Orders of the Day — Parliamentary and Other Pensions Bill

– in the House of Commons at 7:58 pm on 27 April 1987.

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Order for Second Reading read.

Photo of Mr John Biffen Mr John Biffen , North Shropshire 8:18, 27 April 1987

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

Since 1965, there have been six Acts of Parliament dealing with the parliamentary pensions scheme. On almost every occasion, the Minister responsible has had to apologise for the complexity of the legislation. This Bill is no exception, but I hope that it will allow some of the complexities of the present arrangements to be avoided in the future.

The Bill's main purpose is to enable the parliamentary pensions scheme to be contained in regulations rather than in primary legislation. That has two advantages: it makes the scheme simpler and more readily understandable. The current rules of the scheme will be able to be published in consolidated form, so that it will be easier to consult them, and any future changes to the rules will require not primary legislation but the simpler procedure appropriate to statutory instruments.

Before I describe the contents of the Bill in more detail, I should make a couple of general points. The first is the importance I attach to listening to Members' comments about the scheme and to discussing with Members any changes the Government propose. My commitment to this will, I hope, be clear not just from the Bill's provisions on consultation, but from the steps I have taken already to explain to Members what the Bill itself would do. I am grateful for the views of those Members I have been able to consult during the preparation of this Bill. I believe they generally appreciated the reasons for simplifying the scheme in the way we propose. I should particularly pay tribute to the chairman of the trustees of the pension fund, the right hon. Member for Manchester, Wythenshawe (Mr. Morris), for his help and advice.

The second general point is to emphasise, especially to the House, that this Bill does not amend the provisions of the scheme in any way. I am aware that some aspects of the scheme are seen by some hon. Members as unsatisfactory, but we have a tradition of referring proposals for improvements in our pension arrangements to an independent body. The House will recall that substantial changes were made to the scheme in 1984 following recommendations by the Top Salaries Review Body. In view of this I do not expect the TSRB to offer recommendations on the pension scheme again in the near future.

Photo of Mr John McWilliam Mr John McWilliam , Blaydon

Surely the Leader of the House is not implying that the House, when it last took the decision as a result of the recommendations of the TSRB, actually enacted the recommendations of the TSRB. The right hon. Gentleman will recall that it did not.

Photo of Mr John Biffen Mr John Biffen , North Shropshire

The House has never been in a position of formally, totally and exactly reflecting any recommendations from the TSRB. I believe that the hon. Gentleman will none the less conclude, if he considers the legislation that was put through the House following that report on the pension scheme, that it reflected many of the recommendations, including the extremely valuable one on the rate of accrual. I accept that, of course, the House never has reflected and doubtless never will precisely and exactly reflect the recommendations of the TSRB. I will, of course, take note of any points that are raised today about the substance of the scheme, but I believe that our debate should and must concentrate on the contents of the Bill itself.

Clause 1 reproduces the main provisions of the existing legislation governing the existence of the parliamentary contributory pension fund. The fund will continue to operate with the current trustees, appointed by the House, as it does now. Detailed arrangements for the conduct of the trustees' business will, in future, be contained in regulations.

Clause 2 is the heart of the Bill. It gives a power to the Leader of the House to make regulations providing for pensions for Members, Ministers and certain other office-holders. The principal matters that may be covered by the regulations are listed in schedule 1. This clause and schedule are based on various provisions of the Superannuation Act 1972 which governs most of the main public service pensions schemes. Schedule 2 provides for the current legislation to continue to have effect until it is replaced, as appropriate, by regulations made under the new power.

Although the change from primary legislation to regulations means that the opportunities in the House for debate and amendment of the Government proposals will be less extensive, the clause provides significant safeguards for the rights of Members. No regulations can be made that adversely affect the accrued pension rights of former Members or office-holders no longer in service at the time of the making of the regulations, or their dependants, without their consent. The Leader of the House is obliged to consult the trustees and Members' representatives before making any regulations. The regulations themselves will be subject to affirmative resolution procedure in both Houses.

Clause 3 provides for the continuation of the annual Exchequer contribution to the fund, which is based on the recommendation of the Government Actuary. He will continue to report on the fund every three years, but the Bill does slightly amend present practice. In future the Government Actuary will be recommending a rate of contribution by the Exchequer for the years following publication of his report, rather than the years following the valuation date, which may be some time before the report is published. This will avoid unexpected adjustments to the rate of contribution, which can upset the trustees' investment activities.

Clause 4 gives authority for the payment of a pension to the widow of Lord Maybray-King, the distinguished former Speaker who died last year. When Mr. Speaker King retired in 1971 his pension arrangements were set out in a special Act of Parliament, as was the practice then. This provided for a pension to be paid to his then, wife, who was named in the Act, in the event of his death. She died, however, and he remarried, but the Act did not provide a pension for his surviving widow. There has been a certain amount of public comment on this provision, and I am pleased to have this opportunity to correct any misleading impression that may have been given. Mr. Speaker King's Retirement Act makes specific provision for his widow's pension to be subject to the limitations applying to the pension of Members' widows. Since the parliamentary pension scheme began in 1965, it has provided that the survivor of a marriage after retirement should be entitled to a pension. But it would clearly have been invidious to have made explicit provision in the 1971 Act for the possibility of Mr. Speaker King being married to anyone other than his then wife at the time of his death. Clause 4 is, therefore, needed to ensure that Lady Maybray-King is in no worse a position than if her husband had remained just a Member of Parliament and had not become Speaker.

The House will see from this brief description that the Bill is almost wholly concerned with the legislative framework of the scheme. As I suggested earlier, I envisage no substantial changes to the scheme itself in the absence of recommendations from the TSRB. Some changes will be necessary before next April, however, so that the scheme complies with the requirements of the Social Security Act 1986.

