Armed Forces (Pensions and Compensation) Bill

– in the House of Commons at 1:15 pm on 22nd January 2004.

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[Relevant documents: The First Report from the Defence Committee of Session 2003–04, Armed Forces Pensions and Compensation, HC 96-I and II, and the Government's response thereto, Cm 6109.]

Order for Second Reading read.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence 1:17 pm, 22nd January 2004

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

Before turning to the detail of this important Bill for the armed forces, I must set out the wider context. The Government take their responsibilities to past, present and future service personnel very seriously. For the first time, for example, all veterans issues from right across government were pulled together under a single Minister when the Prime Minister created the post of Minister for Veterans as part of the veterans initiative in March 2001. We also strive to ensure that our current servicemen and women receive due recognition and reward for their outstanding achievements both at home and abroad. For the future, we intend to ensure that our people will have opportunities to enhance their skills and qualifications through their careers, and that pension and compensation arrangements are robust and fair.

The Bill will allow the Ministry of Defence to modernise pension and compensation arrangements for the armed forces. In developing the new schemes, the Ministry of Defence has consulted extensively with serving personnel and ex-service organisations. The new pension scheme will be introduced for new entrants from 6 April 2005, with existing personnel being given the opportunity to transfer by April 2007. The new compensation scheme will cover all service personnel for deaths and injuries due to service after its introduction on 6 April 2005.

J

The statement by Mr Hoon
"The government take there responsibilities to past pesent and future service personnel very seriously"
The statement obviously does not apply to pre 1975 servicemens rights regarding pro rata pensions.
J.P.Lloyd

Submitted by James Lloyd

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

Will provision be made to take account of members of the Ulster Defence Regiment who served in a part-time capacity but for whom there are no pension arrangements? Can arrangements be made retrospectively?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I do not want to get into each and every particular implication of the proposals for every different kind of service personnel. Arrangements will largely depend on the number of hours served and whether those hours are sufficient to make an occupational pension worth while. If the hon. Gentleman wants to raise a specific issue about a defined group of service personnel who require attention, I will certainly discuss the matter with him and respond to any letter that he might send to me.

Photo of Angus Robertson Angus Robertson Shadow SNP Spokesperson (Defence), Shadow SNP Spokesperson (Foreign and Commonwealth Office)

The Secretary of State referred to specific groups of personnel or retired personnel who may be affected by the Bill. He may be aware that there are only 27 surviving UK service personnel from the first world war. One of them is 107-year-old William Burnett, who hails originally from Aberdeen. I am certain that the Secretary of State will be unable to answer direct questions about the plight of Mr. Burnett—he and his family are currently in financial difficulty—but can he tell us whether the Bill will have an impact on veterans who served such a long time ago? If not, will he make a commitment that his staff will get into communication with Mr. Burnett's family to see what can be done in that case?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

If the hon. Gentleman contacts me about that case, I certainly undertake to look into it. Later in my speech I shall refer to a scheme that might be of assistance to that gentleman, but the substantive answer to the hon. Gentleman's question is no, the pension scheme will not be retrospective in the way that would be required to benefit that individual.

We have been able to respond positively to criticisms from the Defence Committee in its report on our original consultation proposals in May 2002. The Ministry of Defence published last week, in Command Paper 6109, a detailed response to the Committee's latest report, published just before Christmas.

I accept that it has taken a long time to develop the new arrangements, but we have used the time to ensure that the outcome better meets the needs of service personnel, as well as being consistent with the Government's wider agenda for pensions. We have worked closely with service and ex-service representatives in developing the schemes.

At a critical stage in the development of the new pension scheme, the Government published, in December 2002, two Green Papers—on longer working lives and pension tax simplification. The measures being developed by the Department for Work and Pensions and the Inland Revenue to simplify regulations and, more generally, to encourage individuals and employers to make adequate provision for retirement are obviously welcome. However, the Green Papers meant that the Ministry of Defence's original pension proposals had to be substantially reworked. As a result, the revised scheme is better focused on the needs of service personnel, offering a range of improved benefits, consistent with the way in which other key public servants are supported.

The new pension scheme, which will be introduced for new entrants to the armed forces from April 2005, embraces the Government's wider pensions agenda, in four important respects. First, the changes respond to the Government's general decision not to allow the payment of pension benefits before the age of 55, by replacing the immediate pension currently paid at about the age of 40 with a system of compensation payments. The early departure payments scheme will be of lower value than the immediate pension, with the savings generated used for major improvements to the benefits paid to widows and to cover the cost of pensioners living longer. The scheme will still be a valuable and unique benefit. I was pleased that the Select Committee broadly supported that approach.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

Will the Secretary of State confirm that although the critical age of 55 that he has mentioned is indeed the critical age for the police and the fire brigade, under his new scheme—in contrast to the early departure payment scheme—most retiring armed forces members will not receive the pension until they are 65?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I shall deal with that point in more detail, but the hon. Gentleman will know from his own experience that there are a great number of service careers, and they are so different in terms of longevity that it is difficult to design a single scheme to satisfy all of them. For example, there are those who serve 22 years and leave at about the age of 40, and there are others who serve until they are 55, whose only career, in effect, is in the services. It is thus necessary to adjust the scheme. I shall explain that in more detail in due course, and give way to the hon. Gentleman again if he is unhappy with that explanation.

Photo of Michael Clapham Michael Clapham Labour, Barnsley West and Penistone

My right hon. Friend did not make it clear whether a serviceman who became sick would have a route to his pension. Is that intended under the scheme?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

Yes. I hope that in the course of my speech I shall satisfy my hon. Friend on that point.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I thought that by setting out general principles as I developed my speech I should be asked to deal with the specifics before I could cover them in the context of my speech—but I shall risk giving way again.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

I draw the attention of the House to my entry in the Register of Members' Interests. The Secretary of State will be aware that greater use is being made of reservists. Their pay is abated in the same way as that of other servicemen, but they do not receive the pension. The Ministry of Defence makes generous arrangements to pay the pension contributions of reservists while they are mobilised, but what consideration has been given to making the benefits of the scheme available to those who have no pension arrangements to which the Ministry can make contributions, or who are unemployed?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

That is a perfectly proper question and, given the hon. Gentleman's distinguished contribution to the armed forces, it is right that he should raise it. Indeed, it was a question that I raised in preparing for the debate. The difficulty, as I hope he will accept, is that it is unlikely that the number of hours that most reservists give in service during their careers as reservists would make a realistic contribution to what is, in any view, a generous occupational pension scheme. Even if the reservists paid the contributions themselves it would be unfair on them, as they would be making only very modest contributions towards—to be frank—a very modest pension. Given the complexity of extending such an arrangement to reservists, it was not thought appropriate to do as the hon. Gentleman suggests.

The second important aspect of the scheme is that we have increased the maximum period for pension accrual to 40 years, which will address the current concern that long-serving service personnel cannot earn pension benefits beyond 34 years for officers and 37 years for other ranks. The change also reflects the desire of many for longer working lives to allow them to make better provision for retirement. At present, that affects a relatively small number, but in the longer term it will allow us to reward longer working lives, consistent with the Government's overall approach to that issue.

Thirdly, we shall retain unchanged the current career pension age of 55. For those who leave before that age, we propose to defer the payment of preserved pensions from age 60 to age 65 in both the new and the current scheme, while protecting benefits already earned. That reflects the increased costs caused by people living longer, which all pension schemes have to address.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

I am most grateful to the Secretary of State for his courtesy in giving way to me a second time. My earlier point was precisely that the overwhelming majority of armed forces personnel do not serve until the age of 55. They will not come into the full pension scheme until they are 65, whereas comparable groups—the police or fire officers—can receive a pension at 55. That is a major reduction in the terms of service of our armed forces.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I do not think that is entirely fair when we compare the existing arrangements. To repeat in part my earlier reply: someone who joined the fire service or the police force and served a full career, sufficient to earn the full pension, would have had a single career and would retire at 55 expecting, not unreasonably, a full pension based on that full career. The hon. Gentleman knows from his experience that that is not the position for the great majority of people who join the armed forces. Indeed, the educational and training arrangements that we are currently developing are designed to recognise the fact that even after 22 years' service, someone leaving the armed forces at 40, or in their early 40s, will be looking for a second career. We want to improve their educational qualifications to ensure not only that their second career is fulfilling but that they recognise that it is part of their whole career pattern—from the start of their working life until they retire. Although I accept that at first glance there appears to be a difference in approach, there is no difference in principle.

Pension scheme members in both the public and the private sector contribute to meeting the costs of the scheme. Companies such as Rolls-Royce, BAE Systems, Sainsbury and Tesco have all taken action in the last 12 months either to increase member contributions or to reduce the level of pension benefits on offer. More generally in the public services, the normal retirement age will in most cases be deferred to 65 to help deal with that issue. It therefore follows that, consistent with the Government's broader policy on longer working lives, it is right to introduce a slightly later pension age for those spending relatively short periods in the armed forces. The rationale for that is that a new entrant to the new pension scheme from April 2005 can, on average, expect to benefit more from a longer working life than their counterparts on the current scheme, and should thus bear a greater share of the cost.

The Defence Committee recommended that the Ministry of Defence should consult armed forces personnel about the timing of the change in the age for the payment of preserved pensions. Just as service personnel benefit from increased longevity, so those benefits have significant consequences that cannot be overlooked. It is difficult to make the case for excluding service personnel from the general policy of encouraging longer working lifetimes and increasing public service pension ages. However, the special circumstances of long-serving personnel, who now complete at least 18 years' service, have been recognised by our decision to pay early departure compensation from the age of 40 and by our retaining the normal full career pension age of 55.

To address the point made by Mr. Brazier directly, essentially what is being preserved is the recognition that many who join the armed forces anticipate that their career will lead to a new career in their early 40s, so at that point they will have both a lump sum payment and an income stream, and the possibility of a further career leading, I hope, to a pension from that further career as well as the lump sum and pension from their service career. On balance, that seems to be a very favourable arrangement.

The fourth principle is to provide benefits for unmarried partners who can demonstrate that they are in a substantial relationship. The scheme recognises the wider changes in society and the lifestyle preferences of those who are already serving and those whom we seek to recruit. As with other pension schemes, the range of criteria to determine whether a relationship is substantial includes evidence of dependence, such as a joint mortgage and other shared financial assets, and a shared responsibility for children, if appropriate.

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

Will the Secretary of State make it absolutely plain what Her Majesty's Government's attitude is to single-sex partnerships and to applying the same compensation and pension arrangements to bereaved partners in such instances? Many of us find that a very perilous path, both on ethical grounds and given the very temporary nature of many single-sex relationships.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I shall take the hon. Gentleman through my reasoning: once it has been recognised that the Government should compensate those who choose to live together but are not married—understandably, there was a considerable, vociferous campaign in the House to recognise that, not least before the start of the most recent conflict—and we have recognised heterosexual couples who choose to live together without marrying, it must necessarily follow, unless the hon. Gentleman can persuade me of some legal reason otherwise, that those of the same sex who choose to live together have to be recognised on the same basis. I cannot see a distinction between the two groups that would be sustainable either in law or, frankly, in fairness. If the hon. Gentleman has a way to make such a distinction, I should be delighted to it hear it.

Photo of Paul Keetch Paul Keetch Liberal Democrat, Hereford

I apologise to the Secretary of State for missing the start of his speech, but may I tell him that many hon. Members will be grateful to the Government for that decision, particularly for the fact that it was announced before the Iraq conflict? Will any of the dependants of the British servicemen tragically killed in Iraq benefit from the change, which the Government announced before the war? If so, some of those people will benefit who would not have done so previously.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I will not go into each case in detail, but that work can certainly be conducted. However, we introduced the change in the unmarried arrangements to deal with the threats from that conflict.

