, it is wrong for those who depend upon us to be subject to the whims of the electorate and other matters; nor is it right that they should be given such a low proportion of the final pension of a Member.

I am sure that hon. Members will suggest many other benefits that should be considered. In my opinion, the sooner the TSRB meets to consider the proposals and puts our scheme on a proper basis comparable with other public schemes, the better the House will be served.

6 pm

I congratulate the hon. Member for Horsham (Sir P. Hordern) on his speech and, especially, on the research and background work he has done on our behalf. He presented his case in a reasoned manner. I hope to present a case that is as well authenticated as that presented by the hon. Gentleman, but it is a slightly more indelicate one. Frankly, hon. Members have already been taken for a ride and have been ripped off by the Treasury—hon. Members may have gathered that from the information that they have already received.

We should reject out of hand the suggestion that the Treasury contribution should be dropped to 4·4 per cent. To substantiate my claim of a rip-off, it is important to look at the background to the case, as my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) has done. The hon. Member for Horsham was involved in at least one meeting in the mid-1980s to which I want to refer when we were negotiating the previous arrangements. In my then role as deputy shadow Leader of the House, I attended with Lord Dormand a meeting to negotiate, as my right hon. Friend the Member for Salford, East (Mr. Orme) does today, on behalf of the parliamentary Labour party. It is important to remember what was suggested at the time of the previous settlement and negotiations.

The TSRB proposed a substantial pay increase for hon. Members and an increase in our pension contribution from 6 per cent. to 8 per cent. to bring our contribution into line with the notional contribution then being taken into account in Civil Service pay. That proposal did not appeal to the Government and they rejected it—it was a political decision. They said that they were unwilling to go along with the proposed pay increase. Then the negotiations began. The Government were not only against the pay increase, but they wanted our pension contribution to be increased by 50 per cent. They wanted it to increase from 6 per cent. of salary not to 8 per cent., as recommended by the TSRB, but to 9 per cent. The outcome of those negotiations was a settlement on which we lost on both scores. I am sorry to say that the then chairman of the 1922 Committee, Mr. Edward du Cann, did not play a particularly beneficial role on behalf of hon. Members in those negotiations. I am afraid that he sold out hon. Members, as we lost on both scores.

In exchange for the pay increase that had been recommended for that year by the TSRB, we were told that we could have that increase over four years. For three of the four years, we lost the pay increase that we were due to have and, in the meantime, we also did not receive the further annual increments that one would have expected on the basis of that pay increase if it had been awarded at the threshold level. Therefore, on pay, we lost out twice. So that the Government should make us the great concession of paying our pay rise over four years, Edward du Cann felt that we should pacify the Government by giving them something in return—the 9 per cent. pension contribution.

Together with Lord Dormand I went to a meeting with the then Minister of State at the Treasury and the then Leader of the House—I believe that that was the meeting at which the hon. Member for Horsham was also present. I remember well my incredulity when I demonstrated, mathematically, that the extra percentage increase from 8 per cent. to 9 per cent. was unnecessary. The Treasury Minister, of all Ministers, said to me that he did not think that we should be discussing such matters on an actuarial basis. Of course he did not, because the figures were against him. I prophesied that, if we pursued that course, the pension fund would, inevitably, make a surplus. We are now discussing the very surplus that the Treasury said would not arise. I am not suggesting that that percentage increase was the sole cause of that surplus, but it had an important effect.

Now the Treasury has said—this is where the rip-off comes—that it should have full benefit of the surplus and that its contribution to the fund should be reduced from 11 per cent. to 4·4 per cent. You, Mr. Deputy Speaker, in common with the rest of us, have already been taken for a ride by the Treasury. We should ignore the 18 per cent. that the Leader of the House quoted, as there are all manner of elements in that figure that have nothing to do with our on-going pension scheme. One need only consider what the Government Actuary said in paragraph 28 of his 1987 report:
"The Exchequer contributions are much lower than those recommended in my 1984 valuation report."

