It was my original intention to speak on the need for an early increase in Public Service pensions but, owing to the rules of procedure governing the subject, I am unable to speak on the general question of increasing public service pensions as it would be ruled out of order because it involves legislation. I understand that I can speak on the question of increasing the pensions of ex-members of the Armed Forces because that can be carried out by Royal Warrant and does not involve legislation. In these circumstances I shall confine my remarks to that category, and I am sorry to say that this has meant a disappointment to my hon. Friend the Member for Manchester Wythenshawe (Mr. Alfred Morris) who had asked me to raise the question of teachers' pensions.
Whilst in the course of my remarks I may make quotations from statements made about public service pensions as a whole, I shall do so only to show their relevance and application to Armed Forces pensioners. In other words, I am forced to mention the general question in order to arrive at the particular.
The undertaking which we gave at the General Election was that
Pensions will be linked to earnings. This link will mean that pensioners are not only compensated for rising prices but also receive their full and fair share in rising national prosperity.
At the same time, when various pensioners' organisations inquired about our proposals on pensions, we informed them that we were
favourably disposed towards the principle of parity
that is to say, the same pensions for the same service regardless of the date of retirement. We promised that we would open negotiations with interested bodies to see how reforms along these lines could be introduced.
The Prime Minister is on record as saying that
Pensions will be reviewed so that they will keep their full purchasing power instead of
being eroded as they have been in recent years.
When we are considering the pensions of Armed Forces pensioners we are also considering a category of pensioner who normally retired at an earlier age than the majority of other pensioners. They have therefore suffered from the effects of inflation for many more years than have the ordinary pensioners who normally cannot retire before the age of 60 years.
An examination of the statistics governing retired officers shows that 16 per cent. were retired on 1919 rates of retirement pay and a further 45 per cent. were retired on rates fixed in 1945 or earlier. Ratings and other ranks are in a similar position and many of them are receiving less than half the pensions paid to those who retire today.
We must not forget also that their widows' pensions are based on the same obsolete rates, and many are in receipt of National Assistance and are among the poorest in the land. In the journal of the Officers' Pension Society there is a table giving comparative information about widows' pensions, and it is shown that eight countries have better widows' pensions than we do and in most cases the pension is nearly double what we pay to the widows of our Forces pensioners. Only Finland is below our level. Moreover, the widows of other ranks, other than warrant officers Class I, who were discharged before September, 1950, receive no pension at all
The present pensions increase system, which has remained practically unchanged for 45 years, has resulted in all Forces pensioners having continually to lower their standard of life, and those who live in retirement the longest receive the least upon which to live when they are old and least able to help themselves. As is said in an appendix on Armed Forces pensions in the book, "Public Sector Pensions", by Gerald Rhodes, Service pensions differ from the normal pattern of civilian public sector schemes in not being directly related to pay at the time of retirement. Thus, increases in pay do not automatically lead to increases in prospective pension, as happens in terminal salary schemes. When, therefore, because of inflation or for some other cause, a change in pension rates is thought desirable, a new scale or code is drawn up in place of the existing one. Hence, at any one time there may be several codes in existence and the pension received by any individual pensioner will depend on the code in force at the time he retired. In this connection, it should not be forgotten that members of the women's Services are paid less and receive smaller pensions than men.
A pension, like a salary or wage, is income. Since the last increase under the Royal Warrant, incomes have risen inside and outside the Armed Forces, but Armed Forces pensioners have remained pegged to the position determined by that last Royal Warrant in, I think, 1962. Therefore, those whose pensions have been based on out of date wage and salary scales have no means of combating increases in rents, rates, taxes, food prices, fares and other necessities of life, let alone in the cost of small luxuries which make life easier.
A pension for a member of the Armed Forces is an income based upon service. Those still serving in the Armed Forces have their incomes related to the present value of the £, and those who retire now at least have the advantage of a pension based upon current standards. Why, then, should former members of the Armed Forces, with length and level of service similar to those who retire today, be restricted to a pension related to out of date salary and wage rates? The most recent Royal Warrant improving Armed Forces pensions still gave in cash, though higher in percentage, the smallest increases to the oldest and least well provided for. In the last 12 months, the Index of Retail Prices has moved up over 8 points.
Other countries are aware of the need for urgent action. In the United States, retired pay is increased automatically with increases in active pay, while in France, Belgium, West Germany, Italy, Holland, Denmark, Norway, Sweden and Spain retired pay goes up with the cost of living. It appears from this that there is now wider recognition of the need to eliminate the suffering caused by a system which freezes pensions at their original paper value plus any percentage increases that may from time to time be made. Pensions should in all justice be increased in proportion year by year. Even if one retired on the 1960 Code it would be necessary to increase the award by no less than 10·5 per cent. in order for it to be comparable with the 1964 Code.
I know from the volume of mail I receive on the subject that the question of Forces pensions and public service pensions is uppermost in the minds of many of my constituents. The position throughout the country is rather bleak, but Brighton has a high percentage of retired people. They live in an area of abnormally high rates and they have also been affected by increases in mortgage rates and the price of food. So far they have not been able to benefit from any concession by way of cheap bus fares, although many live in the suburbs.