I have set out the general principles in the Bill. I want now to deal with how they will be implemented. The Bill will give the Secretary of State enabling powers to introduce the new schemes. I recognise that there is general concern about Bills with wide enabling powers, but that approach is the only practical way that the proposal can be made to work. It gives Parliament more involvement than there is with the current scheme, and is in line with other major public service schemes, such as those for the police and fire services and the national health service.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

As has been identified by the Royal British Legion—supported by 113 Members through early-day motion 301—will the Secretary of State recognise that the proposed change in the standard of proof of entitlement to a disability award in favour of the MOD, from beyond reasonable doubt to the balance of probabilities, will lead to 60 per cent. fewer pensions being awarded? Will the Government deal with those concerns?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I will deal with that specific point when I reach it in my speech. I had thought that the hon. Gentleman would ask me about enabling powers—he obviously felt able to resist that temptation—but I promise him that I will give way to him again when I get to the relevant part of my speech. I hope that he can be patient that long.

We have published details of the two schemes in framework documents—copies are in the Libraries of both Houses. The full scheme rules will also be laid before the House in statutory instruments, giving the opportunity to comment and have an appropriate debate.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

In dealing with the vexed issue of parliamentary scrutiny, the Secretary of State suggested that the statutory instrument procedure is the way in which the schemes can be considered, but that will give us only one and a half hours of debate, will it not? Or can he tell us that we will have more time than that to deal with these very complex and important matters?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

Of course these are complex and important matters—I am not in any way suggesting otherwise—but as I will explain in a moment, the basic issue is how, if necessary, we can amend those complex schemes in time to put into practice any such change. We will be talking not about the broad-brush approach or the general principles, but about things like pension splitting. I had to deal with that when I was a lawyer in practice. It was a development that the courts began to recognise, but it was not allowed in many statutory schemes.

To ensure that, in fairness, such changes are made available to members of the armed forces, it is necessary to have a relatively rapid means to adjust the precise terms of the scheme to implement them properly; otherwise, as the hon. Gentleman knows from his experience in the House, waiting for primary legislation could take a considerable time—which is the point that I was about to make in any event. If we had to introduce primary legislation each time a relatively minor change to the detailed provisions was required, such proposals would have to wait in the inevitably long queue for legislation. That simply does not seem fair.

The current schemes have been amended two or three times a year to reflect wider changes in Government policy. I have used the example of pension sharing on divorce, and other legal changes occur from time to time. It would be neither sensible nor fair to require such changes always to be the subject of amendment through primary legislation. We are all aware of the pressure of the Parliamentary timetable. It would be unfair to scheme members if we had to wait for parliamentary time on the Floor of the House, with all the appropriate Committee procedure. I shall give way again if I have not satisfied the hon. Gentleman on that important point.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

I wish to deal not so much with the subsequent changes as with the initial proposals. The new scheme will be presented to Parliament by way of a statutory instrument. Does the Secretary of State propose to have one and a half hours' debate on the whole new scheme?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

No. Obviously, as the Bill progresses through Parliament, the hon. Gentleman and his colleagues will have the opportunity to deal with the details, as well as the principle, in Committee, so he will have as much time as the usual channels allow. I know of his enthusiasm for Committee work, but I promise him that we will try to limit it within reason.

I recognise the Defence Committee's concern that armed forces personnel have no representative body to speak for their pension interests. However, the options are inevitably limited. It is long-established practice that the interests of service personnel are represented though their chain of command and, in particular, through the personnel staff, who have had a direct contribution to the process of policy formulation for the new schemes. We believe that that arrangement has worked effectively, identifying and representing the concerns of service personnel with regard to the reviews. In addition, there was an extensive public consultation exercise, and we commissioned an independent view of the design of the new schemes. Copies of those documents are in the Libraries of both Houses. Against that background, I believe that the interests of service personnel have been taken fully into account as we have developed the new arrangements.

Photo of Angus Robertson Angus Robertson Shadow SNP Spokesperson (Defence), Shadow SNP Spokesperson (Foreign and Commonwealth Office)

On the background documentation and the assessment of the impact of the Government's proposal, may I raise an issue that may be specific only to the handful of hon. Members who represent constituencies with a strong footprint of military bases—I have two large RAF bases in my constituency—and a local economy that is in part subsidised by early retirees going into the work market because they are confident that the current armed forces pension allows them to do so? Is the Secretary of State content that the Government's new proposals will not have a detrimental effect on the jobs market, especially in low-wage areas such as Moray? If he has evidence to back that up, will he share it with hon. Members who represent constituencies such as mine?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I am sure that the hon. Gentleman is not suggesting that people who retire from the armed forces should be exploited in any way by being offered an income less than what the market would otherwise bear—[Interruption.] I thought that that was the implication of his question. I expect those who retire from the armed forces to be treated properly in terms of their wages and terms and conditions.

I assure the House—this is relevant to the point that the hon. Gentleman raised—that more detailed information on the arrangements for a new early departure payments scheme will be available by the time that the Bill reaches Committee. The scheme is the one major aspect of the proposals about which we have not yet given full details, which is due mainly to the limited time available following the publication of Inland Revenue proposals to develop an alternative to the early immediate pension. The early departure payments scheme is a unique, mid-career leaver's compensation scheme that will be paid to personnel aged 40 and over when they leave after 18 years' service. The early departure payments will be structured in a similar way to the current immediate pension, with a lump sum payment and an income stream paid until the individual reaches 65, when a second lump sum and pension will be paid. In fact, only a minority of armed forces personnel benefit from the current immediate pension. It has historically been an extremely expensive benefit for a relatively small number of people—about one third of the annual cost of the scheme goes to the one in five people who receive that pension.

The chiefs of the armed forces are content with the reduction in the value of the payments to fund improvements to benefits elsewhere and to help to cover longevity costs. The armed forces recognise that the levels of provision introduced in 1973 are no longer required to maintain retention through to age 40. It is also recognised that the level of assurance provided to those leaving is sufficient given the better employment prospects of those leaving the armed forces mid-career as a result of the improvement in transferable skills. The change is thus a sensible rebalancing of resources.

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

Will the Secretary of State clarify what the level of gratuity or terminal grant will be for officers who leave under the new scheme at the "38 years of age, 16 years of service" point, and for people of other ranks who leave after 22 years' service? Will the terminal grants be more than the existing grants to compensate for reduction in people's income stream thereafter? That needs to be spelled out.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I said that we have more detailed work to do on that aspect of our proposals, which should be available before the Bill reaches Committee. I do not think that the hon. Gentleman was dealing entirely with the specific point that I was addressing. I was talking about an adjustment to arrangements that were originally introduced essentially as a retention measure to encourage and pull through—to use a service expression—those who joined the armed services, and specifically the Army, in their late teens so that they would stay until they had completed 22 years' service. As I said, the adjustment is supported by the chiefs and recognises the different employment and retention situation in the armed forces.

The details of the new schemes are set out in two framework documents. The new pension scheme is a defined benefit pension scheme with benefits linked to final pensionable pay. It will give a high level of assurance to our personnel in their retirement or in the event of injury, ill health or death. It will also be fairer than the current scheme, with common terms for officers and other ranks. Those are two important differences from the present scheme.

There will be significant improvements to dependants' benefits. The death-in-service lump sum benefit will be increased from up to one and a half times pensionable pay following a death due to service to four times pensionable pay. Widows' and widowers' pensions will be increased by 25 per cent. to reflect the particular demands of service life and their impact on a spouse's ability to earn a pension. Additionally, dependants' benefits will be extended to unmarried partners, including same-sex partners who have a substantial relationship. The precise levels of payment that a dependant will receive will depend on individual circumstances, such as the rank and length of service of the service person who has died. The changes reflect key concerns that were raised during our consultations. They address the need to make proper provision for those who are left behind when personnel die or are killed in service.

The pension scheme will be introduced for new entrants to the armed forces on 6 April 2005 and will be available for existing personnel who choose to transfer to the new scheme no later than 6 April 2007. The decision to transfer will be entirely voluntary for each individual member, and the Ministry of Defence will give individuals all information necessary to allow them to make an informed choice so that they may decide what is best for them and their families.

It is also proposed that a new compensation scheme will be introduced from 6 April 2005 for death or injury resulting from service after that date. The arrangements will replace provisions under the war pensions scheme and benefits under the current pension scheme. The existing arrangements will continue for disablement or death due to service with a cause that predates 6 April 2005.

The existing arrangements have their origins in the two world wars of the past century and are they are now outdated and over-complex. The standard of proof used in the war pensions scheme—beyond reasonable doubt—was introduced in 1943, but for the first world war and the first four years of the second world war, the scheme used tests based on a balance of probabilities. We propose to use that standard of proof for the new scheme.

The standard was changed to beyond reasonable doubt because of the extreme circumstances of the time, including a global conflict involving millions of combatants and thousands of claims that had to be decided quickly using incident and medical records that were often incomplete. The social, medical and political environment is very different today. The proposed balance of probabilities standard of proof is widely accepted for other occupational schemes, as well as for decisions in the civil courts. It is no longer possible to justify a different approach for the war pensions scheme. In combination with the absence of any time limit for claiming, it does not allow an evidence-based decision to reflect properly how conditions arise. The lack of focus of the current scheme means that if we perpetuated the current outdated arrangements, we would risk not making proper provision for those who deserve it most—those who are most seriously disabled—and do service personnel a disservice.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

I shall add to the previous point that I raised with the Secretary of State and I would be grateful for his answer. I understand that the current unlimited period for applications will be reduced to five years. The Royal British Legion has approached ex-servicemen to remind them of their right to claim, but why should people who have been injured in the service of their country be subjected to a time limit?

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I hope that I have dealt satisfactorily with the hon. Gentleman's previous point. It is important that we explain the changes to service personnel. I am willing to give him another opportunity to state why he believes that the existing test should continue, given that it is at variance with practice before 1943, widespread practice throughout occupational pension schemes and, crucially, the practice of the courts.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

There is great suspicion that the reason behind the change is that it will cut out 60 per cent. of potential claims and therefore provide a cost-saving opportunity rather than a solution to the specific problem of ensuring that people who are injured during the course of duty get their just deserts.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I assure the hon. Gentleman that the change is not financially driven. Moreover, there is an entirely independent system for determining such claims. If service personnel are dissatisfied with the situation and can prove negligence in an appropriate case, they have the opportunity to pursue their case through the civil courts. They would have to prove that case on a balance of probabilities, so there is absolute consistency in the approach that the Government are recommending to the House. I hope that he will appreciate that consistency when he examines the proposals in more detail in due course.

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons)

The Secretary of State seems to accept that the system represents a tightening of the rules for compensation. It is thus likely, as he said, that more ex-servicemen and women would pursue their claims through the civil courts. Given that the civil courts usually tend to award larger sums than the Ministry of Defence has, and that that encourages the compensation culture that many of us do not wish to see, is not the MOD's policy heading in completely the wrong direction? The Ministry should open up the ability of ex-servicemen and women to claim through the system and close down their opportunities of pursuing the Ministry through the civil courts.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

I could give the hon. Gentleman a long lecture on the problem of no-fault schemes, but I will not. He needs to recognise that there are two approaches to the problem of compensation: either, essentially, a no-fault scheme that recognises that the claimant should receive compensation as of right, by virtue of their status as a member of the armed forces, or a scheme that requires people to choose to go to court and prove fault—negligence—to win compensation.

Members of the armed forces have the best of both worlds. They may be able to satisfy the terms of the no-fault arrangements and derive the compensation available under that scheme, but if they so choose, they can go to court to win, as the hon. Gentleman suggests, higher compensation, should that be justified, on the basis of proving fault. That is an admirable arrangement, and I would not want to deprive members of the armed forces of that second opportunity. It seems to me that they should have the same right as any other citizen in our society to prove fault, if it exists, and win compensation.

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons)

The Secretary of State is effectively outlining a double-track system, but I am saying that the Ministry of Defence owes a primary responsibility to those who are injured as a result of their service, so the MOD should be their first port of call. The Secretary of State should try to look after ex-servicemen and women primarily in that way, not by changing the rules in the way that he is suggesting, and should try to discourage them from going through the civil courts, which costs the MOD more and gives the public a bad perception of its uncaring attitude. He will know better than I that it takes a great deal of time and money for people to go through the civil courts.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

In my view, the arrangements are to the benefit of members of the armed forces because, as the hon. Gentleman knows, no-fault schemes inevitably pay lower compensation than fault-based schemes. It would be wrong to deny members of the armed forces that opportunity of earning higher compensation through proving fault. I hope that he will accept that I resisted any suggestion of doing that because I think that it would be to the disadvantage of service personnel. Perhaps the matter can be debated in more detail in Committee. He raised a question of fundamental principle; I believe that the present proposals give service personnel the best of both worlds, and I am comfortable with that.