The most significant change is that membership of the scheme will no longer be compulsory for Members. This means that we, like all other members of occupational pension schemes, will be able to take advantage of the new freedom to choose personal pensions. I shall not detain the House further on this point now. I have already circulated to Members an outline of the pension scheme illustrating their effects, and we shall, of course, have an opportunity to debate the regulations themselves. I am incidentally indebted to my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) for pointing out an ambiguity in that outline in the reference to pensions based on final salary: in common with many other schemes, pensions are based on the salary earned in the last 12 months of service, rather than the rate in payment on the date of retirement.

In conclusion, I say to the House that I believe that we should not take up an inordinate amount of parliamentary time with debates on our terms and conditions. It is, however, right that there should be a proper degree of public and parliamentary scrutiny. This short and relatively modest Bill improves the modalities by which we make and discuss these arrangements. I commend the Bill to the House.

Photo of Mr Peter Shore Mr Peter Shore , Bethnal Green and Stepney 8:27, 27 April 1987

I believe that the House will want to thank the Leader of the House for that extremely clear and unusually concise presentation of what is, in fact, a rather complex matter. I accept that, as the right hon. Gentleman's speech confirmed and as the explanatory and financial memorandum tells us, the main purpose of the Bill is to enable the parliamentary pension scheme to be set out in regulations rather than, as at the present time, in successive Acts of Parliament.

The Bill makes no changes to the rules of the present scheme, but in future it will enable further developments in the parliamentary pension scheme to be made by regulations rather than by primary legislation. The case for making future changes by regulation rather than by primary legislation is that since pensions for Members of Parliament were first introduced in the Ministerial Salaries and Members' Pension Act 1965 no fewer than five Acts of Parliament have been found necessary during the following 20 years. I accept that the scheme is now very complex and that further amendments to the scheme as it now stands would make it even harder to follow than it is today.

The Bill proposes three things. The first is that the parliamentary contribution fund should continue and that the elected trustees should continue to decide how to invest the assets of that fund. Secondly, it provides that the present rules of the scheme should be continued. Existing provisions, therefore, both those enacted by previous primary and secondary legislation, which relate to the parliamentary contributory pension fund, are to be continued. They are set out in schedule 2 and the provisions are safeguarded as though they were contained in regulations under clause 2. These features will not be controversial. Indeed, the House will be pleased that the trustees' role is to be safeguarded.

Thirdly, the Leader of the House is empowered to make regulations for future changes to the scheme. The provisions are listed in the 13 paragraphs of schedule 1. Clause 2(4)(a) enables the Leader of the House to make regulations covering any or all of those provisions. Clause 2(4)(b) gives the Leader of the House the power to make regulations from a date before they are made. If I understand that correctly, it is a retrospective power.

Clause 2(4)(c) provides a general power to make different provisions in respect of different recipients. These powers will give greater flexibility to the scheme but they are wide ranging. The powers are to be exercised by statutory instrument and the Bill provides that regulations cannot be made unless the trustees, other representatives and those who are eligible for a pension are consulted by the Leader of the House. That is welcome. Regulations must be approved by a vote in both Houses. The approval is to be sought by affirmative resolution guaranteeing what would normally be a one and a half hour debate.

No one will doubt that the regulation-making power gives very great power indeed to the Leader of the House and to the Government. If the past is any guide, in future many matters of controversy will arise from further proposed changes in the parliamentary pension scheme. The House might wish to make amendments to what the Leader of the House proposes. That will not be possible because a regulation can only be accepted, defeated or withdrawn.

Moreover, the one and a half hour debate will be inadequate for any major proposal for change. The great advantage of proceeding by way of further primary legislation is that it gives ample scope for debate and for considered amendment. The disadvantage is the increasing complexity of primary legislation and the lack of flexibility.

These points, in particular the objections to the regulation-making procedure, have been put strongly to the Leader of the House and I believe that he recognises the widespread concern.

One proposal that has emerged in discussion is that which allows debate on an amendable motion before any regulations altering the scheme are laid before the House. The amendable motion is the procedure by which we decide such complex matters as Members' pay, the amount and content of the secretarial allowance, car allowance and other controversial matters. As a result of those debates on the motions, amended or not, and approved by the House, regulations are subsequently issued. Such a procedure has the great advantage of allowing for detailed amendment and for debate not being limited to one and half hours. Such a procedure would meet the anxieties expressed by many hon. Members. We shall listen with particular interest to what the Minister says later. I hope that it will be possible to explore the matter further in Committee.

The other main change in the Bill is the provision which governs the Exchequer contribution to the parliamentary contributory pension fund as provided for in clause 3. The Government Actuary will continue to value the fund every three years and to produce a report as soon as practicable after the valuation date. Each report will continue to recommend the Exchequer contribution rate and the changes will come into effect in the year following the year in which the report is made, and in the two subsequent years. This differs from present arrangements whereby the Exchequer contribution to the fund is set from the three years starting with the year of the valuation date. It is claimed that the change will lead to a smoother adjustment to whatever new rate is proposed. I am inclined to accept that.

That apart, there is only one other change to the Bill to which the Leader of the House referred. Clause 4 amends Mr. Speaker King's Retirement Act 1971 and provides a pension for the widow of the late Lord Maybray-King. This has attracted some critical attention since it extends the right to a pension to the survivor of Lord Maybray-King's post-retirement marriage. However, the provision is in line with the current arrangements for Speakers' widows' pensions and for the pensions of the widows of other Members of Parliament, which also provide for the payment of pension to the survivor of a post-retirement marriage. I was surprised at that. As such a provision has been part of the parliamentary pension scheme since it was introduced in 1965 it would, indeed, be an anomaly if Lord Maybray-King's widow were to be treated differently from the widows of other Members.

The Leader of the House has made it clear that he does not intend to introduce in the Bill any other changes in the provisions of the parliamentary pensions scheme. I accept that this is not the occasion to make major amendments to the scheme since we shall shortly receive the report of a further review of parliamentary pay and allowances from the TSRB, but there are a number of anomalies which we now have the opportunity to rehearse or to remove.