Behind the respectable front room curtains of many smart homes there is a story of suffering and hardship. It is no answer to say that many can qualify for National Assistance. Rightly or wrongly, these are people to whom that proposition is repugnant. They are not asking for charity and in any case if the money is there for National Assistance it must be made available for an increase in pensions. They are asking for compensation to which they are entitled.
Since last October many hon. Members on both sides have been concerned about this position. Numerous Questions have been put down and we are informed that we must await the outcome of a review which is independent of the review of social security benefits generally. I am aware that the country has many acute financial problems and that if the principle of parity were conceded for all public service pensioners it would cost £100 million a year. Nevertheless the time is running out for these people. They are in the evening of their lives. Time is not on their side and in all conscience, I believe that within eight months we should at least be able to state our proposals about these pensions.
The time is coming when the public will make an outcry because a considerable section of the population is not getting a fair crack of the whip, and that outcry will transcend party politics. I would like the Government to concede the principle of parity even if it may mean introducing it in stages over a number of years.
I said at the outset that I would be speaking purely on the question of increased pensions for ex-members of the Forces. Nothing I have said can hide the fact—and over 160 signatures to Early Day Motion No. 220 supports it—that the remarks I have made about Forces pensions apply equally to all public service pensions and the Government should do all in their power to look at the question as a whole, particularly having regard to the urgency of the situation.
I support the case put by the hon. Member for Brighton, Kemptown (Mr. Hobden). As I am sure he is aware, for a very long time I have tried to do all in my power in Parliament to forward the cause not only of Forces pensioners but of all public service pensioners as well. Quite apart from the need to make some very real improvement in the pensions payable at present, I want to register in particular my view that the whole system operating in relation to these groups of people really does require overhauling and a more modern approach made.
It is completely right, as the hon. Gentleman said, that those who retired years ago, and especially their widows, are worse off.
I fully recognise that the arrangements for pensions and retired pay were improved by the Government which I supported before the General Election, but much of the improvement was to attract men and women into the Services, in itself a satisfactory objective. But it is not right that this country, which has been devotedly served by public servants and members of the Armed Forces, should leave those who did valiant and reliable service in the condition in which many now find themselves.
Like the hon. Gentleman, I represent a constituency with a higher than average proportion of retired people, and I know how strongly they feel. I think that it was the last occasion of a Pensions (Increase) Act when a higher percentage increase was given to those who had retired earlier: but a 12½ per cent. increase to someone getting a low basic amount makes for a smaller increase than a lower percentage increase of a greater basic pension. Therefore, although the new scheme had a very good objective, it failed badly.
I hope that the Minister will tell us that we can look forward to a redemption of the pledge made by his party at the General Election and that, with the full agreement of the House, we are to have legislation so that there will no longer be long delays before we have modern pensions increases legislation, which is vitally important.
I wish the hon. Gentleman well. I am delighted that he has thought of bringing forward this subject. I read the pledge given to the Officers' Pension Society about officers, their dependants and those of other ranks, but I do not recollect anything being said about waiting for a review. I understand about the other review, but although I was naturally questioned about this subject, as was my Labour opponent, I do not remember my opponent saying that the redemption of the pledge would have to await a review. I hope that we shall be told about the pensions for the Armed Forces and especially about widows' pensions and that we shall not be told that we have to await a review. I congratulate the hon. Gentleman, and I am delighted to be associated with him and hope that we are to hear good news for all pensioners, but especially for those who have served in the Armed Forces.
Public service pensioners should be grateful to my hon. Friend the Member for Brighton, Kemptown (Mr. Hobden) for raising their case in this debate and for doing so so persuasively. I am sure that they will not be surprised that at this debate, even at this unusual hour, the hon. Lady the Member for Tynemouth (Dame Irene Ward) should be at her station again to carry out the task which she has performed before and also stating her strongly held views on this subject.
At the same time I think that neither of the two hon. Members who remain in their seats now seriously expects from me a far-reaching statement on Government policy on this extremely important subject. I noticed with a particular personal interest that my hon. Friend the Member for Brighton, Kemptown referred to the unusually large number of public service pensioners he counts among his constituents in Brighton. As it happens, some of these constituents are well known to my wife and myself. He may not know that during the election, by helping with postal votes and transport, we claim to have contributed at least five pensioner's votes to my hon. Friend's slender majority of seven. I hope, therefore, that he will recognise that I, like him, understand that many of his constituents and many people throughout the country regard this as a vitally important subject.
I have the greatest sympathy with a great deal of what my hon. Friend has said. He has chosen a subject of very great concern to a very large number of people, not only in the Armed Forces but throughout the country. I can only regret that his Motion has come at a time when the Government's general review on public service pensions, which includes the Armed Forces pensions, which I distinguish from the long term review on the social security measures, which is also under way, is still in progress. I will not be able to tell him tonight anything which can be regarded as news.
