I am pleased to inform the House that there will be a significant increase in Gurkha pensions backdated to January 2006. This increase is in line with the tripartite agreement which established a linkage between Indian army pensions and those of the British Brigade of Gurkhas.

It has always been our policy to ensure a fair deal for the 26,500 Gurkha pensioners mainly living in Nepal, who will receive an increase in their pension rates. This is in addition to the 7 per cent. increase they received earlier this year as part of their annual inflationary uplift. Over 85 per cent. of pensioners who were of the rank of corporal or below will receive an increase to their pension of at least 19 per cent. I am also announcing today a review into the mechanism by which we uprate Gurkha pensions annually.

The Gurkha pension scheme currently cost some £33 million per year and it is calculated that this increase will add to the cost by £6 million per year.

The increased benefits have been included in the Gurkha offer to transfer to the armed forces pension scheme, also affecting 3,400 serving and 2,400 recently retired Gurkhas, which I announced to the House on 8 March 2007, Official Report, columns 141-42WS.

This increase sustains Gurkha service pensions at a fair and appropriate level and demonstrates the Government’s continuing commitment to the retired Gurkha community in Nepal. It also reinforces the UK’s long-standing links with the Government of Nepal, whose co-operation and support for the recruitment of Nepalese citizens into the Brigade of Gurkhas we greatly value.