I was a little worried about what the Leader of the House said about the next TSRB report. He gave the impression that it would not consider pensions. I would not like the Leader of the House or anybody else to think that we reached in the 1984 Act a perfection in pension provision, because clearly that is not so. We have been learning slowly over the years how to construct a reasonable pension arrangement for Members who have, after all, the most curious and most threatened career structure of any group in the country.

On the subject of anomalies, the House will recall that in the 1984 Act it is agreed that if a Member retires at the end of a Parliament, and if at that time he is over 60 and has served for 20 years, he is entitled to a full, unabated pension. There will be a small number of hon. Members, aged 57, 58 or 59, who have completed 20 years of service and who do not wish to serve again for the life of a further Parliament. It is reasonable for such ex-Members to wait until they are 60 before drawing their full, unabated parliamentary pension. But as things stand such a Member has to defer drawing such a pension until he is 65, unless he is prepared to draw a substantially abated pension. Surely that anomaly should be put right.

Further thought should be given to the 60/20 rule. If a Member has reached the age of 60 and has served for 20 years but stands and is defeated in the subsequent general election, he is not qualified under the current rules to draw an unabated pension. He is in exactly the same position as a Member over 60 who has completed 20 years' service but who decides not to stand again at the general election. The logic or justice of treating one Member differently from another is not clear.

There is a further anomaly. All hon. Members are entitled to severance pay, or resettlement grant, if they lose their seats at a general election, if they cannot stand as a result of boundary changes, if their constituencies cease to exist or if they retire at a general election. The resettlement grant is graded according to the age of the Member and the period of his service. That applies to all Members except those who have reached the normal age of retirement. For them, no resettlement grant or severance pay is available. Again, that does not seem to me to be fair.

Some hon. Members first enter the House in their middle years. They may well have served for fewer than 20 years before their retirement. Therefore, they will not be eligible for a full parliamentary pension, but no resettlement grant is available to them. Again, that is anomalous when compared to a Member of Parliament who conforms to the 60/20 rule but who chooses to retire at the age of 60. He is entitled to a resettlement grant as well as to his full pension. I believe, therefore, that there is a strong case for making a retirement cash payment equal to the resettlement grant for Members who retire at over 65. It is possible that the Leader of the House or the Minister of State, Treasury will be able to give an assurance on those points. Perhaps hon. Members will wish to frame amendments for the Committee stage.

I conclude with a further point that deserves attention—the contribution that members of the pension scheme and the Treasury make to the fund. The House will recall that in the 1984 Act Members' contributions were increased from 6 per cent. to 9 per cent. of salary. That was 1 per cent. higher than the 1983 review of parliamentary pay and allowances had recommended. Since then, we have had the report of the Government Actuary, which was laid before the House on 26 November 1986, and which valued the fund as it stood on 1 April 1984. It showed a remarkable increase in the value of the fund from £20·6 million in April 1981 to £41·7 million three years later. That has enabled the Government Actuary to recommend that the Treasury contribution be reduced from 16 per cent. in 1984 to 13 per cent. in 1987.

I have no knowledge of the value of the fund to date, but if it has kept pace with market values generally it must be at least twice the £41·7 million value in April 1984. If that is so, there will already be a strong surplus of assets over all computable liabilities in the pension fund now. Under present arrangements, that will simply mean, when the Government Actuary next reports, a further—and large — reduction in the Treasury contribution. The Social Security Act 1986 allows Members to opt out of the parliamentary pension scheme in favour of a personal pension. That must make the parliamentary pension scheme less attractive. On the face of it, the 9 per cent. Members' contribution seems to have been set too high and a new basis for calculating the Treasury contribution or other changes and improvements in the benefits available under the pension fund are now required.

I hope that we shall hear more about that from my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), and, indeed, from other trustees of the fund. I hope that we shall have a sympathetic response from the Treasury Minister.

This is in no sense a party issue. I am speaking for myself and reflecting my own views, not the views of my party, but I hope that in Committee it will be possible to make further progress in improving our parliamentary and other pension arrangements and removing the anomalies that still exist, which are small in cost but burdensome in their effect.

Photo of Mr Alf Morris Mr Alf Morris , Manchester Wythenshawe 8:44, 27 April 1987

I am grateful to the Leader of the House for his extremely kind reference to me in his opening speech. As he said, I have a very special interest in this Bill as chairman both of the managing trustees of the parliamentary contributory pension fund and the House of Commons Members' fund.

I pay tribute to the quiet and unpublicised, but often difficult and always painstaking, work of my fellow trustees in the service of their fellow Members. At the same time, I place on record here the unfailing help that we receive from Jim Dobson, Tony Lewis, Frank Brewer and all who work with them in the Fees Office. Nothing is too much trouble for them if they can help any Member of this House, past or present, or their dependants. The House as a whole owes them its gratitude.

The cumulative effect of six separate Acts of Parliament and 20 or so statutory instruments has made the parliamentary pension scheme, as it now exists, administratively very complex; and we have reached the stage where further amendments would make it extremely hard to follow. This Bill makes no changes to the rules of the scheme, or to the benefits available, but will enable the existing legislation to be consolidated in regulations or to continue to have effect as if contained in regulations, as appropriate, and will also enable future amendments to the scheme to be made by regulations. So the Bill, on which I congratulate the Leader of the House, is deserving of support on two counts. First, it will be more convenient and make the scheme more comprehensible to have it in a single document; and, perhaps more importantly, any future amendments will not be subject to the constraints of the parliamentary time available for primary legislation and can thus be implemented more quickly.

Contributions under the original Act in 1965 were expressed as a fixed sum of £150 a year from each Member with, effectively, a matching Exchequer contribution. There was provision for an additional Exchequer contribution to meet the cost of pensions in respect of non-contributory, but reckonable, service before the scheme started. The 1965 Act further provided that benefits and/ or contributions could be varied in the light of any surplus or deficiency revealed by an actuarial review of the fund.