Pensions today are paid under a number of codes, dating from 1919, and running to 1945, 1950, 1956, 1959, 1960, 1962 and 1964. The basic rates paid under these codes partly reflect increases in real terms in active service pay, and the increases in successive codes provide some measure of the improvements which have been made in Service pay in recent years to match the rate of increase in wages and salaries in civilian life. The years since 1945 and even more since 1919 have seen a steady fall in the purchasing power of money, as well as increases in the real value of wages and salaries. The rates of pension paid under the earlier codes have been adjusted at intervals on this account. There have been pensions increase measures for public service pensioners generally in 1944, 1947, 1952 and 1956, 1959 and 1962.
The increases applied in general to those over 60 or the incapacitated, or widows. The object of these measures was to alleviate hardship caused by progressive increases in the cost of living, and the measures do not all work in the same fashion. The measures of 1944, 1947 and 1956 gave larger proportionate increases to those with smaller pensions than to those with larger pensions. The later acts of 1959 and 1962 gave uniform percentage increases, but distinguished between different codes. For instance, the broad basis of the 1962 measure was to give 12 per cent. to those on the 1956 and earlier codes, 6 per cent. to ratings and other ranks on the 1959 code and 4 per cent. to those on the 1960 code.
May I take up a point which my hon. Friend made? He reminded me of statements made during the General Election about the relation of pensions to the cost of living. I do not think that he meant to suggest that the Government had fallen down on their undertaking or were likely to do so. This, with respect, would be to jump to conclusions against the evidence. Ever since they came to office, the Government have shown that they have a very lively sense of obligation towards pensioners in general, as witnessed by the increase in the National Insurance pension, which applies to the great mass of pensioners, including most of those drawing Armed Forces pensions.
My hon. Friend asked about the maintenance of the real value of Armed Service pensions. Our review is still in progress, and it is too soon for anyone to draw conclusions about the outcome. As a result of past pensions increase Measures, the basic rates of pension have been increased, but some relativities have been disturbed in the process. We have to consider two large general questions. First, is there a case for another pensions increase; and, secondly, if so, is there any means of ironing out the disparities which have crept in?
The case for pensions increases in the past depended on a substantial movement in the retail price index. Hon. Members need no reminding from me that there has been a pretty sizeable increase since the introduction of the last Measure in January, 1963.
But this is not the whole story. Over 85 per cent. of the Armed Service pensioners are or will become eligible for the National Insurance retirement pension as well as their Service pension, and one of the Government's first acts was to raise these National Insurance benefits. Since January 1963 the cost of living has gone up by just over 10 per cent. but during the same period there have been two increases in National Insurance pensions—of 10s., which is 17½ per cent., on 27th May, 1963, and of 12s. 6d., which is 18½ per cent., on 28th March, 1965. These increases are for single persons, and the increases in the married rate have been bigger. The increases in March this year were the largest ever.
If we take the increase in the total pension income of those who get the Armed Forces pension and the National Insurance pension combined and compare it with the cost of living since the pensions were awarded, the comparison shows up in better light for the pensioner.
My hon. Friend said that in the United States retired pay goes up with active pay and that in France and most other Western European countries, there are similar benefits for Armed Service pensioners. It is only right to point out that in one way or another none of those countries allows Armed Forces pensioners to draw the old age pension in addition to the Service pension.
Although I cannot accept all my hon. Friend's arguments, I do not want to give the wrong impression. The case which he has presented for an increase in the Armed Forces pensions is strong, and nothing that I have said should be taken to imply that the Government deny that such a case exists. Supposing, then, that we find as a result of our review that a case is made out for a pensions increase. The second main question which arises is whether we ought not to try to iron out some of the disparities which have arisen. The alternative to trying to iron out the disparities in a number of rather elaborate ways is one which has often been canvassed—the principle of parity, the granting of pensions to all who retired under earlier codes on an equal basis, rank for rank and service for service, with those retiring under the current code.
As I have said on previous occasions in the House, parity has big advantages but it also suffers from several important disadvantages, not the least being the cost. The immediate cost of parity on the modern code for Armed Forces pensioners would be something like £25 million. The cost of parity for the whole public service would, as my hon. Friend has said, be over £100 million. It could, of course, be introduced in stages, but the national economy would soon feel the weight of the ultimate commitment. In the private sector and nationalised industries, a commitment to parity might involve a cost of £1,000 million.
I am sorry not to have been able tonight to give my hon. Friend any positive statement on future Government policy in this matter, but I hope that, at least, he will draw one or two conclusions from what I have said. The first is that we fully realise and respect the importance of the subject and the strength of the views of all those, including the hon. Lady the Member for Tynemouth and my hon. and learned Friend the Member for Northampton, who have constantly pressed the case of the Armed Forces pensioner.
The second conclusion which, I hope, my hon. Friend has drawn is that the subject is a difficult one, both in complexity and in the cost of possible improvements and that, therefore, we have not yet been able to come to conclusions on it. Thirdly, we have, nevertheless, given it detailed consideration so that when a decision is reached, all those concerned will know that it has been taken with full knowledge and full appreciation of everything that is involved.