Photo of Michael Clapham Michael Clapham Labour, Barnsley West and Penistone

I welcome the change that my right hon. Friend is suggesting, because it would put servicemen on a par with every other worker in British society. They will be able to claim compensation on a dual track: they can claim first for loss of faculty, to which my right hon. Friend referred, and secondly they can go to court to claim on the basis of negligence; for example, in an asbestos case. That is a favourable development.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

My hon. Friend is obviously a lot more persuasive than I am.

The new scheme reflects modern medical understanding and current practice on disability. It is fair, transparent and simple to understand, and offers consistent and fair outcomes, with better focus on the more severely disabled. The scheme will be evidence-based, with a requirement on the Department to make available appropriate medical and other records that are relevant to a claim, with an independent appeal process. We are confident that no claim would fail where there was reasonable evidence that disablement was due to military service.

In contrast to the current arrangements, there will be in-service lump sum awards for pain and suffering because an injury may be significant without leading to invaliding from the armed forces. Benefits will be provided for dependants where deaths result from service and, as with the new pension scheme, those will be extended to include unmarried partners where there is a substantial relationship. There will be a normal time limit for claiming of five years, with discretion to consider claims delayed by ill health, and an exceptions list of late-onset conditions.

The modernisation of the appeal process is the second major element of the Bill. In line with the recommendations of the Leggatt review, the Department for Constitutional Affairs proposes to change the route of appeals from decisions of the pensions appeal tribunal to include a new level of appeal to a social security commissioner. Under the new compensation scheme, therefore, service personnel will have the opportunity to appeal first to the pensions appeal tribunal and then to a social security commissioner, with a further right of appeal to the Court of Appeal.

There is one final aspect of the Bill that I should mention to complete the picture. It may be that Angus Robertson, who raised a particular case earlier, will pursue this matter. The Royal Patriotic Fund Corporation was set up to provide relief to the widows and orphans of soldiers, sailors and marines who died in the Crimean war. It now assists the spouses, children and other dependants of deceased members of the armed forces. It needs to modernise its constitution and in particular to simplify and reduce the administrative burden.

Primary legislation is needed as the Patriotic Fund Reorganisation Act 1903, under which the corporation is constituted, extends throughout the United Kingdom, while the scheme-making powers of the Charity Commission extend only to England and Wales. We have therefore agreed that the Bill can provide for the legislative changes required. Further details are in the explanatory notes, for all those hon. Members who will be fascinated to study them.

In conclusion, the new schemes are designed to be fairer, to reflect modern practice and to meet the needs of the armed forces in the 21st century. They offer a high level of assurance for service personnel and their families. They were born out of a wide-ranging consultation exercise, in particular with existing personnel and with ex-service organisations, whose comments and concerns are widely reflected in the final schemes. The proposals have the confidence of the armed forces, with whom they have been closely developed. The consultation document was made available to all service personnel in hard copy and through the MOD website.

At a time when pension schemes are under great pressure, we have maintained a defined benefits structure and the value of the retirement age benefits has been maintained or improved. In particular, responding to views both in the services and in the ex-service community, we have made major improvements to widows' and dependants' benefits. That is against the trend seen more widely in pension provision elsewhere. The unique role of the armed forces means that they deserve a high-quality pension scheme, and that is what we are providing, together with the knowledge that, if the worst happens, there will be generous financial support for their families. Service personnel can be assured that they are getting a very good package indeed. I am satisfied that such treatment is fully justified. I commend the Bill to the House.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence 1:57 pm, 22nd January 2004

I apologise to the House and to you, Mr. Deputy Speaker, as I have to the Secretary of State by letter, for the fact that, since the business managers moved this debate to today, an obligation prevents me from staying for the winding-up speeches; indeed, I have to leave very soon after I sit down. I thank the Secretary of State for being gracious in that respect.

George Washington said:

"You can judge a society by the way that it treats its veterans."

The changes to the armed forces pension scheme will determine how we treat our veterans and their families for years to come. The arrangements that we establish now will set down the provision for those who have not yet even begun their military service, and they will have profound implications for those already serving, should they choose to transfer to the new scheme.

The starting point of any armed forces pension scheme must of course be the unique nature of the armed forces themselves. I quote from an excellent letter in The Daily Telegraph yesterday from a gentleman in Scotland, which I thought was very well written:

"All who join the armed forces do so in the knowledge that they may one day have to give their lives in the service of their country. There is an unwritten contract between the members of the armed forces and those of us on whose behalf they are prepared to make that sacrifice: we will only put them in life-threatening situations with extreme reluctance after all avenues have been exhausted and we will equip them with the tools to give them every chance to perform their duties and get out alive. We elect a Government in whom we entrust the maintenance of that contract."

All that the members of the armed forces ask is that they and their families be treated fairly in return for the sacrifices that they make on our behalf.

That unique situation has been recognised by successive Governments, including the present one, who rightly acknowledged it when they introduced the minimum wage. Mr. McCartney, the then Minister of State, Department of Trade and Industry and the Minister responsible for the National Minimum Wage Act 1998, gave his reasons for making the armed forces exempt from its provisions:

"I should emphasise that the exemption of the armed forces will not be a precedent for the treatment of any other group. The armed forces are unique in the demands that are placed on them and the diversity of duties that their members may be required to undertake at any time and for any period."—[Official Report, Standing Committee D, 5 February 1998; c. 779.]

An introduction to military pay on the Ministry of Defence website states that

"no civilian occupation can be directly compared to serving in the Army".

That should continue to be reflected in the make-up of the new armed forces pension scheme. Recent events have demonstrated the critical importance of ensuring that our armed forces are supplied with the best equipment and accorded the best conditions of service. After all, it is the men and women of Her Majesty's armed forces who are the key to securing success in often dangerous military operations.

That is the litmus test that we shall apply when assessing the adequacy of the Government's proposals to change the arrangements for the payment of service pensions and compensation to those injured as a result of their military service. Regrettably, the Government have failed to make a good start. Although they instigated a review following the publication of the strategic defence review, it was not until 2001 that a consultation document appeared. It was roundly condemned in a tour de force by the Defence Committee, to which the House is greatly indebted for its thorough, painstaking and professional work in a highly complex area, and whose deliberations I make no apology for quoting liberally. It took the Government another two years, until last September, before further proposals were published, and they, too, received a thorough going-over by the Select Committee.

Our first objection to the Bill, and one of the Select Committee's principal indictments, is that it is an enabling measure, with much of the essential detail missing. As the Committee concluded, it is unreasonable to expect Parliament to agree enabling primary legislation without those details being available. In their response, the Government rather feebly pleaded that their September proposals provided a suitable basis for discussion, but they admitted that their plans to replace the immediate pension with a new statutory early departure scheme had not been finalised. The early departure scheme is not only a major change in armed forces pension schemes but is the principal source of the savings that the Government hope to make to fund improvements elsewhere. As the timetable for introducing the Bill was exclusively the Government's responsibility, there is no excuse whatever for bringing before Parliament a measure whose principal controversial ingredient is still the subject of negotiation with other Government Departments.

The armed forces pension scheme, uniquely among pension schemes, has no independent governance, and its members do not have trade union representation. Instead, it is constructed and protected by primary legislation, or Act of Parliament. However, the Government are to strip the armed forces of even that protection, and are not going to introduce independent trustees. When they eventually complete negotiations on the final shape of the early departure scheme, its details, as the British Medical Association has pointed out in its helpful briefing, will be given in secondary legislation, which will not be subject to proper parliamentary scrutiny. That is simply an unacceptable state of affairs—the Government should have held the Bill back until that key issue and others were resolved.

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

My hon. Friend is making a powerful speech and has just made a telling point. Is not a great deficiency of secondary legislation the fact that it cannot be amended? Measures as complicated and as important to servicemen and their families as the early departure scheme require detailed scrutiny and the provision for amendment that primary legislation alone provides.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

I entirely agree with my hon. Friend, particularly because, as the Secretary of State rightly acknowledged, this is a delicate and profoundly important matter for members of the armed forces.

Photo of Geoff Hoon Geoff Hoon Secretary of State, Ministry of Defence

Can the hon. Gentleman answer two questions? First, if he believes that there is a principle missing from the Bill or, indeed, the detailed arrangements, does he acknowledge that it could be added by means of an amendment if he and his supporters feel strongly about the issue? Secondly, is he saying that if a beneficial change in the detailed provisions of pension arrangements is to be introduced—that regularly happens, as I have told the House—members of the armed forces should wait for primary legislation?

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

The right hon. Gentleman is leading with his chin. Members of the armed forces are used to waiting for almost everything—[Interruption.] I am going to answer the question. The Bill is an important measure. Given the time that we have had to wait for it, the missing details should have been included in a detailed appendix.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

We will do so, but if the Government are going to make a noise like a chicken, it is preferable that they lay an egg. We would like complete and detailed provisions.

We do not intend to divide the House tonight, but we reserve our position and will judge the Government on any progress made in Committee. The Government have declared that the changes should be cost-neutral, so increased benefits can be paid to someone only if someone else has theirs reduced. We recognise the constraints on public expenditure, but the Government cannot proclaim that their motivation for introducing change is to produce a scheme commensurate with best practice elsewhere while at the same time cutting some existing benefits. The Defence Committee said of the initial consultation paper, in its first report published in May 2002:

"It . . . fails to reflect modern best practice, standards or legitimate expectations of service personnel and their dependants."

During interminable debate on this issue, the Ministry of Defence has effectively moved the goalposts by changing the actuarial assumptions on which everything is based. As the Defence Committee reported, the expected cost of the existing scheme to the Ministry in 30 to 40 years' time has been recalculated from 22 per cent. to 24.5 per cent. of pensionable salary. The new scheme will reduce the estimated cost to 22 per cent. However, if the original actuarial assumptions were applied to the new scheme, it would cost 20.3 per cent. of pensionable salary, so the total value of the new scheme is 1.7 per cent. less than the value of the current scheme, which flatly contradicts the Government's claim that any savings in one area would be used to enhance benefits elsewhere.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

Does my hon. Friend agree that it would be helpful if the Government could give figures for the saving that they would make by quantifying the precise saving made by deferring the pension from 60 to 65?

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

I agree entirely with my hon. Friend, and I hope that we will have an opportunity to hear a speech from him this afternoon. On behalf of the whole House, I congratulate him on his richly deserved reward.

The Government assert that under the new scheme service personnel will be able to earn a full career pension, within Inland Revenue limits, of 66.7 per cent. However, the Forces Pension Society, to which the House is indebted, has calculated that the vast majority of people will be able to accumulate a maximum of 62.5 per cent. at age 55. Indeed, only a few three-star generals will qualify for the higher figure. As the Select Committee said, it is at best disingenuous to structure a scheme well over 90 per cent. of whose members are debarred from earning a full career pension without buying additional voluntary contributions. Moreover, cost neutrality is a misleading term. Individual pensioners are being made to fund the cost of their increased life expectancy while the Treasury reaps the full benefit of the large reductions in numbers that will flow from the contraction of the armed forces.

The early departure scheme is intended to replace the immediate pension, and it is in that scheme that the biggest cost savings will be secured—about £100 million a year, according to some estimates. The new arrangement will produce less income for those departing at age 40, and they will have to wait until they are 65 before their preserved pensions become payable, whereas under the current scheme they are payable at 60. It is important to understand that like the immediate pension, the early departure scheme will be a manning tool, principally for the benefit of the MOD, which needs to shed men at 40, particularly in the infantry, where physical fitness is crucial. The arrangement recognises that for many of those forced to retire from military service, the prospects of establishing themselves in a new career are more limited, at a time when family responsibilities are at their peak.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

The other huge disadvantage faced by those leaving the Army is that most of them do not own houses, and house prices are colossal. The one opportunity they have to make up some of that difference is by commuting a large part of the immediate pension.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

That is an extremely good point, which I am sure my hon. Friend will enlarge on when he speaks. I thank him for all he does for the armed forces and for the wary eye that he keeps on their welfare and benefits.