By contrast, the Parliamentary and Other Pensions Act 1972 determined the Member's contribution at 5 per cent. of salary, leaving the Exchequer contribution to be determined by the Government Actuary at the appropriate level necessary to balance assets and liabilities. This means, of course—and it is essential for the fact to be understood by the House as a whole—that the fund can never go into surplus, no matter how well the investments perform. Equally, it means that the prospects of securing improvements in the scheme, based on successful investment management, are effectively vetoed since the Exchequer contribution correspondingly diminishes as a result. I ask the House to take very careful note of that point.

The amendments recommended by the Top Salaries Review Body in its 20th report were estimated to increase the cost of benefits under the scheme from about 18 per cent. to 22 per cent. of a Member's salary. It was therefore recommended that the Member's contribution should be, as before, approximately three eighths, or 8 per cent. Notwithstanding the review body's recommendation, the Government decided that the Member's contribution should be 9 per cent. The effect of that decision, endorsed by the House, has been to cause the Government Actuary to recommend a significant reduction in the Exchequer contribution from 3·3 times Members' contributions in 1985–86 to 2·3 in 1986–87 and only 2·0 thereafter. I must strongly emphasise to the House that this compares most unfavourably with other pension funds. The Government Actuary's Seventh Survey of Occupational Pension Schemes 1983, which was published in 1986, shows that across the board employers' contributions are 3·03 times employees' contributions. The multiple for the public sector alone is 2·6. Allowing for the fact that the parliamentary scheme's multiple also contains an element relating to pensions in respect of pre-1964 service, the Exchequer contribution to our scheme is inferior to that for the public sector taken as a whole.

There have, of course, been many improvements in the scheme over the years, in which the trustees have taken a leading role, not least those in the accrual rate; in the qualifying age/service conditions for early retirement at a general election; and the provision for ill-health retirement pensions. There is, however, a strong case for further improvements, and it is ultimately for the House to decide if and when they should be effected. Take, for example, the relationship between salary and pension. In 1975, the TSRB recommended a parliamentary, salary of £8,000, compared with £4,500 per annum then payable. Although the recommendation was not implemented in full (the salary moving only to £5,750) the Government of the day nevertheless permitted a higher notional salary to be implemented for pension purposes. Thus, the widow of a Member who died in service was awarded a pension correspondingly higher than would otherwise have been the case. The House may think that this precedent should be followed in all circumstances where a Government cannot see their way fully to implement TSRB recommendations on pay at the outset, as happened in 1983.

Ill-health retirement is another subject of concern. On retirement for reasons of ill health, service is enhanced to twice its actual length if that is less than 10 years or, if service is more than 10 years, to 20 years or by six and two thirds years, whichever is greater. In no case can the enhancement be greater than the period from the date of retirement to sixty-fifth birthday. The current practice of the Inland Revenue would permit a pension based on potential service to age 65. So if a Member retires on ill-health grounds at the age of 55, with 23 years' service, under the parliamentary pensions scheme his or her pension is based on 28 and two thirds years, whereas under Revenue rules it could be based on 32 years. In the 10 cases we have had to date, seven pensioners would have benefited under a change to the Revenue maximum.

I turn now to the death in service gratuity. The gratuity payable on death in service is a sum equal to a Member's salary. The Revenue limit is four times salary, including any retained benefits. If the gratuity in the parliamentary scheme were to be set at twice the Member's salary at the date of death, the question of retained benefit could be ignored. On current salary, the widow of a Member who died in service would, therefore, receive £37,000, compared with the Revenue limit of double that amount, less any retained benefits as defined by it.

The pension paid to widows and widowers is currently one half of the Member's notional ill-health pension. The Revenue maximum is two thirds of the Member's notional ill-health pension, based on potential service to age 65. So if a Member dies in service at the age of 55, with 22 years' service, the widow or widower would receive over £2,500 a year less than the Revenue maximum allows. Moreover, under our scheme, the widow's or widower's pension ceases on remarriage or cohabitation, whereas, under Revenue practice, it may continue for life notwithstanding remarriage or cohabitation.

Some of the public comment there has been on clause 4 of the Bill, which allows for the payment of a pension to Lord Maybray-King's widow, must have left many of those we represent with the impression that the widows of Members of Parliament are extremely well provided for. While Lady Maybray-King's pension would, in any case, not be payable from the parliamentary pensions scheme, but from the Consolidated Fund, it may thus be instructive to spell out in this debate just how much the generality of widows of Members of Parliament are entitled to receive.

If a Member died, over the age of 65, with 30 years' service, his widow's pension would be £4,604. In the case of a Member who died, under the age of 65, with 14 years' service—and with an enhancement of over six and a half years—the long-term pension of his widow was less than £2,800 a year. That is the reality behind some of the public comment there has been about clause 4 of the Bill, and right hon. and hon. Members may feel that the time has now come to look at improvements in widows' benefits that would bring them more into line with those in some other schemes. In particular, a case could be made for a minimum pension based on not less than 10 years' actual and notional service. At the present time, this would provide a widow's pension of £1,800 a year which very few people here, or anywhere else, could describe as extravagant.

I am, of course, very much aware how strongly many right hon. and hon. Members feel about the payment of a year's salary as resettlement grant to Members who retire under the age of 65, but not to their colleagues, often with much longer service, who have reached that age when t hey leave the House. Resettlement grant is payable from the Consolidated Fund and not from the parliamentary pensions scheme, but the Leader of the House has been made fully aware of the strength of feeling on this issue which, no doubt, others will want to speak about as the debate proceeds.

If we accept the hints given both by the right hon. Gentleman and the Prime Minister last Thursday about the length of time left to us before this Parliament is dissolved, the Bill now before us may have two Second Readings, one before the election and one afterwards. If that proves to be the case, there will be ample time for suggestions made in this debate to be fully considered before we enact the Bill.

