I beg to move, That the Bill be now read a Second time.

I am grateful for the opportunity to bring the Bill to the Floor of the House. I am representing my right hon. Friend the Member for East Hampshire (Mr. Mates). I am grateful to the Minister for his time, and I know that I can always expect a fair hearing from him.

I will give a bit of background first, but I will be extremely brief. Improvements to the armed forces pension scheme in 1973 led to an increase in the provision for service widows. As with all improvements to public sector pension schemes, the change was not retrospective. In this case, that meant that an anomaly was created whereby widows whose husbands served before 31 March 1973 receive only one third of their late husband's pension, whereas the widows of servicemen who served on or after 31 March 1973 receive one half of their husband's pension.

Those who served in the forces on or after 31 March 1973 contributed to the higher rate of widows' pensions through the deductions from their salaries. Although those who were serving at the time could "buy in" their pre-1973 service, so as to ensure that their wife was eligible for a half-rate pension on their death, those who retired before the change could not do so.

In 2002, the European Court of Human Rights ruled out various challenges to the armed forces pension scheme in respect of widows. It rejected the argument that the changes in 1973 had treated service personnel unfairly. Therefore, my right hon. Friend the Member for East Hampshire wishes to introduce the following provisions.

The Bill does not provide an increase from one third to one half of the relevant forces widows' pensions, because to do so would breach the ban on private Members’ Bills spending public money. Instead, the Bill provides for the Government, through regulation within 12 months of the Bill becoming law, to provide pensions to the spouses or civil partners of servicemen or servicewomen who retired before 31 March 1973 and between 31 March 1973 and 6 April 2005 on an equal basis. That means that the Government can either increase the pensions of those currently receiving a one-third pension, or reduce the pensions of those receiving one half. Clearly, the latter is a non-starter.

It is difficult to be exact about the cost of that. The cost of raising pensions to one half does not seem to be available from the Ministry of Defence. It has said that it does not know how many widows are in this position. In evidence to the Select Committee on Defence in 2002, the MOD estimated the cost of making the 1973 change retrospective at between £25 million and £30 million a year. The cost of course is falling all the time as, sadly, widows die. The Ministry of Defence figure is a gross cost; part of the expense would presumably be recouped through higher tax receipts.

I fully understand the arguments against my right hon. Friend’s Bill, but every Member represents widows who are caught in this anomalous position; we have all had mail, pressure or surgery cases involving such widows. I personally know many widows—not so much from my generation, but certainly from my father’s generation—who are now in this pensions trap.

This is a right and sensible alteration to make, and the Government would be wise to listen to my right hon. Friend’s proposal. I hope that they will see reason, and I look forward to hearing the Minister’s arguments.

I just wish to place on the record the Liberal Democrats’ support for the Bill, and to note that three of my party colleagues are among its sponsors.

I congratulate my hon. Friend the Member for Newark (Patrick Mercer) on his clear and lucid account of the Bill’s provisions. We understand what it seeks to achieve. Equality of treatment is a matter of fairness, which we support. He mentioned cost and said that it was not an option to reduce pensions currently in payment, and I think we would all accept that we must not do that.

The key question for the Government is how much this measure would cost. On 6 November last year, my hon. Friend the Member for Forest of Dean (Mr. Harper) tabled a written parliamentary question. In the reply, it was stated that the Government Actuary had confirmed £50 million as the cost of the measure, and it was also stated that if the measure were applied across all public sector pension schemes the total cost could be between £300 million and £500 million. Will the Minister respond specifically on that point, so we know exactly how much it might be?

Will the Minister also say something about the war widow’s special allowance? I have tried to find out about that, although not with any great success. Does the special allowance increase the value of the pensions of the widows who receive it to the half-pension level that pre-1973 retirees would have enjoyed? I would also like to know how many widows whose servicemen husbands retired before 31 March 1973 are not receiving that allowance. Those are all facts that we need to know in order to be able to take the Bill forward.

The official Opposition are sympathetic to the sentiments behind the Bill, as expressed by my hon. Friend the Member for Newark. We back the policy of equal treatment or fairness; that should run through everything we do in this House. However, there are significant questions that we need the Minister to answer before we can proceed.