In other words, we were made to pay more for our pensions than the TSRB had recommended while the Treasury is already paying lower contributions than the Government Actuary suggested. Although the pension fund surplus has nothing to do with the Treasury fulfilling its commitments, it wants the full benefit from it. In the wake of such richness, the poetic unpleasantness of the du Cann settlement becomes apparent.

In paragraph 28 of his report the Government Actuary states that one reason why we have a surplus in the pension fund is we did not have a pay rise and, because of that, our envisaged pension rates were lower. Therefore, when assessing the future liabilities of the fund, the Actuary noted that the liabilities were lower than they otherwise would have been. Part of the fund's surplus arises from the fact that we gave up part of our pay rise and accepted an increase in our contributions to the pension fund.

The Government will shelter behind the fact that the Actuary has made a recommendation to them. My right hon. Friend the Member for Salford, East and other right hon. and hon. Friends have already pointed out that that recommendation provides no such shelter because the Actuary, by statute, is required to express the Treasury contribution as a balancing sum against the going rate of contributions from Members.

The Government Actuary has said that the Treasury should contribute 4·4 per cent. to the fund, but he has not said that that contribution is necessarily or morally the correct proportion. He is just doing what the statute requires. The Actuary has said that, for the fund to meet its future liabilities—as long as we presume that Members go on paying at 9 per cent.—the Treasury needs to pay a 4·4 per cent. contribution only. That recommendation is arithmetically correct, but it has nothing to do with a value judgment as to how that surplus should be distributed. The Government are trying to shelter behind that recommen?dation when presenting their case.

The surplus should be distributed among the Members; we should receive the benefit. The surplus is probably bigger than the Treasury has admitted. In paragraph 31 of his report, the Actuary says, in essence, that, because his valuations are not carried out in the way that they would be for normal private pension funds, our surplus is smaller than it would have been if he had valued it on a normal basis. Therefore, we have a surplus which the Treasury says is about £7·4 million. The Actuary agrees that it is, but says that it would be more if he applied the rules which apply to every other pension fund.

Therefore, we can afford to look seriously at some important changes which should be undertaken. First, we should look at the possibility of a lump sum on retirement, as applies under many pension schemes, instead of just a lump sum if a Member is unfortunate enough to lose his or her seat. We should consider the possibility of applying a one-fiftieth formula to serving Members in the pre-1983 period. At present, the one-fiftieth formula goes back only to 1983. Many of us have early payments which are evaluated on the one-sixtieth formula. We should look at the possibility of the accrual rate for those whose payments do not reach the ceiling by the time they are 65 continuing beyond their 65th birthday to the full statutory ceiling. That is not possible under the present system. I think, as do all hon. Members, that the 66 per cent. widows' benefit is long overdue.

I shall make one final, cynical point. The Leader of the House slipped in and glossed over an important procedural suggestion. He talked about it being for the convenience of hon. Members and the House to have just one Bill during the life of a Government, and then umbrella legislation—orders based on the Bill—for carrying out other changes during that Parliament's lifetime.

I urge hon. Members to bear in mind what my right hon. Friend the Member for Wythenshawe said. He said that we are the people with the power eventually to decide the scheme's shape. However, if we allow the Government to switch to using subsidiary legislation, we cannot amend it. Therefore, the occasions on which we as Members have the opportunity to table amendments to what the Government might propose will be limited.

I do not want there to be any misunderstanding about this. When I discharge my functions in such matters I regard myself pre-eminently as the Leader of the House rather than as a member of the Executive. As we exercise the responsibilities of the kind described by the right hon. Member for Manchester, Wythenshawe (Mr. Morris), we are exercising the powers of the House over taxpayers' resources and therefore it is important that we carry them out fairly and honourably.

When I made my suggestion I wanted not to deploy a covert objective of an ex-Treasury Minister, but to say that if we proceed expeditiously with the matters before us which have been largely agreed—almost all of which are capable of implementation by secondary legislation—we must be sure that we do not lose the opportunity to deal with further matters of that kind because they cannot be dealt with by secondary legislation.

I seek to ensure that we have the ability to do what the House wants us to do. I think that the existing primary legislation gives us that ability, but because of the curiosity the timing of the Government Actuary's report and its impact on what is happening, I made the suggestion. I did so not as a gamekeeper lurking in a Treasury role but as the Leader of the House.