As of now, as chairman of the managing trustees, I am glad to have had the opportunity provided by this debate to indicate both the restraints on the parliamentary pensions scheme and, at the same time, some of the improvements I should like to see, especially for Members' dependants. I hope that they will be given due attention by both sides of the House and that today's hopeful precepts on improving the scheme, or at least some of them, will become tomorrow's practice. It is within the power of the House to make that happen.

Photo of Mr Anthony Kershaw Mr Anthony Kershaw , Stroud 8:58, 27 April 1987

I wish to add only a few words to those of the right hon. Members for Bethnal Green and Stepney (Mr. Shore) and for Manchester, Wythenshawe (Mr. Morris). As they have just said, the present scheme is said to be too complex. The Bill will enable us swiftly to alter arrangements and to take them through the House easily without the long debates and delays which have characterised our past legislation. That may well be, and to that extent one welcomes these new arrangements, but it implies that new arrangements are desirable and that changes will be made. In several respects, which have already been alluded to, these changes are certainly necessary.

I should like to deal principally with two items. The first is the gratuity or resettlement grant — I am not sure which to call it — at the end of one's service in Parliament. I should declare an interest in this matter because I am over 65 and shall not receive one. The gratuity or resettlement grant has never been payable to one who will receive a pension. Originally, if an hon. Member retired or disappeared from the House, he did not receive a pension until he was 65, so there was a gap when he received no parliamentary pensionable income. Therefore, it was fair that there should be some payment to tide him over until he was 65 and could receive a pension. However, as a consequence of one or two hard cases which will be present in the minds of right hon. and hon. Members, first, we gave a gratuity to people younger than 65. Then one could receive one's pension at the age of 62, and now one can receive it at the age of 60. One can even receive a reduced pension and a gratuity at the age of 50. If one is over 65, however, one cannot receive a gratuity.

The reason for the arrangement to tide over those who have not reached the age of 65 has now disappeared, so it is reasonable to discuss whether those over 65 should also receive a gratuity or resettlement grant or whether the others should not because they receive a pension. There is no logic or fairness in the present position and I am sure that my right hon. Friend the Leader of the House or anyone in his position will wish to consider that soon.

My second point relates to our contributions, which are now 9 per cent. of salary. I understand that, historically, the reason why we pay 9 per cent. of salary is because we made no or too low contributions before 1964, so we have to make up time. As has been said, the Exchequer reviewed the position and decided that its contribution and ours were unnecessarily high to maintain the fund, so it reduced its contribution from 3·3 times hon. Members' contributions to 2·3 times—a prudent financial move. But why are we left paying 9 per cent.? Should not our contribution decrease proportionately? I do not understand the logic of the present position. Will my fight hon. Friend the Leader of the House say why we still pay 9 per cent., yet the Treasury has reduced its contribution so remarkably?

If we pass the Bill, as we undoubtedly shall, it will be possible for my right hon. Friend to make changes in our various arrangements quickly. Is that not important in view of the political situation? Admittedly, the Bill must pass through all its stages and that will take time, but if we are to have a general election, as we read in the newspapers, perhaps nothing can stop my right hon. Friend, as soon as the Bill receives Royal Assent, introducing regulations to make all sorts of beneficent changes which will gladden the hearts of more than 100 right hon. and hon. Members who will retire before the general election.

If we continue in our Sessions and our Parliament and we go beyond 1 January next year, for many people the position will be transformed. We will then go to a salary of over £21,000, linked to the chief veterinary officer of the Ministry of Agriculture, Fisheries and Food—which, of course, will enable us to be very important people. But unless we reach 1 January 1988 we will not receive that. At the end of perhaps next week, when we get rid of the Bill, it will be possible for the Treasury to introduce various regulations to improve matters.

The right hon. Member for Wythenshawe spoke about widows. Is it possible to imagine that the widow of a Member who served over 20 years in this House will get a pension of £2,000 a year less than one can get from the Department of Health and Social Security if one applied over the counter? It is an absolute disgrace that this should be tolerated and even to speak of it ought to give one a sense of shock.

Such changes, which will not cost very much money—the usual plea of a Back Bencher to the Front Bench—nevertheless ought to be made in the short time that may be available to us before Parliament is dissolved.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley 9:06, 27 April 1987

It is agreed in all parts of the House that an adequate contributory pension scheme in up-to-date form is a most necessary buttress to the independence and reputation of the House and of each hon. Member. It is largely because the Bill offers a way for amendments to be made to the scheme to keep it up to date with less delay than in the past and with much less excuse about lack of parliamentary time that I, who have the honour to be one of the managing trustees, support the Bill.

Pensions are a very dynamic topic. Already in this short debate a formidable list of invaluable changes has been carefully compiled by the Leader of the House, who has always seemed to me to be very understanding of such problems.

In supporting this new method of keeping the scheme up to date and in line with general developments in pension schemes, I would like to support those hon. Members who have already pointed out the extraordinary situation of Exchequer contributions. The trustees, under the diligent leadership of the right hon. Member for Manchester, Wythenshawe (Mr. Morris), try their best to improve the state of the fund and if the long-term consequences were not likely to be so unfortunate, it would be comical if, with with the assistance of a buoyant stock market, their labours were reasonably successful, and the sole result was that the Exchequer's contribution was automatically reduced.

This also destroys the opportunity that trustees ought to have of being able to say to the Leader of the House, if there is an imminent surplus because of the success of the fund, that they have been reasonably good stewards, that they have been lucky in their results, that they have more backing to enable the fund to be improved, and that Members should have better benefits in return for their substantial 9 per cent. contributions. But not a bit of it. We are not in that position at all, because there cannot be a surplus. Any improvements in the scheme are bound to decrease, in however small a degree, the Exchequer contribution.

The trustees are set an impossible task and are given no incentive, apart from a sense of duty to the Exchequer, to keep the fund buoyant. I am sure that the absurdity of the long-term position must be apparent to the Leader of the House and the Treasury Ministers and that we shall have some encouragement to hope that the position will be made a little more equitable on that score.