To make the point more emphatically, the House should bear it in mind that some have put estimates of ex-servicemen among London's homeless as high as 20 per cent. Equally, for those with readily transferable skills, such as signallers, RAF pilots, aviation engineers and other technicians and highly trained service personnel, who are likely to be lured away prematurely by the private sector, the IP and its attendant lump sum payment provide an incentive to stay on.

The Defence Committee estimated that even assuming an inflation rate as low as 3 per cent., the value of the EDS payments by the age of 65—the new point at which the ex-servicemen's preserved pension is payable—will have halved. The new arrangements will be inferior to those applied to the police and the fire services, whose members will receive a proper index-linked pension at 55. What will the Government do to address the issue?

We must also be told what effect the removal of the EDS from the pension rules is likely to have. We were told by the Treasury in a parliamentary answer that the EDS will not be subject to national insurance contributions, but what guarantee is there that the Government will not change the rate or make other changes without consulting Parliament? An immediate pension is a pension enjoying all the special protections associated with pension funds. Our fear is that the EDS is neither fish nor fowl.

The £100 million cut in the cost of the IP will clearly help pay for some of the improvements that we warmly welcome. Those include improvements in benefits for widows and dependants, particularly the increase in dependants' pensions from 25 per cent. to 33 per cent., and the death-in-service benefit, which will increase from the current 1.5 times salary to four times salary, bringing that benefit more into line with best practice elsewhere and reflecting the unique commitment that servicemen give to our country.

We welcome the proposal to abolish the distinction between a widow whose husband's death was attributable to military service, and a widow whose husband's death was not attributable. In future, both groups will retain their pensions in the event that they marry or cohabit. That is an important step. However, the so-called unattributable widows whose husbands have already died, together with those whose husbands die before the new scheme comes in, will not qualify.

To that group of disadvantaged people, add one other distinguished group of pensioners wholly ignored by the Government—the widows of those who died before 1973, arguably some of the most deserving, since it was the husbands of many of them who helped preserve the freedom of these islands during the second world war. As things stand, they receive a pension worth one third of their late husband's pension, whereas those whose husbands died after 1973 receive half. Under the new scheme, future widows will receive 62.5 per cent.

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

The hon. Gentleman refers to 1973. After that, there were 18 years of Tory Government. Perhaps he can tell me what he did to solve the problem.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

That is not the point that I was making, but it is a valid point. Those people have not been treated as well as they should have been. In addition, those who married retired servicemen who left the forces before 1978 receive no widow's pension. They will see that they have been overlooked, particularly in favour of unmarried partners.

The extension of benefits to unmarried partners is a contentious issue that understandably arouses strong passions on both sides of the argument. [Interruption.] I could tell that the Secretary of State was referring to his hon. Friend John Robertson. I thought he might wish to speak.

We accept that the armed forces must have regard to social conditions prevailing in the wider society that they serve and from which they recruit. Nevertheless, as appears to be agreed across the Floor of the House, the armed forces are indeed different. We would argue that that difference—their commitment to a raft of values that is sadly not always apparent in the rest of society—results in the kind of stunningly successful military operations that we have just witnessed.

We are alarmed that the principal reason advanced by Ministers for the changes is not that without them recruiting would dry up, but that they must be introduced to comply with something rather dismally called the Government's equality agenda. I warn Ministers that the elevation over military efficiency of some kind of Orwellian social engineering and political correctness will inflict lasting damage on our armed forces. This is not the only area. There are other areas where great concern is being expressed by senior officers about the increasing "risk-averse" difficulties becoming apparent in the armed forces, and the reluctance of people when training to react in the way that they normally would.

Even now, the Government have failed to provide a comprehensive set of criteria by which servicemen and women living together will be deemed to qualify for the benefits available to married couples. In answer to my hon. Friend Mr. Howarth at the Defence Committee evidential session just two months ago, the Under-Secretary said:

"We are talking about substantial relationships; we need to work out exactly what that means".

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

I am grateful to the hon. Gentleman for giving way. In his research for today's debate, I am sure he will have seen the memorandum that I submitted to the Defence Committee after my oral evidence, including Annex A, which details what the Ministry of Defence regards as a substantial relationship.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

I am about to come to that. For all those who had the opportunity to read it, it was a walk through the foothills of immortality.

On 27 November 2003, the MOD submitted a draft Defence Council instruction setting out some of the proposed criteria, which the Under-Secretary has just drawn to the attention of the House. Unlike the Secretary of State, I am no lawyer, and in that regard I am disadvantaged in life, but even I can see that the opportunities would make a member of the right hon. Gentleman's profession salivate.

When the Under-Secretary winds up, I trust that he will tell us what assessment has been made by the Ministry of the likelihood of litigation arising from those who are not considered to meet the criteria that are finally agreed. That is a matter of fundamental importance. I shall anxiously read in Hansard what the hon. Gentleman says about the matter. Furthermore, with respect, he needs to consider the knock-on effect his proposals on benefits will have on accommodation. That is a serious matter, which I know is giving rise to a great deal of thought in the Ministry of Defence, particularly among senior servicemen and commanders.

The Government will not extend to those on the existing scheme certain benefits from the new scheme that it might have been reasonable to make available, such as the much increased death-in-service benefit. However, they are prepared to import into the current scheme some of the less favourable aspects of the new one. For example, in order to comply with the Government's new wider pension policy, under the new scheme, the age from which the preserved pension will become payable will be raised from 60 to 65, but this change will also be applied to those in the current scheme.

Photo of Paul Keetch Paul Keetch Liberal Democrat, Hereford

I am grateful to the shadow Defence Secretary for giving way during his entertaining speech. Given what he said about unmarried partners, can he specify the Conservative party's policy on the matter? If they can be properly defined, does the Conservative party support the payment of benefits to unmarried partners of either sex—same sex or not same sex—in accordance with the general principle outlined in the Bill?

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

First, we would wish to see the definitions made clearer. Secondly, I am not prepared to engage in wider social policy outside my brief, but, as I said when I began this passage, we believe that the very exceptional nature of service life and the demands and ethos of service life may require that these matters are not as they may be elsewhere. I am not making a hard and fast judgement on that. We should very much like to see the definitions drawn up by the Government. I hope that that is clear.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

I hope that it is completely clear. As it is, I am walking a tightrope between my hon. Friend the Member for Aldershot, to whom I defer on all these matters, and a number of others in my party.

I take the hon. Gentleman's point. To be serious, there needs to be clarity on this matter on all sides. Until the Government lay down how they intend to handle this matter on a much wider scale, including in relation to housing, I shall reserve judgement.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

I shall not give way. I have been trapped once, and I shall not be trapped again.

In order to comply with the Government's new wider pension policy, under the new scheme the age from which the preserved pension will become payable will be raised from 60 to 65. This change will also be applied to those in the current scheme. What that will mean is that today's servicemen will be paid their preserved pension at age 60 for that part of their service which precedes the date of the introduction of the new scheme, but will have to wait until they are 65 before drawing that part of their pension attributable to their service after the changeover date.

Those serving today will not be able to mix and match. They will have the simple choice of remaining within the existing scheme or switching to the new one. There is little doubt that any serviceman deciding to switch will enjoy reduced pension benefits but enhanced death-in-service and dependants' benefits. Where is a serviceman or woman to find advice about reaching this decision, which is very important both for them and for their spouse? Is the Ministry going to provide a new battalion of khaki independent financial advisers to be on hand to help? If not, will it provide an allowance to enable people to seek advice from the high street? Or will all those people just turn up at our surgeries?

The changes to the compensation arrangements that the Government propose have caused particular controversy among the veterans community. We accept that the compensation scheme is in need of reform, and we welcome the opportunity to re-examine the arrangements.

Since the Government came to power in 1997 the amounts paid by the Ministry of Defence in compensation claims have risen by a staggering 50 per cent.—£34 million—to £104 million. The war pensions and compensation schemes for the armed forces have always been generous and favourable towards the claimant, but the increases in the last three years alone suggest that even the armed forces are no longer immune from the compensation culture.

Any new arrangements for armed forces compensation need to strike a balance between accepting the special nature of military service—and the unique exposure to risk which goes with the territory—and avoiding further concessions towards the very insidious compensation culture that is beginning to do our country such harm.

Because of the heightened risks arising from military service and the high levels of physical fitness required, the compensation arrangements through the war pensions scheme have always been similarly generous. The standard of reasonable doubt that has traditionally been applied, and the absence of a time limit on claiming, reflected the exceptional nature of military service and resulted in many claims being granted which would have been unlikely to succeed in comparable public service schemes. Figures provided by the Royal British Legion for the claims made in 2002–03 suggest that under the new arrangements, with the introduction of the balance of probabilities and the five-year time limit, 60 per cent. of those claims would fail on those criteria.

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

My hon. Friend is making a very important point. But is it not the case that certain categories of military injury by their very nature will not emerge within five years? I am thinking of radiological accidents, for example. The pernicious effects of radiation overdoses often become apparent only after 10, 15 or 20 years. That is a very serious matter.

Photo of Nicholas Soames Nicholas Soames Shadow Secretary of State for Defence

I am grateful to my hon. Friend, who has experience in these matters. I shall come to that point.

The unique generosity of the scheme has always been explicit. Changes to the scheme in the past through secondary legislation have always been in line with this acceptance. However, the Government stated in their consultation document:

"This generosity means that war pensions are sometimes lawfully awarded for conditions only tenuously linked to service. This does not seem reasonable or in line with the practice in most modern schemes."

The onus should continue to be on the Government to prove that service was not responsible for causing or worsening a condition for which a compensation claim is made. The standard of the balance of probabilities—the point that my hon. Friend Mr. Wilkinson was making—taken together with the five-year limit, does not take account of the pressures of military service. Medical conditions resulting from military service can often take years to surface. By setting an arbitrary time scale of five years, the Government could prevent certain members of the armed forces from receiving their proper due.

In its conclusions on the new compensation arrangements, the Select Committee suggested applying to compensation claims a test that might more fairly reflect the needs of the claimant, while achieving greater efficiency in dealing with these claims. The Committee said, at page 47 of its first report:

"A possible solution might be to apply a double test to compensation cases to ensure that the burden of proof does not unfairly discriminate against service personnel. Under such a system, a claim for compensation would only fail where both: (a) the claimant is unable to prove on the balance of probabilities that a condition is due to service, and (b) the MoD is able to prove on the same standard of proof that the condition is not due to service. We have not assessed how this proposal would be implemented in practice, but believe that the MoD should seriously consider it in the light of the special circumstances of Armed Forces personnel."

It is extremely disappointing that in their response to the Committee the Government have dismissed that reasonable compromise. Worse, they have prayed in aid, in paragraph 15, the fact that their proposition is

"in line with the practice of other occupational pension schemes and the civil courts."

Manifestly, that fails our litmus test, which is that the armed forces are not just another public service; they need to be treated differently.

The setting of arbitrary tariffs for disabilities fails to take account of how injuries can affect different personnel in different ways. A minor eye injury may not have such an adverse effect on an infantry soldier as seriously to impede his career, but an airman suffering the same injury will certainly have his flying career ended. What assurances can the Secretary of State give the House that any system of tariffs in the new scheme will be flexible enough to take account of the differential nature of such injuries?

I apologise for keeping the House for so long. We believe that the Government have failed to provide a Bill whose proposals are clearly laid out. Some of the essential detail remains to be worked out, with much work needing to be done in Committee. As the Secretary of State said, it is entirely down to us to table amendments. My hon. Friend the Member for Aldershot will lead for us in the Committee, where we will explore some of our ideas and concerns in great detail by way of amendments. If we are not to seek to block the Bill's progress here and in another place, we shall need answers to some important questions that we shall seek to raise.