I am grateful to the right hon. and learned Gentleman. I am sure that none of us would challenge what he has said. In view of his comments about protecting our interests, he probably will not press any further the proposal relating to a single Bill. While he quite rightly says that almost anything any of us wants could be achieved under secondary legislation, a Bill would mean that proposals for change could come from anywhere in the Chamber. However, only the Government can initiate secondary legislation and what they initiate cannot be amended. Therefore, it is vital not to allow this procedural change to slide through, because it will severely limit our ability as Back Benchers, of whatever party, to influence the shape of the future of our fund.

6.16 pm

I wish to propose two improvements to our pension scheme. First, I echo what every speaker from the Back Benches and the Opposition Front Bench has said: we clearly should have two-thirds widows' pensions. That is the standard form in all good, new commercial pension fund arrangements and it is long overdue for this House. I hope that the Leader of the House has noted the unanimity on this issue and that the Top Salary Review Body will bear this in mind when it considers the proposal.

Secondly, the scheme should be improved by the qualifying length of parliamentary service to enable a Member to receive a full pension being substantially reduced. As the right hon. Member for Manchester, Wythenshawe (Mr. Morris) said, at present Members have to serve in the House for between 33⅓ and 40 years, according to whether they were elected before or after July 1983, to qualify for the full pension.

As the hon. Gentleman also said, the average term of service in the House is about 17 years. As my hon. Friend the Member for Horsham (Sir P. Hordern) said, some hon. Members stay here for a much shorter time. My hon. Friend the Member for Horsham and I have been here almost since the Flood and, like our beloved leader, we hope to go on and on and on. But everyone cannot hope to do that, and it is unsatisfactory that such a large proportion of hon. Members can never hope to receive anything like the full pension.

The right hon. Member for Wythenshawe also said that many other Parliaments have much better schemes, in terms of a variety of benefits, than ours. He was absolutely right to mention Australia, but it is not only the Australian Parliament which has a better scheme. In Australia, a Member of Parliament qualifies for a full pension of three quarters of his final salary after 18 years of service.

When I was preparing for this debate I asked the Library to find out the qualifying periods in the two leading Commonwealth Parliaments and the two leading EEC Parliaments. It is interesting to make a comparison with those other Parliaments, bearing in mind the fact that our qualifying period is between 33⅓ and 40 years. Canadian Members of Parliament qualify for a full pension of three quarters of their average salary in the best six years, payable after 17 years service. French Members of Parliament receive the full pension after 22½ years service at a minimum age of 55. West German Members of Parliament can receive a full pension after 16 years of parliamentary service and at the age of 55.

Those figures for the two leading Commonwealth and EEC Parliaments present an extraordinary contrast with those for our own. I suggest that the qualifying length of parliamentary service to obtain a full pension on retirement here should be reduced to 20 years. Even then, because of the average length of service of 17 years, most Members will not be able to attain it.

In the past, various arguments have been advanced against the suggestion that our pensions are insufficient. One was that it is possible for Members who are not members of the Government to hold other paid occupations at the same time and thus obtain other pension rights. I have been able to do that, but only because I have been excluded from Government service. Other Members who are active and punctilious in their attendance at morning Committees find it extremely difficult to have other paid employment.

From reading the newspapers, one sometimes gets the impression that some of the outside jobs that my colleagues take on might have been better avoided. I do not believe that the argument that other paid employment is available stands up to examination.

It has also been argued that, after Members leave this House, they can find very good jobs. One reads of special cases of particularly famous Members who find highly remunerated posts after leaving the House, but that is extremely rare and is becoming rarer. Having discussed this with former Cabinet Ministers, I can say with some insight that even they are finding it very much more difficult to obtain employment, partly because there are far more ex-Cabinet Ministers about now.