I should like to add my voice to those who have already said that if we are to proceed by regulation, for which there is much to be said, all hon. Members must be given an opportunity for a debate on an amendable motion. I am sure that my fellow trustees, and particularly our chairman, will not object to my pointing out that, although trustees try, as a result of their experience month by month in managing the fund and the scheme, to point out anomalies and remind the House, particularly the Leader of the House, of injustices inherent in the present scheme, the job of the trustees legally is to administer the scheme as the House has already enacted it. Anything we do over and above that is simply a bonus from such experience as may have been accumulated. Therefore, the House should not rely—I am sure it would not—upon a small body of trustees to maintain and uphold the interests of different hon. Members, almost all of whom have somewhat different circumstances.

I hope that as the Bill proceeds on its way—I wish it a speedy passage—the Leader of the House will come forward with firm and clear undertakings that the Government fully recognise an obligation to enable the House to have a full debate on an amendable motion before any regulations under the Bill are introduced.

Photo of Mr John McWilliam Mr John McWilliam , Blaydon 9:12, 27 April 1987

I will not detain the House for long, but I join others in giving my thanks to those trustees who have worked so hard over the years to look after our interests. I do not think that their work is suitably appreciated or lauded in the House. I am grateful and I am sure that every hon. Member present is grateful also.

I should like to thank all the officers of the Fees Office—it would be invidious to name any particular one—for the help they give Members in administering an extremely complicated scheme, vested as it is in so many different pieces of legislation. That is why I welcome the intention behind the Bill.

There are some details with which I take issue and which I hope to have an opportunity to explore in Committee. I share the concern of my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) that pension debates might in future be limited to a one-and-a-half hour order some time after 1 o'clock in the morning because such debates are important.

As my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) has set out so clearly, there are anomalies. Our widows are not as well treated as widows in other schemes. Our people who retire after 65 are not as well treated, and our people who die in service or who are severely injured in service are not as well treated. I wish them to be treated to the extent allowable within the general Inland Revenue and DHSS regulations. That is certainly possible given the strength of the scheme as it exists.

There are some problems within the legislation. For instance, clause 2 states: The Leader of the House of Commons may, with the consent of the Treasury, by regulations make provision with respect to the Fund". We had a civil war about that once upon a time. We vote funds to the Treasury; it does not vote funds to us. Our trustees look after the scheme, not the Treasury. The Treasury has no responsibility for it. Therefore, the clause should refer to the trustees and not the Treasury. I am certain that that is not an oversight and I am equally certain that the Leader of the House did not exercise his mind sufficiently on the constitutional implications of the clause. It is important not only constitutionally but practically. If the trustees have no incentive to manage the scheme well, why should they bother? It seems that there is a major fault in the scheme.

Clause 3(2) talks about the contributions being made in accordance with the report of the Government Actuary. That seems as if we are legislating in the sense that each time one has a row with one's wife, the mother-in-law must be the judge and jury. That seems to be the effect of that provision, and it should be looked at.

The point was well made that the freedom to choose outside pensions which now exists will cause some problems for the scheme in the future. It will certainly cause me some heart-searching. I do not mind coming in at 38 years of age and bringing 20 years' reckonable service with me. I do not mind at all if that extra money—from which I can never benefit because even on my own contributions, by the time I reach 60 I shall be over the Inland Revenue limit — results in better benefits for widows of those who die in service or those who are injured in service. But I mind a great deal when the Government Actuary says, "I shall nick that and give it back to the Treasury." That, in effect, is what is proposed. I could have given that money to charity rather than to the Treasury, but that is what has been enacted.

As increasing numbers of people such as myself come into the House with a good pension scheme behind them which brings in substantial benefits, it seems to me that we should have some say in those benefits. I do not want to pay any less than anyone else, but it ought to go to a good cause, and these days it does not seem to me that the Treasury is the best cause in the world.

That brings me to the 9 per cent. actuarial contribution. I well remember those debates, because I led from the Opposition Front Bench. I remind hon. Members that the additional 1 per cent. contribution was not recommended by the Top Salaries Review Body but was part of the rakeback which the chairman of the 1922 Committee proposed — I suspect not with the permission of his Committee — in order to save the Government's face when they decided not to implement the Top Salary Review Body's report and to stage the salary increase over a number of years instead of granting it immediately as was suggested. They decided to rake back another 1 per cent. by inserting an additional pension contribution, and tonight it is proposed that the Treasury should rake it back. I do not mind having a clean argument about salaries and pensions, but that muddied the water, and I feel strongly about that I per cent. contribution, as clearly, from what I have said, I am paying far too much already.

I welcome the opportunity to get the Bill into Committee. I think that we can do something with it. The way in which we treat our widows and the way in which we treat those who die in service—particularly given the number who have died in the last six months—as well as those who are injured in the service of the House because of the way in which we choose to operate does not make the House a particularly civilised place for which to work.

I do not mind working such long hours, but if I keeled over tomorrow I would like to think that my family would at least be well taken care of. At present that is not the case. I therefore look forward to taking the Bill into Committee and I look forward to the opportunity sensibly to amend it once it is there.

Photo of Mr Brynmor John Mr Brynmor John , Pontypridd 9:20, 27 April 1987

I shall detain the House for only a short while. Although this appears to be a constitutional Bill at first sight, it is not merely such a Bill. I want to voice my suspicion about anything that is unamendable. I hope that the Leader of the House will consider how amendments can be made because a "take it or leave it" option puts the House in a most invidious position.

The Bill allows us the opportunity to be rid of anomalies. No one here is after a gold-plated scheme. However, with the help of the funds in the scheme and the contribution of 9 per cent.—a very high figure indeed—that we make historically as contributors to the pension scheme, we deserve a reasonably good scheme. However, we certainly deserve a scheme which is rid of anomalies before the Bill is enacted.