I congratulate the right hon. Member for East Hampshire (Mr. Mates) on obtaining the time for this debate, and the hon. Member for Newark (Patrick Mercer) on coming to the Chamber to speak in support of the Bill. I also pay tribute to his distinguished service in the armed forces. I know that he takes a great deal of interest in the welfare not only of the armed forces but of their families and, sadly, widows as well—of which, of course, we have had a number in recent years, in addition to those from earlier conflicts.

I pay tribute to Mrs. Jenny Green of the War Widows Association, who will be known to many Members of this House. She has done sterling work on behalf of war widows, and will be stepping down some time this year. She has taken a great interest in war widows’ issues and has been a forceful character in pursuing them.

Let me first give a general picture, so that a number of points are on the record. I hope that the House will bear with me. The Government of course value greatly the work and commitment of the individuals who have served in our armed forces over the years; in that regard, we need only look at the outstanding and courageous work that our people are doing in Iraq today. Of course, these individuals have received all the benefits that were considered appropriate at the time, and that were part of their terms and conditions of service when they served. It is a long-standing principle that, where changes are made to the benefits of public service pension schemes, they are implemented from a current date for future service only and are not made retrospective.

There are of course a number of legacy issues, including those relating to widows’ and widowers’ benefits, that have arisen as a result of Government economic policies and improvements that were made in the past—mostly in the late 1970s—to the armed forces pension scheme 75, known as AFPS 75, that did not cover those who served before the changes were made. It is in this context that I want to address the three key legacy issues relating to the Bill.

On pensions for life, following a change of policy in 2000, widows and widowers whose spouses died for reasons associated with service life have been able to retain their pensions on remarriage or cohabitation. However, the change was extended only to those individuals who had not already remarried or cohabited; it was not made retrospective. The change made in 2000 was exceptional and for a very special group of war widows; it was not extended to widows or widowers whose spouses had died for reasons unrelated to service. The one-off cost of buying back the liability to restore the attributable pensions of those who remarried before the change would be about £40 million. The future cost of providing pensions for life for non-attributable widows and widowers would be £14 million a year, with retrospective costs of £460 million for the armed forces scheme, and of some £3 billion if applied to the rest of the public sector.

On post-retirement marriages, the Social Security Act 1975 required occupational pension schemes to introduce pensions for widows who married their husbands after they had retired from the service. Provision was made in AFPS 75 to comply with the Act, but only widows whose husbands gave service after April 1978 benefited, and only service after that date was used when calculating the level of pension. For widowers, the change was not introduced until April 1989, and then only for service from that date. The one-off cost of extending the entitlement to all current and deferred AFPS pensioners is estimated at £50 million; the cost across all public service schemes would of course be much greater.

On the one-third rate and half-rate changes, until 1973 the widow of a retired serviceman was entitled to a pension equal to one third of that of her late husband. As a result of the Social Security Act 1973, this was increased to one half from April 1973, but only for service from that date. An opportunity was given to serving personnel to make direct contributions in order to buy in former service at the half rate. It would cost up to £30 million a year to change all pre-1973 armed forces widows’ pensions to half rate, and the cost across all public service schemes would of course be much greater. I should add that, having given the option for members of the armed forces serving on or after 31 March 1973 to buy in their previous service if they wished, it would be unfair to extend the half-rate pension to widows whose husbands had not contributed financially towards the improvement.

Naturally, many issues associated with widows’ pensions and forces pensions in general revolve around the retrospection policy that Governments have continuously stuck to over the years. The Government are of course very aware of the strength of the feeling among ex-service personnel and dependants who have not benefited from improvements to pension provision. However, legal principles dictate that members’ entitlements are generally calculated according to pension rules in force at the date of their retirement. It is a policy principle of public service pensions, upheld by successive Governments, that improvements to pension schemes are not made retrospective.

I ask the hon. Member for Newark to take into account the fact that the AFPS 75 legacy issues do not affect only the armed forces, but are common to all public service schemes. Where legacy issues are common across public sector schemes, a retrospective change implemented for the armed forces would certainly result in pressure from others for similar treatment. To concede retrospection to one group would place great pressure on other public sector—

It being half-past Two o’clock, the debate stood adjourned.

Debate to be resumed on Friday 22 February.