Orders of the Day — Overseas Retirement Pensioners

– in the House of Commons at 12:00 am on 16th January 1974.

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4.22 a.m.

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

With the possibility of a General Election in the next few weeks and knowing that there is not even a postal vote in the subject that I wish to raise as No. 12 on the list of subjects, and knowing that I would be called to speak at this witching early hour of the morning, I was sorely tempted to cross my name off the list. But I was dreaming recently that I was at a New Year party at which "Auld Lang Syne" was being sung, and my mind suddenly switched from "Auld Lang Syne" to the many overseas pensioners abroad. I then realised that I must come to the House to make once again a plea on their behalf to the Government.

I raised this problem over a year ago in a debate on a previous Consolidated Fund Bill in order to get something done for the 41,000 retirement pensioners scattered around the world who, having left the country, get no increment in their pension or, indeed, any Christmas bonus. I must underline, as the Minister will no doubt say, that of the total of retirement pensioners overseas the largest proportion live in South Africa, about 6,700. But there are over 3,000 in Spain.

Since I spoke on this subject in December 1972, unfortunately nothing very much has been done for these people. I am glad to say that I was drawn first on the list on that previous occasion. I apologise to my hon. Friend for having brought him to the House at this hour. However, even joining the EEC has helped these people only at the margins.

The greatest hope is to get some form of reciprocal arrangement and for some time the Minister responsible has been holding out hope of reaching a reciprocal agreement soon with Spain. I questioned the Prime Minister about that in October and earlier. A certain amount of hope was held out at that time.

The chief reason for raising this subject now is that the Minister will be able to report on the present state of negotiations and perhaps say why the negotiations have been dragging out for such along time, particularly when many of the pensioners living in Spain are hard hit, as are many of those living abroad, by the falling value of the pound. When does the Minister hope to reach agreement with Spain?

Is it not possible to start negotiations with South Africa on some form of reciprocal arrangement? I have had talks with South African senators and with retirement pensioners from South Africa. I am sure we could do more than we are at Government level on behalf of these pensioners. It is particularly important to do so because of the increased burden they bear. I have the case of a pensioner in South Africa asking whether it would be possible to come back to a home for the elderly in Kent. My hon. Friend the Minister knows of this case and has replied to me about it. I am sure that this is an indication of what we can expect in the future. It might be cheaper to pay a periodic increase in the retirement pension than face an influx of elderly people returning to this country because they can no longer afford to live abroad, and putting an additional strain on our health and welfare services.

Most of these pensioners have spent the best part of their working lives in the United Kingdom and others have spent the time working in the Commonwealth for British concerns, private or Government. Nearly all will have contributed to the national insurance scheme. Surely they should get the increments in the flat-rate retirement pension. The scheme has been reviewed by the Select Committee on the Parliamentary Commissioner for Administration. Hon. Members on that Committee say that they are aware that the present practice of not paying the increase has been reviewed by successive Governments and that any increase would be met by people resident in Britain. The cost would be about £11 million.

I know that some of that money could come to North-East Essex but, like me, my constituents regard this as a debt of honour and whether a pensioner is in poor circumstances in North-East Essex or living abroad it is right that we should look after these British citizens in the same way that we would look after our constituents. The Treasury may say callously that it will cost £11 million and therefore it cannot worry about it, but from the point of view of looking after elderly people who are in need, the Government should look more seriously at this proposal.

The Committee says that it is of the opinion that it must produce a sense of unfairness that persons who by their work and contributions here have qualified for retirement pension from this country should be denied an increase in that pension because they go and live abroad. That sense of unfairness must be all the greater because those who live in countries with which there are reciprocal agreements receive an increase.

Since I raised the subject a year ago I can vouch for the sense of injustice felt by those retirement pensioners, who are also hit by the lowering of the value of the pound. I have heard from many of them, and have forwarded some of the letters to my hon. Friend so that he can know of their strong feelings.

Perhaps these days we should welcome any reluctance by the Treasury to increase its expenditure, especially across the exchanges. But is not an insurance element also involved in retirement pension contributions? I am certain that it is. Whilst it can be said that there is a case for the Government attitude, I am sure that the Select Committee was right to say that the Government must seriously think, as soon as they can, of being more generous to retirement pensioners living abroad, particularly in view of the changes in the value of money.