Our armed forces have always served our country with enormous distinction. They and their families rightly look to us to protect their interests. That duty we fully intend to discharge.

Photo of Rachel Squire Rachel Squire Labour, Dunfermline West 2:28 pm, 22nd January 2004

I begin by presenting the apologies of my right hon. Friend Mr. George, the Chairman of the Defence Committee, who is unable to be present for the whole debate. As has already been said, the date of the debate was changed at short notice, which the House will appreciate made it very difficult for my right hon. Friend, in view of his commitments for today. However, he hopes to be able to join us before the end of the debate, when those commitments allow.

On that basis, I have been given the honour of being asked to speak for the Defence Committee as a whole. I should, however, declare that I have a personal interest, in that I am the entirely voluntary honorary vice-president of the Dunfermline branch of the Royal British Legion Scotland.

Photo of Rachel Squire Rachel Squire Labour, Dunfermline West

I thank the hon. Gentleman for such a compliment.

As the hon. Gentleman and other hon. Members recognise, the Defence Committee has a long-standing interest in armed forces pay and conditions, and we welcome the keen interest that has been shown in our report. Towards the end of the last Parliament, we conducted an in-depth inquiry into personnel issues, and our report on the Government's proposals was published in May 2002. We stated that we considered the proposals to be

"at best inadequately thought-through and at worst fundamentally flawed".

In December 2002, the Committee took evidence on legacy issues from the then Minister, my hon. Friend Dr. Moonie, and the report on the proposals that are before the House was published in December last year.

The Committee welcomes certain aspects of the Bill and the proposed schemes. We welcome the modernisation of pension and compensation arrangements in the armed forces; the fact that officers and other ranks are to be put on an equal footing so that all will be able to start accruing a pension as soon as they enlist, at whatever age, and all will be able to claim early departure benefits at the same age and after the same period of service; the improved provision for widows and other dependants, especially where a service person has been killed in action, and the introduction of benefits for unmarried partners; the focus on compensation payments for the most severely injured and disabled; the setting up of an independent appeals system for contribution claims; and the guarantee of the possibility of parliamentary scrutiny of future schemes—albeit a very weak form of scrutiny.

However, the Committee still sees problems with the proposed pension and compensation schemes, even after the Government's response to our report. On pensions, the proposals essentially amount to "making ends meet". We do not consider that that is what our highly valued and professional armed forces deserve. The Government have made no attempt to break out of the straitjacket of cost neutrality. The proposals are based not on what the forces deserve, but how much money they get at present. Apparently, no one has tried to assess whether what our armed forces get now is what they need and, indeed, deserve.

Even worse, the level of benefit that our armed forces will get year on year is being reduced to compensate for the fact that they are expected to live longer. Although the forces have a low retirement age of 55, very few people actually serve to that age—no more than 10 per cent., almost all of whom are career officers. The remaining personnel—that is, 90 per cent. or more—will, under the new pension scheme, get their preserved pension five years later than they do now, at 65 instead of 60.

We have already heard about the early departure payments that are replacing immediate pensions for those who stay on to about the age of 40. Those payments seem to have two purposes—first, to improve retention of skilled personnel, and secondly, to compensate those personnel for their reduced career prospects on leaving the armed forces. The Committee is concerned that we still do not know how that benefit will be structured, although I welcome the assurance that the Secretary of State gave earlier. The reason given for the delay was that it was necessary to rethink the immediate pension following the publication of the Inland Revenue's proposals for pensions tax simplification. We find that hard to accept, given that those proposals were published more than a year ago, in December 2002. It is unacceptable that the Government failed to publish details of their proposed early departure scheme before the debate. We know that the value of the payments will be less than before, but we do not know whether they will be protected from inflation.

The Committee has questioned the Government's commitment to giving service personnel the benefits that they deserve. The Superannuation Act 1972, which legislates for most public service pensions, has written into it a requirement to consult, but there is no such requirement in the Bill. That may be because there is no one to consult, because service personnel have no specific organisation to represent them as employees. The Government's reply to the Committee's report states:

"It has been long-established practice that the interests of Service personnel are represented through their chain of command, and in particular through the Personnel Staffs".

With all due respect to the personnel staffs, they have their own interests to represent, and the Committee feels that there has been little evidence that the chain of command has sufficient regard for the interests of personnel who are towards the bottom of the chain.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

The hon. Lady is making a powerful and courageous speech. Highly professional as the personnel staffs are, they can have no further interest in a major or sergeant in his 40s who has come to the end of his service, because their interest always has to be in the next generation. Parliament has the duty to take account of those who have given the best part of their lives to serve in the armed forces.

Photo of Rachel Squire Rachel Squire Labour, Dunfermline West

I thank the hon. Gentleman. I agree, and I am confident that the Defence Committee would agree, with his point.

Personnel who serve a full career to the age of 55—career officers such as those at the top of the chain of command—will have excellent pension entitlements. However, benefits for personnel who serve for only a short time—the vast majority—are, in the words of the Government's own independent consultants, only "fair", and will "look increasingly less generous" in future. People do not generally think about pensions when they decide to join the armed forces, but that does not mean that their needs on retirement should be ignored, especially by Parliament.

Not surprisingly, there is a very low level of interest in, and understanding of, pensions among those in the forces. The Committee admits that there has been a poor response to flawed consultations. However, that does not mean that consultation should be taken to be a waste of time, but that our forces personnel should be better educated about their entitlements. That underlines the need for a body that is truly representative of all ranks of personnel as employees.

We proposed that a requirement to consult should be written into the Bill by making schemes that are made under it subject to super-affirmative procedure. The measure should provide for proper consultation with armed forces personnel in the same way as the Superannuation Act 1972 provides for proper consultation with other public servants. There is currently no such provision and the Committee would like to know the reason for that. We would like the Government to establish in law their duty to consult all armed forces personnel.

The Committee agrees that although the scheme is non-contributory and unfunded, there will be no independent trustees to ensure that it is properly administered. Sadly, cases of maladministration of the existing schemes have recently come to light. Would not it be appropriate to ensure independent oversight of those who administer the new scheme?

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

My hon. Friend is making an interesting speech, as Mr. Brazier said. In pension policy, independent trustees are usually appointed because there is a fund to manage. In the case that we are considering, there is no fund to be actively managed.

Photo of Rachel Squire Rachel Squire Labour, Dunfermline West

I thank my hon. Friend for his point, but I re-emphasise the Committee's concern about the absence of information and consultation in all ranks, and of proper scrutiny and accountability when the new pension scheme is introduced.

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons)

When the hon. Lady is considering the Under-Secretary's point, will she also bear it in mind that the armed forces are unique in having no representative body such as a trade union that looks after their interests? They are a special case and even if they do not have a fund and therefore do not need trustees, they need a form of independent governance because nobody else looks after their interests. Surely that is the critical point.

Photo of Rachel Squire Rachel Squire Labour, Dunfermline West

I agree with the hon. Gentleman. When the Committee has been on visits and made an effort to talk to all ranks of armed forces personnel, we have been genuinely concerned by the lack of information about, and understanding of, the proposals.

I do not want to take too much time because other hon. Members wish to speak, but I should like to deal with the compensation scheme. It exists to help service people who have suffered injury or illness through their work in the armed forces. It is an unusual but important benefit. Again, the Committee emphasises how few other jobs require employees routinely to put themselves in mortal danger.

One of the main changes to the scheme is the method for deciding whether an injury has been caused by service. It is worth going over the points that have already been made. The Ministry of Defence currently has to prove beyond reasonable doubt that an injury was not caused by service. Otherwise, a claim for compensation succeeds. The proposal would change that so that, in future, service people would have to prove on the balance of probabilities that their injury was caused by service. The Ministry of Defence claims that that

"reflects wider good practice in modern compensation schemes".

However, the Committee believes that it is only natural to be sceptical about a change that appears to make life easier for the Government and more difficult for claimants.

The Committee is prepared to keep an open mind about whether the balance of probabilities is an appropriate standard of proof, but it is much less happy about the proposed change to the burden of proof. As the Committee's report states, armed forces personnel

"are likely to be involved in situations of great uncertainty, with uncertain effects on their health".

The Government have acknowledged that they have responsibilities to service personnel who make compensation claims. That is welcome.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

I am so grateful to the hon. Lady for giving away again. Before she leaves that narrow point, I emphasise that there is an additional problem. The Royal British Legion and others asked for a unified veterans agency and suggested that it should be based in the Department for Work and Pensions. However, the whole mechanism, including medical records, is now being handled by the employer. In no other profession is all the relevant medical information held by one of the two parties.

Photo of Rachel Squire Rachel Squire Labour, Dunfermline West

The hon. Gentleman makes a valid point. Recent press reports have suggested, for example, the possible use of secret vaccines. The medical records of armed forces personnel, which they need to support a claim, are held by their employer. Under the circumstances, is it reasonable to ask personnel to show that their condition has been caused by service? What difficulties will they encounter if, through lack of information—for example, about secret medical records—they are unable to prove that their condition was caused by service?

The Committee also raised anxieties about the proposed income streams under the compensation scheme; it describes them as "mechanistic." Injuries will affect different people's earning potential in different ways. Although the proposed income streams are supposed to compensate personnel for loss of earnings, they are related to specific injuries rather than the calculation of an individual's loss of earnings. For example, someone who suffers the loss of one eye will receive 50 per cent. of their salary as an income stream under the compensation scheme, whatever the effect on earning potential. However, someone who suffers from two frozen shoulders, with significant continuing disability, will receive no income stream.

The Government told the Committee that a more flexible approach, linked to an assessment of loss of earnings

"would not be appropriate to a no-fault scheme where the aim is to deliver consistent, fair and reasonable outcomes, within a reasonable timescale and cost-effectively and which can be reasonably understood and administered."

Yet that is precisely the approach that the Government already take to ill health benefits under the pension scheme. If it is appropriate under the pension scheme, why not under the compensation scheme?

The Committee feels strongly that communications with personnel remain unsatisfactory. It described the original reviews as

"dogged by delay and incompetence" and the consultation documents as "weak and uninformative". It remains concerned that the Government do not take communications with service personnel seriously enough. In their response to the Committee's most recent report, the Government acknowledge that there were "shortcomings" in the consultation process, from which lessons needed to be learned. However, in the next breath, they rejected one of the Committee's recommendations on the basis that they do

"not accept that there has been inadequate consultation".

In the Green Paper, "Simplicity, Security and Choice", which was published in December 2002, the Government undertook to

"consult on how and to what timescale the higher pension age and any associated benefits could be extended to existing employees".

The Government intend to raise the preserved pension age to 65 for existing armed forces personnel for future service. However, they have notably failed to consult them about

"how and to what timescale" that will happen. The Committee makes that point strongly in its report. We believe that the Government appear to be trying to back out of the undertaking, which has implications for all public servants, that they made in December 2002.

The time scale for the implementation of the new schemes is very short, and service personnel will have to make a complex choice between the existing pension scheme and the new one introduced by the Bill by April 2007 at the latest. We hope that the Government will produce individual benefit statements to enable service personnel to make that choice, but at the moment they do not seem to have the computer systems that can produce such statements, nor do they know when they will have such systems. The Government do not know how to target individual personnel reliably to make sure that they are aware of the choice that they have to make, and that they are informed enough to make it.

I apologise for the length at which I have spoken, but the Defence Committee has given a great deal of time and priority to this matter, and will continue to do so. In conclusion, although we in the Committee feel that the Government's proposals are better than those which we first examined early in 2002, we are still not happy with the overall structure in which the schemes have been conceived. We are very unhappy indeed that details of the early departure scheme, which we felt should have been available for this debate, are still not available. We are worried about the implementation of the schemes and about the fact that, after numerous delays, we are now working to a tight parliamentary time scale.

The Committee's comments on the schemes are intended to be constructive. It is important that the schemes that are introduced work, and are seen to do so. The armed forces devote intense commitment, and sheer energy of work, to protecting their country, and they should receive pension and compensation benefits that match the importance of what they do. The Government do not seem to have considered what the armed forces deserve and, bluntly, the Committee believes that the current proposals fall far short of that.