It is argued by the Treasury—its favourite and understandable argument, known as the "open-door" argument—that my proposal would open the door to similar demands in the public service for pensions after much shorter periods of service, but that is not valid. Parliamentary service is unique. I speak as one whose majority in my first constituency was 164—after three recounts—so I know that survival here depends not on how good a constituency Member one is but on the geographical area that a Member happens to represent and on the whims of the Boundary Commissioners, who may appear on the scene at any moment and take away 25,000 devoted constituents and replace them with 25,000 political opponents. These are terrors that civil servants do not have to face.

As my hon. Friend the Member for Horsham rightly said, most Members enter the House in their forties so it would be appropriate for them after 20 years to reach the full pension of two-thirds of their final year's salary.

Finally, I echo what has been said so well by many hon. Members about the actuarial position of the fund. The fund is in surplus, as we have heard and, as my hon. Friend the Member for Horsham explained clearly, it is funded, not pay-as-you-earn. As the right hon. Member for Wythenshawe pointed out, the usual practice is that the employer contributes twice as much as the employee. The new extraordinary proposal is that this should be reversed: we should continue to contribute at 9 per cent.—one of the highest contribution rates for employees in any funded pension fund—and the Treasury contribution should be reduced to 4·41 per cent. It has already notionally been reduced to that figure as of April 1989. So, far from the Treasury paying twice what we pay, we pay twice as much as our "employer", which is wholly unjustifiable.

It must also be borne in mind that, until recently, the Treasury contributed 18 per cent., so the suggestion of a 4·41 per cent. rate means that its contribution will drop to less than a quarter of what is has recently been.

I hope that the Leader of the House will sympathetic?ally consider these points and ask the Top Salaries Review Body to look at the suggestions of a two-thirds pension for widows and widowers and a 20-year qualifying period of service, and that my right hon. and learned Friend will ask the TSRB to treat these and our other recommendations with urgency so that its report can be submitted to the House in time for legislation this Session.

6.25 pm

I congratulate the Leader of the House on arranging this debate, belated and twice postponed though it is. I wonder whether the press, who are so anxious to suggest that Members of Parliament put their own benefits and salaries first, would care to consider that the top salaries review report that we are discussing dates from May 1988, while the more important Government Actuary report on the valuation of the pension fund was ordered to be printed on 1 April 1987. If we had waited another nine weeks the next report would have come out, with more up-to-date figures.

It has been amply demonstrated by hon. Members who have spoken that for the considerable contribution of 9 per cent., which takes some matching anywhere in the country, we do not get value for money. Now we find that in 1987, almost three years ago, the Actuary's valuation of the assets in our fund showed that it was £5·4 million in surplus. When suggesting a reduction in the Treasury's contribution, he extrapolated figures for 1989, by when he said that the fund would be £7·4 million in surplus—after, by his own admission, having undervalued the assets. If the figure that the Actuary puts on the assets is correct, the true surplus three years ago was more than £13 million.

The considerable surplus must be distributed in one way or another—our contribution is certainly too high—and I strongly object to the Treasury taking the surplus for itself by reducing its contributions. There are several proposals about what could be done with that surplus.

Setting aside any improvement in our own conditions, what about hon. Members who retired or lost their seats early and whose pension is based on a salary which, it is now admitted, was very much less than it should have been? The pensions are tied to those lower salaries and some former hon. Members are drawing totally inadequate pensions. We should look at that. I know that it is difficult because there are all sorts of legalities and regulations in our pension fund, but after all it is our money. The 9 per cent. that we pay is clearly ours and any contribution from the Treasury could reasonably be considered as deferred wages. The report talks about the 6 per cent. in addition that the Treasury has paid. That was not paid to us and has nothing to do with us, but was paid because of the inadequacy or non-existence of a previous pension fund.

I shall be brief because other hon. Members want to speak. My hon. Friend the Member for Bassetlaw (Mr. Ashton) mentioned the resettlement allowance. I understand that that allowance is paid to hon. Members for any reason—voluntary retirement or perhaps the loss of a seat—up to the age of 64, provided that they retire at a general election. The timing of a general election is not a matter for Back-Benchers. The decision is made elsewhere. The position that I am outlining does not apply to me, but I know several hon. Members to whom it does apply. The timing of the general election could mean the difference between £26,701 and nothing, and one day could make that difference. The rule should be that the resettlement allowance will be paid to any hon. Member who retires or loses his seat, provided that he does so not later than the first general election after his 65th birthday. That would mean that every Member would have the opportunity to decide for himself whether to retire and receive the resettlement allowance.

