Orders of the Day — Parliamentary and Other Pensions Bill

Part of the debate – in the House of Commons at 8:27 pm on 27th April 1987.

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Photo of Mr Peter Shore Mr Peter Shore , Bethnal Green and Stepney 8:27 pm, 27th 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.