Photo of Colin Breed Colin Breed Liberal Democrat, South East Cornwall 2:52 pm, 22nd January 2004

It is a great pleasure to follow Rachel Squire, and I thank the Defence Committee, through her, for its tremendous work. My party shares many of the concerns that she quite properly raised. I hope that when the Bill goes into Committee we will be able to do justice to all the concerns that the Defence Committee has so thoroughly investigated, and that in Standing Committee we will be able to argue equally forcefully for the changes needed to improve pension and compensation arrangements.

We all acknowledge the tremendous contribution that our armed forces have made over many years, not least in the past year or so. They deserve pension and compensation arrangements that demonstrate the House's commitment to them, just as they demonstrate commitment to their country. Overall, we welcome the main substance of the proposals, including the increase in death-in-service benefit and the extension of dependence benefit to unmarried partners. However, I, too have concerns about quartering arrangements. I live in a constituency that is very close to the naval establishment at Devonport and have often seen emergency housing requirements caused by the splitting up of marriages of armed forces personnel. That places tremendous pressure on the local authorities. There must be a clear system, and the Bill may trigger the development of one by the Government.

The proposals aim to bring armed forces pensions into line with other public sector pensions, which is long overdue, but they do not go far enough. Many examples of their shortcomings have been given this afternoon, not least of which is the inability to reach the two-thirds target. There are ways in which that could be achieved, but the Ministry of Defence feels that it is not important enough to include it in the Bill. That may affect only a small number of people, but it is an important aspect of these pensions if we want to make them comparable to other public sector pensions.

Recruitment has been mentioned. I accept that quite a lot of young people, when they enter the armed forces, or employment generally, do not immediately look at their likely pension arrangements, but far more young people are doing that today than when I first went out to work 30 or 40 years ago. Young people going through HMS Raleigh in my constituency might not immediately look at what they will be paid under that part of their benefits, but far more are now aware of pension arrangements, not least because pensions are much more newsworthy, and some of those young people may have seen their parents suffer from poor pension arrangements. We ought not to ignore the fact that pension arrangements will have at least some effect on those who want to join the armed forces.

I was quite surprised to learn that there has not been a full review of the pensions and compensation scheme for 30 years, which seems an extraordinarily long time, although I recognise that there have been changes during that period. In 1973, armed forces pensions were very much in the top slice of public sector pensions—among the very best. During that 30-year period, however, it is clear that they have slipped considerably towards the bottom of the scale. That must be because of an inability to keep pension provisions constantly under review.

I want to couple to that matter the availability of financial advice, which has already been raised this afternoon. I suspect that 30-odd years ago, although perhaps no one considered them very much, pensions were much more simple—an obvious benefit in a remuneration package. Today, with the complexities of tax and pension arrangements generally, almost everyone, even if they have a reasonable understanding of financial matters, requires independent financial advice. We have seen the mis-selling of pensions only too recently.

The MOD owes a duty of care and responsibility to its employees to provide some means by which they can have independent financial advice. There are various ways in which that can be done. I hope that we can explore some of those in Committee, and that the MOD will realise that that must be part of what it offers its employees. After all, some of them will be taking decisions on their pension arrangements that could significantly benefit their later lifestyles. Independent advice should be available to them during that year or so of important decision making, especially bearing in mind that they do not have the same sort of representation as many other groups.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

The hon. Gentleman raises an important point about financial advice. He will be familiar with the Financial Services and Markets Act 2000, and the fact that neither the Ministry of Defence nor any member of our chain of command is licensed to give independent financial advice. It is important for the whole House to understand and accept that. I accept his point that we could think about that in further detail, but I want to make it clear that the choice of whether to transfer to the new scheme after April 2005 is an individual one, for individual members of our armed forces to take.

Photo of Colin Breed Colin Breed Liberal Democrat, South East Cornwall

I thank the Minister, who is absolutely right. We should make it clear that people have to be properly qualified and authorised to give financial advice, but it would not be beyond the wit of the MOD to authorise half a dozen or 10 well known and authorised independent financial advisers whom servicemen could approach for the financial advice that they need. Rather than saying to them that they are all on their own and must undertake their own reviews, we should acknowledge that they need a bit of help. Of course in the end it is their decision, but they need access to such advice because it is so important for their later lives.

Reference has also been made to the fact that the Bill is enabling legislation. I must admit that when I first received the Bill and started to read through it, I became alarmed about what we were going to debate, because all the meat is in the adjoining papers. The whole issue of enabling legislation concerns me, and several other Members present. It appears in so many Bills, with the possibility of changes being made through the statutory instrument process. I understand why that is so—clearly, as the Minister has explained, there will be changes—but bearing in mind the fact that we have not had a review for 30 years, and given the process that has gone on, the enabling legislation is deficient. I recognise the difficulty of having to make small changes in primary legislation, but surely a way can be found. For instance, a mandatory review could take place periodically—every 10 years, say—so that there was a clear intention to introduce new primary legislation to refresh such measures properly.

We might also consider setting up some kind of independent review body. We have independent bodies for reviewing pay, so why should we not have an independent body for a pension review? That might be another means of providing oversight. At present, the Defence Committee appears to be performing that task admirably, but that it is not necessarily its raison d'être.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

The hon. Gentleman is making a valuable point. That is what happens elsewhere, including in this place. The review of Members' pay includes a review of their pensions. The Senior Salaries Review Body performs both those functions.

Photo of Colin Breed Colin Breed Liberal Democrat, South East Cornwall

I am grateful to the hon. Gentleman. May I, too, add my congratulations to him on his knighthood?

There are ways in which we can consider this matter, and perhaps an independent review body and a mandatory review might elevate the importance of these issues and prevent them from being consigned to the statutory instrument process. There are no trustees, as has been said. Trustees do not simply manage funds; in fact, most delegate that responsibility to somebody else. Trustees look after the interests of the beneficiaries of any pension scheme, to which their legal obligations precisely refer. As I said, management of a fund is often delegated to banks and investment managers, such as those that employed me before I came to this place.

As for the questions of accountability in relation to the manning control scandal, which have been raised in the House from time to time, there are lessons to be learned. Pensions arrangements and the issue of cost neutrality have centred on that, and the notion of cost neutrality seems to run through the entirety of the proposals. It may be acceptable for an overall MOD budget to have some sort of cost neutrality. In the light of some of the incidents in Iraq recently, however, even that may be debatable. It might also be acceptable for the whole of remuneration policy—pay, benefits, pensions and the rest—to have some kind of cost neutrality. It seems extraordinary, however, to have a cost neutrality policy specifically within a pension fund or policy. Today, pensions are part of a total remuneration package. Anyone who enters employment considers all the benefits, bonuses and perks, and the pension, in the totality of their remuneration package. Perhaps the MOD would have been able to provide some of the additional benefits, and preserve some of the benefits that are currently available, had they considered the remuneration of the armed forces on a cost neutrality basis rather than concentrating on pensions alone. Effectively, that has meant that the costs of any new scheme to the Exchequer would have to be exactly the same as the costs that would have arisen under the old scheme. In anybody's language, it will be difficult to provide a modernised enhanced scheme while being saddled with that constraint.

All pension schemes and all those who provide pensions will have to cope with increased longevity. That is not unique to the MOD. All pension funds are under that pressure, and the actuarial reports on many large public companies that have suddenly found a great hole in their pension schemes show that that is nothing new. Most of those companies have recognised that they must put in more money. They have done reasonably well in recent times, and most pension funds for larger companies must now receive greater contributions. The MOD, however, having recognised that longevity has caused greater cost pressures, has decided that it will not put in more money, but will try to keep the envelope the same and adjust the benefits within the scheme. That is not fair—that is the thrust of the issue that the Defence Committee has raised—and we will examine that closely in Committee.

A great opportunity has been missed with this package, after 30 years and all the things that have happened in the past year or so. The increase in the age for preserved pensions from 60 to 65 has meant that the Government will save that additional five years of RPI-linked pension. That will be the result—they will not pay out during those five years. They may have to pay it out later if people live longer, but that savings exercise will take place in the early days. As for widows' and widowers' pensions for life, many will worry that the new scheme, although removing the distinction between attributable and non-attributable, will produce a small group of aggrieved people—non-attributable widows and widowers who will lose their benefit if they remarry or co-habit. It would have been easy to accommodate the relatively small number of people concerned, and the relatively small amount of money, had we not had that cost constraint.

Other legacy issues that have been raised this afternoon could and should have been addressed, because the armed forces are a special case, and no real provision has been made for some of the past injustices that have come to light, which could have been dealt with. We have seen cases of Gulf war illness reported, including a couple in my constituency. We should note with deep suspicion the growing numbers of former soldiers who intend to sue the MOD for unfair dismissal over the abuse of manning control policies. Morale is bound to be affected. If there has been wide consultation, and if the armed forces generally have apparently been prepared to accept the proposals, I am somewhat surprised. There is some difference between that and what was heard from those whom the Defence Committee interviewed. I do not think that the proposals will be welcomed in a way that would show that many of our armed forces felt that they were receiving the pension and compensation payments that they deserve for their service.

We must also remember that some people have been directly affected by the current pension and compensation arrangements. We particularly remember the widows of those who have fallen recently. When we praise our armed forces and take great pride in their exploits, professionalism and courage, and salute them in that way, we must also take responsibility for some of the failures that the Ministry of Defence has experienced in recent months. The failures as well as the successes are important, and we must put right some of the problems that have arisen through individual cases.

I end with an analogy. As I said earlier, before I entered the House, I used to work in the financial industry. One of the jobs that I regularly had to do was to examine many public company annual reports—quite boring reading much of the time. The last few paragraphs of most annual reports often used to say something along the lines of, "We believe that our greatest asset is our staff." Great tribute was always paid to that, but when one examined further what the companies actually did to the staff—in respect of recruitment, retention and benefits—one wondered how much they really cared for them.

We should adopt a similar approach in recognising that our armed forces are our greatest asset, but also ensure—in peace as well as war—that how we recruit and look after staff, how we provide for them and their families, and the benefits, compensation and pension schemes that we offer them, are all a demonstration of the value that we put on them as our greatest asset.

I hope that this opportunity to legislate will—after some 30 years, and now that we are close to the end of the process—truly demonstrate that we believe that the armed forces are our greatest asset and that we are prepared to reward them throughout their service lives and beyond.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley 3:12 pm, 22nd January 2004

I am delighted to speak in this important debate. There may not be many hon. Members who wish to participate or many people in the Press Gallery who are interested to hear us, but I nevertheless believe that our debate is exceptionally important because it signifies how we should treat members of our armed forces and respond to their particular needs.

I am delighted to follow Mr. Breed, who rightly spoke about the importance of our armed forces. He was also right that we should not just patronise them by saying, "Aren't the armed forces wonderful?", but properly respect and respond to their needs.

It was interesting to hear my hon. Friend Rachel Squire speak about the Defence Committee. We are fortunate to have such a fine Select Committee. As I look around the Chamber, I see in their places members of that Committee both past and present. Between the time when I was first fortunate enough to serve on it and now, I have noted the incisive and practical way in which it deals with the important issues for the armed forces. Much detail in the Bill needs to be discussed—we cannot escape that—but I believe that the armed forces will be glad to know that they have such fantastic champions in the form of our Select Committee.

I want to focus on another issue, which also demonstrates the importance of the enabling legislation. It is vital because it deals with the whole issue of equality. It is important to be able to say that we respond well to our armed forces, that we respect them and treat them as an important body, but we must also treat them with equal respect in relation to the rest of society. That is why the changes in the Bill are so crucial.

The first issue of equality has not been tackled for far too many years: the pensions of officers and those of other ranks. To deal with that, we must understand how two people on roughly the same pay can, when they leave the armed forces, have vastly different pensions. That is insupportable. Whatever the rank of serving members of our armed forces, we must ensure that their pensions properly reflect the contributions that they make. The Bill does that and redresses the inequality very well.