Does my hon. Friend agree that one problem is that the resettlement grant is paid out of the Consolidated Fund, not out of the pension fund, and that we have no say in it? Surely it would be better to pay that from the pension fund by using some of the surplus and to let the House decide? That would be much better.

My hon. Friend is right. I was about to make that point. If we had it in our control we could use some of the surplus for the purpose that my hon. Friend mentioned.

The calculation of the resettlement allowance is complicated. It takes account of age and length of service and those matters can vary considerably. My hon. Friend the Member for Bassetlaw drew attention to the anomalies. The calculation should be much simpler. It should be one month's salary for every year of service in the House irrespective of age, perhaps with a minimum of three months' salary or some such set amount. That would make the calculation much simpler and fairer.

I want to see some fairness extended to people who were in this place before us and whose pensions are inadequate. I hope that the possibility of using the surplus, which is our money, will be considered.

6.34 pm

I declare an interest in paragraphs 30, 31 and 32 of the TSRB report. I shall be brief so that other Members who wish to take part in the debate will have a chance to do so.

It has been accepted for a long time that we should encourage cross-fertilisation between the European Parliament and national Parliaments. That is why Members of this House draw exactly the same salary as Members of the European Parliament and pay exactly the same contributions towards their pensions. We also draw exactly the same pension as Members of the European Parliament. However, there is one anomaly—it is referred to in paragraphs 30, 31 and 32—and there is no good reason for it. It should be a perfectly natural career pattern for Members of the European Parliament to seek election to this House and for Members here to seek election to the European Parliament. One hon. Member did that at the last European election but was unsuccesful. In Northern Ireland a former Member of the House took a European seat at that election.

Cross-fertilisation, with Members of this House standing for the European Parliament and vice versa, should be the norm. My right hon. and learned Friend the Leader of the House should look again at paragraph 32 because it is a complete anomaly as the salary, pension and contributions are all the same. My right hon. and learned Friend is a reasonable man, and I am sure that he will come to the conclusion that, not for the first time, the TSRB has erred.

6.36 pm

I shall begin by outlining how we have got into such a position over the pension fund. It is important to explain to those who listen to the debate and who read about it that we are talking about money paid from the salaries of hon. Members. The Government Actuary made an assessment of the liability of the fund for the three years from the date on which the assessment was made, and that assessment was based on certain factors.

If the Actuary recommends a reduction in the Treasury contribution, the 1972 legislation requires that recommen?dation to be acted upon without the need to come to the House. We should amend the 1972 Act so that, when the Actuary makes his recommendation about the Treasury contribution, it cannot be implemented until the House has given its approval. If we do not amend the 1972 Act, there is no doubt that Members in future Parliaments will find themselves in the position that we are in now.

To be fair to the Treasury and to the Leader of the House, I should say that they had no option but to implement the recommendation of the Actuary to reduce the Treasury contribution to 4·41 per cent. The decision is a fait accompli, and that is unsatisfactory. We are dealing with the question of what to do with the surplus. I share the view of the hon. Member for Horsham (Sir P. Hordern) that we should not reduce Members' contributions.

The Leader of the House said that, when there is a surplus in a pension fund, it is normal practice for the holiday to be enjoyed only by the employer. I shall give two contrasting examples of recent weeks from the Post Office and British Telecom. The public sector Post Office has a surplus in its fund, and its employees had their contributions reduced from 6·7 per cent. to 6 per cent. The private sector British Telecom has a massive surplus in its fund, but the employee's contribution has not been reduced and the British Telecom board has decided to take a holiday in relation to its contributions. We can all give similar examples to justify our arguments.

What should be done with the surplus? I am not in favour of reducing the contribution from 9 per cent., high though that may be. I am prepared to make such a contribution from my salary, as I suspect are right hon. and hon. Members in all parts of the House, provided that one eventually enjoys the benefits that such a contribution should provide. At present, that is not so. As there is a surplus, how should it be distributed?