I and many other people believe that a debt of honour is involved. If the Minister cannot now meet it by paying the increases, I hope that he will be able to speed ahead with the negotiations with Spain and start negotiations with South Africa. I am sure that that is a sphere in which we might be able to help as well.

4.32 a.m.

Photo of Mr Paul Dean Mr Paul Dean , Somerset North

I know of the interest of my hon. Friend the Member for Harwich (Mr. Ridsdale) in this subject. He raised it in a Consolidated Fund Bill debate last year, on that occasion at a rather more civilised hour. Despite the hour, I am grateful to him for raising this important matter. I hope to be able at least to convey some modest progress over some parts of the field.

As my hon. Friend will know, national insurance widows' and retirement pensions are paid anywhere in the world. As he has pointed out, however, they are paid at the rate current when the pensioner left this country or when he qualified for his pension if he was then already living abroad. Subsequent increases in the rate of pension payable to pensioners in this country are not paid to pensioners residing abroad unless they are living in a country with which we have been able to make an appropriate reciprocal agreement on social security.

The policy of not paying pension increases unconditionally to pensioners who have gone to live abroad has been followed by successive Governments on the grounds that national insurance is a social security system designed primarily for people in this country and that the benefit rates are related to social policies and economic conditions here. Moreover, where benefit rates are increased the cost of increasing pensions already in payment falls mainly on contributors and employers in this country, and it has never been accepted that they should also bear the cost of paying increases unconditionally for pensioners who have chosen to live abroad.

Those are the general policy considerations, but inevitably, as in any other matter of social security, there are cost implications, too. There are more than 150,000 people drawing retirement and widows' pensions abroad, and the cost of bringing all pensions up to the rate that would be payable if the recipients were in this country would be about £13½ million a year. My hon. Friend will realise that this is one of the competing priorities for the resources available for the social security services as a whole.

Where it has been possible to make reciprocal agreements with other countries, our pensioners in those countries have been enabled to receive the pension increases. Arrangements on these lines now benefit pensioners in a good many countries—namely, Austria, Belgium, Bermuda, Cyprus, Denmark, France, the Federal Republic of Germany, Guernsey, the Isle of Man, the Irish Republic, Israel, Italy, Jamaica, Jersey, Luxembourg, Malta, the Netherlands. Switzerland, Turkey, the United States of America and Yugoslavia. The arrangements cover about one-third of our overseas pensioners.

The list of countries which I have given shows the progress which has been made over the years, and in many cases in fairly recent years, in extending reciprocal arrangements. At the end of 1972, which is the latest date for which I have the full figures, there were slightly over 153,000 National Insurance pensioners receiving pensions abroad. Of that number, just over 53,000 were receiving unfrozen pensions. They were in the countries which I have mentioned. They benefit from the now annual increases in the same way as pensioners in this country, by virtue of reciprocal agreements.

That leaves of balance of approximately 100,000 pensioners receiving frozen pensions. By far the majority of that balance are in Australia, New Zealand, Canada and South Africa. In Australia, where there are nearly 45,000 of our pensioners, and in New Zealand, where there are nearly 15,000, the pension provision is by way of a non-contributory residence-based system. Australian pensions are subject to a test of means. Under the reciprocal agreements with Australia and New Zealand, residence in the United Kingdom is treated as residence in Australia or New Zealand. That means that some of our pensioners receive old-age pensions from the authorities of those countries.

In cases where our pensioners qualify for a pension from Australia or New Zealand by virtue of these agreements, most would be no better off if our pensions were unfrozen because the other country, when assessing the rate of pension, takes account of the rate of British pension in payment. Similarly it would not help those who may be receiving the means-tested South African pension. There are over 7,000 British pensioners in South Africa.

If we take into account the countries with which we have reciprocal agreements where the increases are being paid, and if we take into account, too, the large group of pensioners in the countries which I have mentioned, many of whom are eligible for a pension from the country in which they are now residing, I recognise that there are left at least 33,000 pensioners living in more than 100 other countries. I can assure my hon. Friend that it is the Government's intention to reduce that number wherever possible by seeking further comprehensive reciprocal agreements with countries where there are sizeable numbers of our pensioners.