I want to concentrate on the 60/20 rule. It is the greatest nonsense that if someone chooses to retire at or after his 60th birthday—which may fortunately be the day after a general election — having qualified after serving 20 years, he can draw his unabated pension in full. However, if he is faced with the choice of retiring at 58 or 59 and decides that another Parliament is not for him, he will either suffer an abatement of pension or, if he wants to wait for it in full, he will have to wait a number of years which may be beyond his financial means. Nor do I see why a person defeated in that age band should suffer any difference of treatment. Frankly, I believe that neither person is likely to get employment again.

I want the Leader of the House to look at this matter sympathetically. The Leader of the House was described as seeming to be sympathetic. I thought that he had a flinty tone about him tonight. I hope that that is simply role playing and the Leader of the House was merely playing "Biffen the hard man" rather than the real Leader of the House. If the pension is not drawn until 60, there is no additional charge to the fund and there is no difference between someone retiring at 58 or 59 or after the age of 60. Such a small worthwhile benefit is relatively free of cost and would improve the scheme, ridding it of one anomaly—widows are another anomaly—and that would make the scheme beneficial to the contributors. After all, if we are expecting people to pay 9 per cent. of their salary towards a contributory pension scheme, at the very least they should look forward to retiring in comfort comparable to those in outside industry without having to suffer a cut in pension as a penalty.

Photo of Mr Peter Brooke Mr Peter Brooke Minister of State (HM Treasury) 9:22, 27 April 1987

It is a pleasure to reply to this useful debate. After my right hon. Friend the Leader of the House moved the Second Reading, the right hon. Member for Bethnal Green and Stepney (Mr. Shore) asked a series of questions and made a series of observations about the Bill, to which I will do my best to reply.

My great-uncle was the hon. Member in the Liberal interest for Tower Hamlets, Bow and Bromley. I believe that this is the first time that I have followed the right hon. Member for Bethnal Green and Stepney in a debate of this kind, although I have followed his colleague in Tower Hamlets, the hon. Member for Bow and Poplar (Mr. Mikardo). It is a delight to pay an incidental tribute to my great-uncle as well as to the right hon. Member for Bethnal Green and Stepney.

The right hon. Member for Bethnal Green and Stepney spelt out concisely and neatly the antithesis before us, in terms of the complexity of the legislation and the disadvantages of the simplicity inherent in regulations. He was joined in those observations later by his hon. Friend the Member for Blaydon (Mr. McWilliam). I listened very carefully to the right hon. Gentleman's comments about the procedure upon which we would embark under the Bill and in particular to his questions about the way in which we might handle these matters, assuming that the Bill is enacted. I want to put a proposition before the House which I hope will act as a vehicle for our debates in Committee.

The Bill also provides for consultation before regulations are introduced, but we shall consider carefully whether we can devise arrangements more like those for determining the pay of Members of Parliament, in which Members have an opportunity to debate an amendable motion before final proposals are introduced. That was the gist of the right hon. Gentleman's speech, and I am delighted to respond in this way. He and the right hon. Member for Manchester, Wythenshawe (Mr. Morris) mentioned Lady Maybray-King and drew attention to the fact that some of the criticisms that have been made outside the House about that provision were ill-founded. I am grateful to both right hon. Gentlemen for sustaining the proposition in the Bill.

The right hon. Member for Bethnal Green and Stepney mentioned the Top Salaries Review Body and changes that might be made to the provisions of the scheme and the arrangements for Members, but, as my right hon. Friend the Leader of the House said, the Government do not believe that it is an appropriate time to amend the scheme. We have heard suggestions for improving it, all of which can be referred to the TSRB when it next considers Members' pensions. I should say that substantial improvements tend to carry substantial costs.

The right hon. Member for Bethnal Green and Stepney mentioned anomalies relating especially to Members retiring at or about the age of 60. He mentioned the pension for a Member who retires, with 20 years' service, between the ages of 57 and 59 and suggested that that should be paid as though he had reached the age of 60. In 1984, substantial improvements were made in the pensions for that group. Their pensions were abated by a smaller percentage than the full actuarial reduction. Hon. Members also addressed the issue of lowering the general retirement age to 60. It was considered by the TSRB, most recently in its report on pensions in 1983, but it did not recommend a general reduction.

Photo of Mr Brynmor John Mr Brynmor John , Pontypridd

My right hon. Friend's point was not that the full pension should be paid at the age of 57, 58 or 59, but that if the Member retiring at that age chose not to draw his pension until he was 60 he was taking advantage of the 60–20 rule.

Photo of Mr Peter Brooke Mr Peter Brooke Minister of State (HM Treasury)

There is a hazard in our getting too deeply drawn into the details of the scheme, given the fact that it is not the purpose of the Bill to change the rules at this juncture.

The right hon. Member for Bethnal Green and Stepney asked another question about which I can give some information to the House. He said that Members of Parliament aged between 60 and 65 with at least 20 years' service who retired received pensions while those who lost an election did not. That was changed in 1984, and I am delighted to say that, after the age of 60, it makes no difference whether a Member was defeated in an election or retired.

The right hon. Member for Bethnal Green and Stepney, my hon. Friend the Member for Stroud (Sir A. Kershaw) and others mentioned the resettlement grants for those aged over 65. As they recognised, resettlement grants are not part of the pensions scheme and the arrangements for determining their size and the qualifications for receiving them are not affected by the Bill. They are fixed by resolution of the House following recommendations from the TSRB, and we have no plans to change the rules in the near future. I heard what was said in the debate, but those who are aged over 65 receive a lump sum and a pension from the pensions scheme. No doubt that influenced the decision that there would be no resettlement grants as well.

Photo of Mr Paul Bryan Mr Paul Bryan , Booth Ferry

Does my hon. Friend know the amount of the pension that they get?

Photo of Mr Anthony Kershaw Mr Anthony Kershaw , Stroud

And the amount of the lump sum?

Photo of Mr Peter Brooke Mr Peter Brooke Minister of State (HM Treasury)

The amount will depend on the individual hon. Member's circumstances.