At present, the pensions of Members of Parliament are made up of two accrual rates—one of 60 per cent. up to 1983 and another of 50 per cent. from 1983 to date. The Leader of the House should examine the feasibility of converting the sixtieths into fiftieths, or, more radically—though it would fall into line with Civil Service pension arrangements—of converting the whole lot to fortieths. If the pension fund is so much in surplus, then conversion to fortieths, or at least to fiftieths, should be possible.

Much has been said about the need to re-examine widows' pensions. I am strongly in favour of that being done, but any increase should be linked with an improvement in the pensions of right hon. and hon. Members. All that is before the House now is a proposal to increase widows' pensions from 50 per cent. to 66·66 per cent., which is unacceptable. It would be far better to improve both pensions together.

An examination of the ages of right hon. and hon. Members of the present Parliament reveals that this is the youngest House of Commons in the history of this country's parliamentary democracy. One way of keeping Parliament young is to provide adequate pensions to ensure that, when right hon. and hon. Members feel that the time to retire is right, they can do so. I am not the judge of when any other hon. Member should retire, only of when I should do so. Nevertheless, when right hon. and hon. Members wish to retire, they should be able to do so, free in the knowledge that they will be financially supported by an adequate parliamentary pension.

The Leader of the House mentioned the TSRB's recommendation that Ministers leaving office should be paid the equivalent of three months' salary. He said that that measure had been agreed by both sides of the House. I have certain reservations about such an arrangement, which strikes me as an earnings-related benefit. This House abolished such benefits for outsiders, and if it reintroduces them only for Ministers of whatever party is in power—and I am not trying to get at the present Government, because such benefits would be passed on to a Labour Government in 18 months or two years—there would be a serious risk of bringing this House into disrepute. I have not made up my mind on that aspect, and I shall want to consider the proposals that the Leader of the House is to bring before us.

I was asked specifically by Lord Plowden whether I would agree to that proposal, along with others affecting the Prime Minister and Mr. Speaker. As a good trade unionist, and in an attempt to negotiate across the board in the interests of all right hon. and hon. Members, I conceded such payments because I believed then that there would be a general improvement. Unfortunately, the TSRB proposed instead the arrangements that are now before the House. I make no apology for my earlier concession, which seemed to be in the best interests of all right hon. and hon. Members.

I knew the position to be as my right hon. Friend has described it and that he feels somewhat let down by the TSRB. Deals and quid pro quos are arrived at in many different circles, and my right hon. Friend thought that he was making a concession in exchange for an additional benefit. As that has not proved to be the case, we want to re-examine the whole scheme.

I agree with my hon. Friend the Member for Oldham, Central and Royton (Mr. Lamond) that severance pay or the resettlement grant—call it what one may—should be dealt with tidily and cleanly. It would be simplest to accept the proposition of my hon. Friend the Member for Oldham, Central and Royton that one month's salary should be paid for each year of service, with a minimum of six months' salary. There is much to be said for the point made by my hon. Friend the Member for Bassetlaw (Mr. Ashton), that the financial responsibility for meeting resettlement payments should be transferred from the contingency reserve fund to the pension fund, which would help to absorb some of the surplus.

I am grateful to the Leader of the House for listening to my suggestions, and I look forward to seeing them manifest themselves in the various recommendations that will come before the House at a later date.

6.46 pm

Much of the debate has inevitably centred on the Government Actuary's recommendation that the employer's contribution should be reduced to 4·4 per cent. I would normally go along with the comment in the report of the Top Salaries Review Body that it is not common to pass on a funding rate reduction to the employees, which is the usual arrangement where there is a balance in the relationship between the contributions made by the employer and the employee—which could be of the order of an employee contribution of one third and an employer contribution of two thirds. At worse, both sides might contribute one half each.

The Government Actuary's recommendation of a reduction to 4·4 per cent. in the employer's contribution deals with only one moment in time. The scheme's trustees should ascertain whether they have the power to commission an independent consultant actuary to examine the totality of contributions to the scheme in the long term and try to arrive at a proper balance.