My hon. Friend mentioned Spain, as he did on the last occasion when he raised this matter. We now have nearly 4,000 pensioners living in Spain. Negotiations are in train for reaching an agreement with Spain which would provide, amongst other things, for the unfreezing of our pensions in Spain. If the negotiations are successful, and I very much hope that they will be, the agreement will provide further benefits for those who move between the two countries. For example, it would enable account to be taken of periods of insurance in the other country in determining entitlement to benefit. It would avoid duplicate liability for contributions where workers from one country go to work in another country. Discussions are at present taking place and although my hon. Friend has chosen this very moment to raise this matter, I hope that he will agree that it would be inappropriate for me to say more about them now.

I can assure him, however, that we are anxious that a comprehensive agreement should be reached. We shall press on with it as fast as we can, but we believe there is great value in trying, in reciprocal agreements of this kind, to get a comprehensive range of agreement over the whole area. For this reason discussions often take longer than any of us desire.

The situation in South Africa, which my hon. Friend also mentioned, is rather more difficult. We are speaking of 7,500 pensioners who reside there, but I am afraid that I do not see any prospect of reaching a reciprocal agreement with South Africa. The reason, essentially, is the difference between their scheme and ours.

The South African scheme is non-contributory providing a pension only for residents of limited needs and they vary widely according to whether the beneficiary is white, coloured, or African. The rate for whites is six times higher than that for Africans. With such variation of provision for old age, there appears little likelihood of being able to reach a reciprocal agreement.

My hon. Friend mentioned the difficulty which has arisen because of the depreciation of sterling. I recognise the difficulty which has affected our people abroad, when the income, from whatever source, is paid from this country. The rates of national insurance pension are laid down in legislation expressing amounts in sterling, but here, too, one can fairly say that those who are covered by annual increases are receiving some compensation for the decline in the value of sterling. In the case of some countries where there are large numbers of our pensioners—I am thinking particularly of Australia and New Zealand—one can say that about half our pensioners are not suffering as a result of the loss of value of sterling because they are getting pensions from the countries in which they are living. I therefore recognise that there is a problem, but it is fair to point out that it has not unduly affected all of those pensioners with whom we are concerned in this debate.

My hon. Friend also mentioned that he felt that because pensioners had in many cases worked for long periods in this country and contributed to our arrangements, they should be entitled to the full increases. I know my lion. Friend will recognise that one of the counter-arguments one can use is that the money they have contributed is very small in relation to the amount which they are likely to draw in pension. My hon. Friend is familiar with the pay-as-you-go basis of the scheme. The amount paid is in most cases a very small part of the pension which the people concerned will actually draw, so we are faced with a situation in which the bulk of the pension, even a frozen pension, is being met by employers and by existing contributors in this country.

No pensioner, whether at home or abroad, has contributed anything like the amount actuarially needed to finance his pension and will within 18 months or so recover by way of pension the amount paid in contributions. It is as small a period as that. Pensioners overseas are certainly not deprived of the value of their contributions. They receive the pension their contributions have earned, and, as I have said, it would be unfair to contributors and employers in this country for them to have to meet the cost of providing increases unconditionally to those who have settled abroad.

We have carefully reviewed the longstanding policy of paying pensions universally abroad but only paying increases to pensioners in those countries with which we have been able to reach appropriate reciprocal agreements, and we have concluded that we should continue to maintain this policy whilst attempting to reach agreements wherever this is possible. As I mentioned, to unfreeze pensions unconditionally would add £13½ million per year to the cost. Therefore we feel, for this and for the other reasons which I have mentioned, that the better course is not only to seek agreements which serve the interests of pensioners in particular by allowing our rates of pension to be unfrozen but to help contributors and beneficiaries in general in the much more comprehensive way which is possible when we have an agreement. For example, it enables the periods of insurance in the two countries to be combined to determine entitlements to benefit so that benefits and pensions may be paid at a higher rate or in circumstances where they might otherwise not be payable at all.

Currently, negotiations are in hand with Spain, in which, I hope, we shall be able to reach an early conclusion, with Canada and with Norway, which, if successful could lead to unfreezing our pensions in those countries.

I hope, therefore, that my hon. Friend, although he has not got the answer he hoped for, will feel that at least we are making progress with reciprocal agreements, and I hope that he will feel, in the light of the many calls on resources for pensions, that pressing forward with such agreements is the best way of making progress.