Another vital issue is the position of unmarried partners. Mr. Soames said that the issue of same-sex partners aroused huge passions on both sides of the House. In fact, for the most part, on this side of the House it does not. Our passion is for making other hon. Members understand that our society has changed and moved on. It is vital for the whole House to recognise that. The last thing that we want is to appear not to be in touch with our communities. Frankly, it is fantastic that the Under-Secretary of State for Defence with responsibility for the armed forces, my hon. Friend Mr. Caplin represents such an interesting constituency where there are partnerships of all sorts. It would be most incongruous if he opposed equality for same-sex partners. We must now accept as a society that people with a substantial partnership can contribute, pay their taxes and live decent lives. The House must accept and respect that, and I am pleased that the Bill does.

The Select Committee rightly raised points of detail, but the Bill has many positive aspects, such as providing much better compensation for the severely disabled. If the Government are in power for anything, it has to be for fairness. We could debate how long it has taken to reach this point and how many people have been able to contribute actively to ensuring that the proposals are supportable, but the Bill does tackle the issue of fairness. It ensures that those who are most in need will get the best benefits. Surely that is what everyone wants from a pension scheme.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

I greatly enjoyed serving on the Defence Committee with the hon. Lady for many years. She said that those who were most in need would get the best benefits, but the vast majority of those most in need are people who, after devoting the best part of their lives to the armed forces over many years of service, leave in their 40s. They will now have to wait until they are 65 before they receive a full pension. That is a 10-year step backwards.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley

I thank the hon. Gentleman for that intervention, as he made a point that I would like to tackle. I have the feeling that he will not support what I am about to say. I believe that age is not a disability. Age is not a reason for someone to say that it is time to leave the armed forces. I have fought for equality and fairness for most of my adult life, and part of that involves ensuring that people who are getting older can play their part in society. I know that many members of the armed forces, who played their part extremely well, expected to leave at an early stage. However, life has changed and it continues to change. We should not continue to support people just because they are able to leave.

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

The hon. Lady is making an interesting point, but does she understand that it does not make economic sense to many employers to take on someone who has spent more than 30 years in the armed forces in an activity that might not be very marketable in today's highly competitive commercially oriented society? The person concerned may find it incredibly difficult to find an appropriate job after many years' devoted service in the armed forces; he may not find it possible to find a job at all. At the very least, that person should receive a proper pension from the age of 55. That is the least that our society owes him.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley

I thank the hon. Gentleman for that intervention, but we are talking about people who leave the armed forces at the age of 40. We expect them to go into a second career, and they are well able to do so. Not only have they contributed extremely well to the armed forces, but the armed forces have also given them the ability to be able to work in a second career. My hon. Friend John Robertson may tell of people whom he knows—and certainly there are people whom I know—who have gone into second careers in the police force immediately after leaving the armed forces. I expect that to happen. It is a natural progression for someone who has given a large part of their adult life to the armed forces.

The proposal is fair. If I were to lose my seat at the next general election, I would not expect to be able to take my pension at 50 or 55. Society is moving to the point where a person aged 40 or 50 today is not the same as someone of that age 20 years ago. Society is different and we need to reflect that point in the way in which the House deals with the armed forces.

There are many benefits in the Bill for members of the armed forces. The death-in-service proposals that are worth four times pensionable pay are incredibly important. The proposals cover the points that have been raised in the House. They are designed to ensure that when something dreadful happens, people are left in a fit state and have time to get their lives together and go back out into the community. If a member of the armed forces dies, money is vital to the loved ones who remain so that they have time to reintegrate into society and get back on their feet.

The scheme contains many other advantages that are well worth supporting. I was pleased to hear the hon. Member for Mid-Sussex say that that the Opposition were not minded to divide the House at this point. There are plenty of ways of dealing with the details that have been rightly referred to by members of the Select Committee. There is choice, and it is important that we understand that.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

The whole point of the Select Committee report, which was so well worked out, is that the details of the key issues have not been published. When the detail is published, it will be pushed through by statutory instrument.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley

The hon. Gentleman obviously sees a risk in the way that the Bill will progress, but I do not see the issue in those terms. It was vital to get out the general plan on how the pension scheme was to be run and to put it through. The Select Committee may not agree with that, but it is a reasonable way to take the Bill forward.

It is important to widen recruitment into the armed forces. The pension scheme will make the armed forces more attractive to people who may not be formally married but who have been in a substantial partnership for many years—whether as part of a heterosexual or a gay couple. It can be nothing other than of benefit to the armed forces if they more fully reflect our society and we can widen participation in them. The message of the new pension scheme reflecting society is crucial. The House should support it.

There has been much debate about the early departure scheme, and I understand the difficulties involved. However, we can deal with those difficulties. I was interested to hear the Opposition Front-Bench spokesperson—

Photo of Laura Moffatt Laura Moffatt Labour, Crawley

No, spokesperson. If I have an opportunity to correct the hon. Gentleman's language later, I might do so.

The hon. Member for Mid-Sussex referred to homelessness and the armed forces, and none of us would argue that people leaving the armed forces do not face difficulties. I suspect that none of the homeless were once officers in the armed forces; I would be extremely surprised if they were. Therefore, ensuring that pension provision is fair for both officers and those in other ranks must help with the problems faced by those who find it difficult to become settled and who might now be dealt a blow by a pension scheme that does not properly reflect their needs.

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons)

I bit my tongue the first time the hon. Lady started off down that track but I cannot contain myself any longer. She has not explained how one can remove inequality in a system based on rank. I entirely support the Bill's laudable, perfectly correct and reasonable attempt to remove the distinctions between officers and other ranks—but one has to accept that all three armed forces are based on rank. Officers have very different responsibilities from soldiers, so equality will never come to pass. They are different creatures.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley

The Bill clearly demonstrates that the proposed pension scheme draws no distinction but will ensure that people are properly rewarded. The Bill gives non-officers an important indication that they are valued. I accept that there are all sorts of ranks. My background is in the national health service, which is riddled with hierarchy. The Bill responds to those who fear that members of the armed forces would be dealt a worse blow if the existing pension scheme were to continue.

As to the true cost of the Bill, if the House fails to do anything about pensions, that will be to the detriment of the armed forces, who would be left thinking that the House did not understand their new needs and place in our communities and in the different world in which they have to respond. Of course our armed forces are special. We shall always support them. Not a week goes by without the House complimenting our armed forces, and rightly so. But we must back our support with this important legislation.

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood 3:31 pm, 22nd January 2004

Madam Deputy Speaker, I wish that you had been in the Chair to hear the admirable speech of my hon. Friend Mr. Soames. His speech was refreshing, rumbustious and big-hearted, and demonstrated a commitment to the armed forces that was not replicated by the Secretary of State, whose performance was somewhat absent-minded. It almost seemed as though he was preoccupied with matters elsewhere. That is a pity because our armed forces deserve better than this Bill, which is genuinely half-baked. We are asked to take many of its provisions on trust because they have not yet been spelt out; I refer in particular to the early departure compensation scheme, about which I shall speak later.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

Had the hon. Gentleman read the two extensive framework documents that accompany the pension and compensation schemes before making that accusation?

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

No, I have not read them but I am still happy to make the accusation, because the Secretary of State was not able to clarify from the Dispatch Box the pertinent questions put by hon. Members on both sides of the House. Rachel Squire has made a distinguished contribution to defence matters, as a graduate of the armed forces parliamentary scheme and having given long service on the North Atlantic Assembly and on the Defence Committee. The hon. Lady's speech came from someone who knows what she is talking about and cares. It was in a sense based on a Defence Committee brief, but she put her own gloss on it, whereas Laura Moffatt read from the Labour Whips' brief. Her speech was full of woolly thinking and over-optimistic expectations and showed little clarity or understanding of the demands that the armed forces place on those who serve in them.

The Bill is said to be cost-neutral but I do not see how that can be, unless the measure is predicated on a steadily declining number of members of the armed forces over time, an inappropriate early departure compensation scheme and making pensions drawable at age 65—to which my hon. Friend Mr. Brazier so eloquently referred.

One aspect of the early departure compensation scheme has not been fully taken on board. A full career for other ranks is 22 years, which means that people serve up to the age of 40 or thereabouts. By then, they are mature and usually senior non-commissioned officers, able to give junior personnel the full benefit of their accumulated experience. It is entirely right that they should serve for 22 years, because the understanding, experience and authority that they acquire in that time are crucial for the maintenance of discipline. Senior NCOs set the example for other personnel: they are the backbone of our armed forces, and contribute greatly to discipline, motivation and fighting effectiveness. If those NCOs are to leave after 18 years' service, those qualities will not be available to the same extent.

Moreover, the Government have given no assurance that the income stream to be derived after 18 years' service, once the gratuity upon leaving has been received, will compensate people for rises in the cost of living. That is a serious matter, and I know that the Government are seeking to make savings in this area.

I imagine that the Government may also have savings in mind with their proposal to limit to five years the period during which compensation claims can be made. I intervened in the speech by my hon. Friend the Member for Mid-Sussex to point out the sad fact that radiological illnesses often take a number of years to develop. Cancers and other illnesses can become evident after 10, 15 or 20 years, and that is why it is entirely wrong that claims should be limited to a five-year period after an injury has been sustained. Similarly, the high-tone deafness suffered by people who have worked in close proximity to aircraft or artillery and so on can take a long time to develop, as can the various pathological conditions arising from severe shock or trauma. Mental illnesses can develop as a result of war experiences and unpleasant combat conditions, and certain other illnesses arise from tropical infections suffered in the course of service. In both cases, the most dire manifestations can become evident after a long period of time. It is therefore most inequitable for the Government to insist on the proposed five-year compensation period.

On the subject of equity, I hope that the Government will think again about their proposals on unmarried partner benefits. The Minister and I have exchanged letters on this matter, as I am genuinely concerned about allowing unmarried partners—and especially those in single-sex relationships—to enjoy the same eligibility for benefits as genuine spouses. My hon. Friend the Member for Mid-Sussex was right to say that lawyers will be salivating at the prospect of the claims that will be lodged in disputes about benefits eligibility, especially in respect of single-sex partners.

However, the Minister has injected some clarity into this debate. On 16 December 2003, he replied to me on the subject of unmarried partner benefits, stating:

"Eligibility will initially be assessed on a case-by-case basis against a range of criteria that would include such factors as: children dependent on both partners, financial dependence or interdependence, shared commitments such as a mortgage, prime beneficiary of respective wills, shared accommodation and no legal spouse (on either side). Decision of eligibility will be based on a broad assessment of the substance of the relationship. Not all of these criteria would need to be met for entitlement to exist except no legal spouse on either side."

My interpretation of the Minister's letter is that the Government will seek to be as generous as they can.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley

Will the hon. Gentleman give way?

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

No, I will not.

That implicit generosity will cause a problem because it will encourage individuals, particularly those in single-sex partnerships, to lodge applications. We all know that single-sex partnerships tend to be more transient than marriages and, of course, are often more transient than ordinary partnerships where there are children—for example, when a trooper from the Special Air Service regiment was tragically killed in Sierra Leone, the Ministry of Defence rightly offered compensation to his bereaved partner who had to bring up their child. I am worried about this matter and think that the Government will give the impression that they like the kind of society that does not put marriage and the value of marriage at the heart of the values that it tries to inculcate in the armed forces.

Labour Members say that the armed forces must reflect society as a whole; I disagree. The armed forces must demonstrate a quality of life, commitment and values that exceed those in society as a whole. They are required to make sacrifices of an order that most of us do not comprehend. Not only must they be prepared to give their lives in circumstances of which they may not individually approve, but they must sustain the separations of service and endure pains and traumas that ordinary civilians, mercifully, do not normally have to put up with. For those reasons, service personnel must be loyal to the group as a whole and have a degree of selfless commitment which is normally best demonstrated in society as a whole by a loving marriage. That is why I believe that the provisions are dangerous for our society in the long term.

Members of our armed forces who are traditional in their orientation may become alienated from the society that they are called upon to defend, and that may diminish their morale. I have seen letters from individuals in the armed forces, whom I much admire by virtue of their dedication, knowledge, expertise and the service that they have given to their country, who are particularly vexed by the idea that married quarters should be given to single-sex partners, and I agree with them.