I agree with much of what has been said about other improvements and about the present 9 per cent. contribution made by right hon. and hon. Members. I should very much like to see an improvement in the size of widows' pensions, both pre-retirement and post-retirement. The current pension is only 50 per cent., but it is not uncommon for schemes covering comparable employees—if it is possible to find such a thing outside this House—to offer pre-retirement and post-retirement widows' pensions of as much as 66 per cent. Bearing in mind all that the job of a right hon. and hon. Member entails—with its unsociable hours, the schizophrenic existence that it imposes, and the uncertain future that it presents—we owe it to our dependants to ensure that the scheme incorporates decent widows' pensions.

There is a proposal to increase the value of the death benefit from one times salary to two times salary. I welcome my right hon. and learned Friend's proposal to backdate that improvement to cover former Members of Parliament who are no longer with us. Nevertheless, death benefit outside can be as large as four times salary. Less emphasis should be placed on its being a single lump sum payment, because after all the bills have been paid—perhaps including a mortgage commitment, albeit that it makes sense to arrange alternative protection in that respect—the lump sum should be viewed as additional income replacement, to provide adequate support for retired widows.

The TSRB report makes provision for early retirement. I welcome the spirit of the recommendations, but I am worried that the proposal might create fresh anomalies. Taking the calculations and abatements used in the report, I noticed that for two Members, both aged 60, leaving on a retirement basis, one with 20 years' service would receive a pension of 20 fiftieths or 40 per cent., while his colleague, leaving after only 15 years' service would receive 15 fiftieths or 30 per cent. There would be a further abatement based on years of service. Instead of receiving 30 per cent., the latter would receive only 20·7 per cent. I cannot see why such a difference between two Members of the same age is justified.

When the question was referred to the TSRB, I think that it was asked specifically whether an early retirement pension could he provided from age 55. On the same examples of Members with 20 and 15 years' service respectively, one would get a pension of 27·6 per cent. and the other would get only 15 per cent. That is caused by the perpetuation of a double penalty which is not justified. I hope that the Leader of the House will consider further the use of years of service as a double abatement.

That might also be the answer to the question raised about Members of the European Assembly who are Members of this House. I have great sympathy for the point that has been made about them. If every Member got an early retirement pension, determined solely by the exact early retirement, the years of service, whether in this place or in the European Assembly, could be dealt with fairly and properly.

There is great scope for further progress on the parliamentary pension scheme. Other options deserve consideration. I hope that those options will be laid before all Members by the trustees, perhaps informally, before we have a longer and deeper debate.

6.52 pm

I apologise to the hon. Member for Ogmore (Mr. Powell) for intervening now, but there are only eight minutes left for a reply. I shall listen with interest to what the hon. Member may have to say to me privately afterwards.

I have listened closely to what has been said by colleagues during the debate. I will not make a debating reply, responding to each point as though they had to be knocked down like ninepins in the customary fashion. The hon. Member for Ashfield (Mr. Haynes) reproached me a little unjustly because I was not speaking in the capacity that he normally imputes to me. I appreciate very much the contributions from hon. Members on both sides.

I should also have expressed my appreciation for the work of Mr. Dobson, Mr. Lewis and Miss Moreen McColl, as well as the work of Treasury staff on these matters.

It was unfair of the right hon. Member for Swansea, West (Mr. Williams) to talk about a Treasury rip-off. To a large extent I think that a number of the things about which we are complaining were a result of a self-imposed big dipper. We agreed, rightly or wrongly, to the 9 per cent. contribution. The latest valuation by the Government Actuary, bringing it down to 4·4 per cent., is also an automatic consequence of legislation passed as long ago as 1972. Of course, it is in the power of the House to make the necessary changes. That is a power which we have to exercise responsibly.