Photo of Mr John McWilliam Mr John McWilliam , Blaydon

It might help the hon. Members for Boothferry (Sir P. Bryan) and for Stroud (Sir A. Kershaw) if I tell them that an hon. Member may commute up to one third of his pension as a lump sum when he retires. However, the lump sum is not there as a matter of right and is not built into the scheme.

Photo of Mr Anthony Kershaw Mr Anthony Kershaw , Stroud

What is all this about a lump sum for people over the age of 65? I have not heard of this before. If my hon. Friend the Member for Boothferry (Sir P. Bryan) wants to know the kind of pension that one gets after 32 years of service, I can tell him. It is about £9,000 a year.

Photo of Mr Peter Brooke Mr Peter Brooke Minister of State (HM Treasury)

I am grateful to my hon. Friend. I should not have taken his speech out of order in replying to the debate. The right hon. Member for Bethnal Green and Stepney raised the matter of contributions and the amounts.

I shall respond in general to the question about the report by the Government Actuary. The Government Actuary's latest report was published in November and shows that the Exchequer is still making additional contributions to eliminate the deficiency in the fund that was created mainly by earlier Acts which gave credit for service before 1964, for which no contributions were paid. Therefore, there is no question of the fund being in surplus. The right hon. Member for Wythenshawe spoke about that.

I realise that it is important for the House to have clear information about the state of the fund and the Government Actuary's report. If there are ways in which we can improve the transmission of that information, I shall be delighted to enter into correspondence with hon. Members about how this might be achieved.

The right hon. Member for Wythenshawe asked a number of questions about methods by which the scheme might be improved. As I said earlier, that is not the substance and subject of the Bill. However, one has to ask that question in the context of various questions to the TSRB. He said that we should be able to secure better benefits if the fund's investments are working as well as we have cause to believe them to be. Of course. that works both ways, and I take it that hon. Members would not wish to see benefits reduced when investments do less well. Under the present system, the Exchequer bears all that risk and that underlies the nature of the Exchequer's contribution.

The right hon. Member for Wythenshawe conjectured about the date of the election. I cannot shed any light on that, nor can I speculate about the pace with which we can carry this legislation through. The legislation is useful and I hope that it will be carried through promptly. I also have a family association with my hon. Friend the Member for Stroud in that he and my father were LCC members for my constituency. I am conscious that my hon. Friend will not fight the next election. One's fear, when one hears hon. Friends and Opposition Members speak in the Chamber, is that one may be hearing them for the last time. I am delighted that I have had an opportunity to speak in this debate.

The issues raised by my hon. Friend the Member for Stroud fall into the general area of those raised by other hon. Members, in that improvements to the arrangements for the scheme are not essentially dealt with in this Bill.

The hon. Member for Colne Valley (Mr. Wainright), as a managing trustee, referred to contributions and the hon. Member for Blaydon and others thanked the trustees and the Fees Office, as do I. The hon. Member for Blaydon introduced the civil war into the debate. Part of my constituency played a role vis-a-vis the rest of the nation with which it is not always associated in the light of subsequent events. I was somewhat puzzled as to whether the Government Actuary or the Treasury was supposed to be the mother-in-law.

Photo of Mr John McWilliam Mr John McWilliam , Blaydon

They are interchangeable.

Photo of Mr Peter Brooke Mr Peter Brooke Minister of State (HM Treasury)

One cannot characterise the Treasury as some kind of impersonal force when Lords Commissioners of the Treasury sit in the House and are personally responsible. The hon. Member for Blaydon also referred to the 9 per cent. contribution, as he did when my right hon. Friend the Lord Privy Seal spoke earlier.

The hon. Member for Pontypridd (Mr. John) spoke of particular elements and conditions and although some of the matters raised have been outside the ambit of the Bill as presently constituted it is helpful to have those observations on record so that the debate becomes a quarry from which we can subsequently obtain data.

Photo of Mr Jack Dormand Mr Jack Dormand , Easington

Perhaps the Minister will explain in what way the Bill has been helpful. We had a very depressing speech from the Leader of the House and that of the Treasury Minister has been even more depressing. They have made it clear that they are not prepared to take on board suggestions and proposals put forward from both sides of the House. One appreciates the Minister's argument that certain issues are not matters for him or for the present Bill, but matters for the Top Salaries Review Body or matters for consideration at another time and perhaps with another Bill. Will he come clean and admit that nothing will be done in Committee to change the purpose of the Bill which, as the Leader of the House has said, is merely to bring about a change in the mechanics?

Photo of Mr Peter Brooke Mr Peter Brooke Minister of State (HM Treasury)

My right hon. Friend the Leader of the House has made it perfectly clear, as does the Bill, that we are changing the mechanics, but in view of the complexity into which we have got ourselves it would be a mistake to continue to engage in primary legislation to tidy up that complexity.

The hon. Member for Blaydon queried Members' rights in relation to lump sums: I acknowledge that the lump sum figure is secured by commutation, but there is a right that such commutation can take place.

I wish to deal with one matter that has not been raised in the House. There have been occasions in the past when there has been an interaction between tax legislation and Members' allowances and benefits, but it has not always been identified and when it has been noticed thereafter there has been distress that it was not recognised earlier. I wish, therefore, to draw attention to a proposal in the Budget to limit the maximum lump sum that can be paid out on retirement to those joining schemes after 17 March this year. The proposal will affect Members of Parliament in exactly the same way as other employees. It is not relevant to the Bill before us and there will be ample opportunity to debate it when the House considers schedule 5 of the Finance Bill and when it subsequently considers regulations bringing the parliamentary scheme into line with the provisions of the Finance Bill. I repeat that it does not apply to anybody who is a Member now. It relates only to those who come in after 17 March. However, I thought it appropriate and sensible that this should be put on the record so that it will be known to everybody when we deal with the Committee stage of both of the Bills.

It has become clear during the debate that the central purpose of the Bill is to improve the mechanics of the arrangements. I am delighted that we are able to provide a pension for Lady Maybray-King, and for the support that I received from the Opposition Benches for bringing this in. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).