I was struck by the way in which my hon. Friends the Members for Horsham (Sir P. Hordern) and East Lindsey (Sir P. Tapsell) referred to the extent to which we are also in the power of the electorate, whether we be drones, bees or intermittent occupants of each role. I was struck particularly by the insight of my hon. Friend the Member for East Lindsey into how swiftly we might be removed altogether from this place. I remember vividly coming back on polling day in 1987 from a Nato summit in Reykjavik; I arrived in time for the count in my constituency. I remember saying to the officials who travelled in the plane with me, "At least you know what you will be doing tomorrow afternoon." That shows the hazardous nature of our occupation.

We have a special responsibility. Although a large part of the money is contributed by hon. Members, a significant part is contributed by the taxpayer, and we have to consider it in that way.

There are special factors, as my hon. Friend the Member for Horsham pointed out. None of us was covered by a scheme before 1964. We have, as I think we should, a rapid accrual scheme. That is why the rate of employees' contribution is so high. We are not the same as the fireman or the policeman where the hazard of the employment allows for early retirement; in most cases, we do not retire early but we arrive late. Even antiques like my hon. Friend the Member for Horsham, who has just celebrated his silver jubilee, have been here for only 25 years.

How am I to handle the matter from now on? I hope, after further proper consultations, to implement as expeditiously as possible the matters that have been under consideration by the TSRB, such as resettlement, early retirement, death in service and matters relating to ministerial severance pay and office holders, and also excess contributions, if we can get the right answer.

I note the support expressed by the right hon. Member for Salford, East (Mr. Orme) in the case that I offered, which was supported also by my hon. Friend the Member for Hendon, South (Mr. Marshall), in relation to Members of the European Parliament. With respect to the insight of my hon. Friend the Member for Cardiff, North (Mr. Jones) from my native land, it is a Parliament and not an Assembly. As for the best way forward procedurally, I shall examine the suggestions made by the right hon. Member for Manchester, Wythenshawe (Mr. Morris). I cannot buy his procedural proposals on the nod.

I think the right hon. Member for Swansea, West misunderstood me when I talked about trying to get as much as we could into the secondary legislation framework. It is not because I want to avoid the possibility of amendment; I want to avoid being stuck unnecessarily, waiting for the much more difficult achievement of primary legislation, if we happen to need that to deal with some matters, such as the effect of the Government Actuary's report. There might be a blockage in getting another Bill because of the legislative programme.

After further consideration, I shall seek to identify the matters which should be considered by the TSRB. Not necessarily all the matters that have been raised are appropriate for consideration by the TSRB, as has been pointed out. I should like that consideration to be undertaken as quickly as possible, as my hon. Friends the Members for Horsham and for East Lindsey suggested.

If I am to identify the principal matters for such consideration, I think that the most important is that which has been described as the balance of the fund, or the right relationship between employer and employee. I am struck by the widespread support for the retention of the figure of 9 per cent. I see the right hon. Member for Salford, East shaking his head. I do not say that that figure was endorsed universally, but it was supported widely. It gives resources for the improvement of benefits. Of course, it need not be as high, but it should be a generous figure.

On a contributions holiday, raised by my hon. Friend the Member for Cardiff, North and by my hon. Friend and neighbour, the Member for Croydon, South (Sir W. Clark), it is right to point out that, although it can be dealt with either way, a document provided for the trustees, based on the National Association of Pension Funds' survey 1988, showed at that time that in three quarters of the cases the employee contributions were not altered but substantial reductions were made in the employers' contributions. That is not decisive. At any rate, balance is one question for consideration.

The second important matter, strongly supported on all sides of the House, is the benefit that should accrue to widows or widowers of hon. Members. I subscribe to everything that was said about the miserable existence that we impose upon our spouses, which justifies sympathetic consideration.

Thirdly, my hon. Friend the Member for East Lindsey also raised the rate of build-up of entitlement to full pension. While I mention these things, I am not prejudging them, but they are matters that have been widely supported.

Fourthly, the resettlement grant—however one describes it—again may or may not be a matter entirely for consideration by the TSRB.

As we handle the matter in that way, I shall try to keep the House, and certainly the trustees, informed about the progress of my consideration, so that we can deal with these matters as expeditiously as the House would wish.

I hope that I have made a reasonable response to the points raised today.

It being Seven o'clock the motion for the Adjournment of the House lapsed, pursuant to Order [12 January].