I have said my piece, but I have one final observation. Clause 10 allows the Government easily to make adjustments by statutory instrument after one and a half hours of debate under the negative procedure. The Government know that the power in clause 10 is wide-ranging. Subsection (2) states that statutory instruments may be used

"for giving full effect to any provision of this Act."

Subsection (3) states:

"The provision which may be made under subsection (2) includes provision amending or repealing any enactment".

It is about time that this Labour Government put right the injustice that was perpetrated by the Labour Government in the 1970s—the pension trough. My hon. Friend Mr. Howarth, who gives such distinguished service both on the Select Committee and on the Front Bench and who shows real commitment to the armed forces, has pointed out in parliamentary questions that, because the Chancellor of the day insisted that service pay should be kept down while inflation was rip-roaring away, many categories of people were paid artificially low pensions in the '70s. That injustice has never been rectified.

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

No. I am coming to the end of my speech.

In my judgment—

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

I will not give way.

It is about time that Her Majesty's Government rectified that injustice, and I hope that they will use a statutory instrument to that effect.

Photo of John Robertson John Robertson Labour, Glasgow Anniesland 3:45 pm, 22nd January 2004

I speak as an inexperienced Member of the House who is, furthermore, not a member of the Defence Committee. Although I am a lay person, I can speak with a little knowledge of the armed forces as in June last year I had the opportunity and the honour of visiting Basra with the armed forces parliamentary scheme. We saw at first hand the excellent work of our soldiers who were assisting the local population to rebuild their country and civil society after decades of misrule under Saddam. Everyone who took part in that visit returned united in our admiration for the British troops we met.

It is with those troops in mind that I, and, I am sure, other hon. Members, approach the Bill. We have a political responsibility to scrutinise Bills carefully, but when considering legislation that will have an impact on the men and women of our armed forces, who are prepared to make the ultimate sacrifice, we have an even greater moral responsibility to do our best for their welfare. In that respect, there is much in the Bill of which we can be proud.

The provisions fit broadly into the socially progressive nature of the Government's legislative programme and I shall focus on that theme. I have some concerns that should be addressed in Committee, and I shall seek reassurances about them from my hon. Friend the Under-Secretary.

The Bill is rooted in the values of fairness and equality that underpin so much of the Government's approach. It improves benefits for dependants; for example, widows' pensions will be increased by 25 per cent., compared with the current scheme, and will be awarded for life. The death-in-service benefit will be four times pensionable pay and there will be provision for registered unmarried partners, including same-sex partners. I wholly agree with that. I am pleased about those provisions, as I have in the past made representations on behalf of constituents whose late partners had served in the forces but, because they had not married, were denied the support to which I firmly believe they were entitled. Widows and widowers in similar circumstances in the future will receive the thanks of a grateful nation.

The severely disabled will also receive better compensation, with lump sum payments available for pain and suffering resulting from injury. The guaranteed income stream will be awarded for more serious injuries where there is a loss of earning capacity. I have only two concerns on that point. First, who will make the decision to award the guaranteed income stream? Secondly, how can we ensure that the process is even-handed? I do not want it to give rise to the sort of complaints that I often receive from people with disabilities. They visit my advice surgeries to ask me to intervene on their behalf so that they can be treated properly by a more sympathetic doctor than the one who originally dealt with their case. In some cases, the doctor does not even examine the patients, but merely talks to them across the desk.

Also to be welcomed is the introduction of common treatment for officers and other ranks. They will now serve the same number of years for a full career pension at the age of 55, with an even accrual rate.

These measures are therefore internally consistent with the contribution to the Government's commitment to modern, fair and progressive policies. They are also consistent externally with the principles behind other Bills in the Queen's Speech. The provision for unmarried partners reflects that in the proposed civil partnership Bill. Both Bills show Labour's commitment to promoting equality and diversity and to challenging unjustified discrimination wherever it exists—something that we heard in the previous speech. Likewise, the commitment to providing security in retirement is reflected in the proposed pensions Bill, which will provide greater protection for those in company pension schemes. The Bill should not be examined in isolation, but seen in the context of a wider agenda of social justice and fairness demonstrated throughout the Government's legislative programme, forming an holistic approach.

Some of the criticisms of the Bill made by Opposition Members are unjustified. Yes, the proposals are designed to be cost-neutral, but that is not evidence of penny pinching by the Government. After all, in 2002 the spending review put in place the largest increase in defence spending for more than 20 years. Defence resources are growing by 1.2 per cent. a year in real terms in the three years until 2005–06. That is a great contrast to the record under the Tories. Following their defence review, UK regular forces fell by 60,000 between 1992 and 1995, including 32,000 redundancies.

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons)

We have heard that one at almost every debate since I first entered the House two and a half years ago. I was adjutant to a main battle tank regiment during that exact period. I lived through it. It was the end of the cold war and armies throughout western Europe were decreasing dramatically. Labour Members were pushing the Government hard to make bigger decreases than the Conservative Government made. Everyone was talking about a new world order and a peace dividend. That is the reason for the decrease—the hon. Gentleman knows that perfectly well—and it would be a very good idea if hon. Members on both sides of the House recognised that and stopped trying to make silly party political points.

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

I thank the hon. Gentleman for that intervention, but the fact is that what I am saying is true. Some 60,000 people were made redundant, in effect, and defence cost studies led to a further loss of 22,500 military personnel from 1995 to 1997. The Tories neglected the armed forces, and Labour is supporting them.

Some issues, however, need to be considered in greater detail, and it is especially important that the House does so because the armed forces are not unionised, so they lack one of the major forums for consultation and representation that could usually be used. Several concerns have already been outlined by the Defence Committee, and I congratulate my hon. Friend Rachel Squire for her input—she certainly hit the button. Hon. Members on both sides of the House understand that certain things have to be considered, and my hon. Friend put them in context. I would be grateful to my hon. Friend the Minister if he were to comment on those points.

I am concerned about the decision to raise the preserved pension age—the age until which those who leave before the normal retirement age have to wait before they receive their preserved pension. That is of greater significance for members of the armed forces than for people in other public services, simply because the majority of service personnel retire considerably earlier. In keeping with the principles that I outlined earlier, which the Bill generally upholds, I hope that that point will be considered in greater detail in Committee.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

My hon. Friend makes several important and interesting points, especially about the progress of members of our armed forces who leave service early and go on to future jobs and careers. He might be interested to know that recent evidence shows that about nine out of 10 find good employment within six months of leaving.

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

I thank my hon. Friend for his intervention. Having met some of these soldiers, it does not surprise me that they get employment—I am only surprised that the figure is just nine out of 10.

I would like to hear the Minister's comments on the structure of the compensation scheme. The Royal British Legion, of which I am also a member, has expressed concern about several elements of the revised compensation package, especially the five-year limit for claims and the change to the burden of proof. It says that imposing a five-year limit on compensation claims would have a substantial negative effect on the ex-service community. Many other hon. Members have said that, so it would be right for the Government to revisit the time scale. Five years is not a long time, especially when we consider the conflicts in which we have put our soldiers, airmen and Navy personnel on the front line.

The legion's pensions department organised an awareness campaign between 1994 and 1996 that resulted in 150,000 new pension awards. The majority of the claims for injuries and medical conditions were outside the scope of any five-year limit, so hon. Members will understand why the legion wants us to reconsider the time scale. I want to put down statements about our armed forces personnel becoming conscious of suing the Government. The legion helps them to get money that they richly deserve, so we cannot say that they are a compensation-oriented group of people. It is important that we take account of real concerns felt by ex-servicemen and women, and I hope that the Minister will shed further light on the rationale behind the Government's approach.

The substitution of a balance of probabilities test for a test of reasonable doubt to determine whether an injury or illness is service related will make it much less likely that a claimant will receive a war pension.

Photo of Colin Breed Colin Breed Liberal Democrat, South East Cornwall

Does the hon. Gentleman share my worry that given the movement of the burden of proof from the Ministry of Defence to the claimant, and the extraordinary rise of the so-called expert witness—and the cost of such witnesses—people will find it extremely difficult to get to even first base in a disputed claim unless they have substantial funds, access to legal aid or other support?

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

The hon. Gentleman makes a good point. We must consider cost, and I suspect that bodies such as the Royal British Legion may come into their own in such circumstances. I agree with the sentiment behind his question. Can we reasonably expect ex-servicemen and women to provide extensive proof that an injury that occurred several years previously was due to their service? I dislocated my shoulder while playing cricket years ago. If I were a solider who had suffered that injury, I would have to prove that I did it as a soldier, which is unreasonable.

It is unfortunate that several interested parties were given the impression that the change was a result of financial imperatives. I do not believe that, but the new scheme should not automatically follow modern practice, such as the way in which the civil courts reach evidence-based decisions using a balance of probability as standard proof. Our armed forces give exceptional service in exceptional circumstances and they deserve exceptional support.

I shall address several hon. Members' comments because some were good and others have given rise to questions. My right hon. Friend the Secretary of State talked about transfers to the new pension scheme. The scheme starts in 2005 and people would be able to transfer in by 2007. What will happen to people who have X number of years in the existing system and want to transfer into the new one? Will they be able to buy years in the new scheme, or will they end up with two different pensions? Having read the explanatory notes, I am not sure of the position.

I am very sorry that Mr. Soames is not here because I really enjoyed his speech. I do not have a question about it and I do not want to quote him; I just want to say that it was highly entertaining. When he overheard something that I said and gave way to me, I thought that I did well thinking on my feet and asking a question.

Mr. Brazier, who will, I know, speak later in the debate, mentioned something that came up when I was talking to soldiers in Basra and other areas—house prices. There are those who have been in service for many years and who, because of short-sightedness or whatever one wants to call it, did not invest in housing at an early age. Young people are inclined to forget about such things. As age has crept up on them they have realised that they have to retire soon. We have to make provision to help those people. I am not saying that they should be given extra money, but house prices are a problem for them. It was pointed out to me several times that they are at a financial disadvantage in the housing market. It is a bit like asking a first time buyer nowadays how they can afford to buy a house.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

I thank the hon. Gentleman for raising this issue. In the Army in particular, which is by far the largest of our three services, it is almost impossible to own a house if one is being moved every year or two, except towards the end of one's service. The one factor that partially compensates for that huge disadvantage, which is met in America by a large interest-free loan on leaving the forces, is that British servicemen can trade in part of their immediate pension for an additional lump sum, which goes some way towards the huge cost of a house. In the early departure scheme, that sum will be a great deal smaller.

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

I thank the hon. Gentleman for that point and for his earlier intervention, which reminded me of this point.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

I hope that I can help the House on this point. I do not always want to advertise my speeches, but I made a speech this morning about homelessness and the armed services to the Sir Oswald Stoll Foundation and the ex-services action group. I announced that on 1 April we are to introduce a new system for a continuous stream of interviews through the chain of command about housing requirements, particularly in the Army. Mr. Brazier is right: there is an issue about us moving Army personnel too often and not allowing them to settle down, particularly when their partners have a job that helps to support them and their families.

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

I thank both my hon. Friend and the hon. Gentlemen for their input. That is excellent, but we still have to address the fact that there are soldiers who are about to leave the Army, and who undoubtedly need help. Anybody who has put their life on the line for 20 or 25 years deserves support from us.

Mr. Breed said correctly that nothing had been done for 30 years. I return to the point that I made in my intervention on the hon. Member for Mid-Sussex, when I quickly thought on my feet, which is that the Government should have done something by now—and I am referring to all Governments. It is a sad reflection on the Conservatives that they did nothing during 18 years in government. I have heard Opposition Members' criticism of Ministers, but at least they are trying to do something. Although I support much of what Opposition Members said, in this they must take the responsibility, and their party must explain why it did nothing during that 18 years. It is a party that says that it supports our armed forces more than anybody else. I am sorry, but it does not come out that way.

My hon. Friend Laura Moffatt made an excellent point about those aged 40 or over who do not have a disability. I spoke to people in the armed forces who are approaching or slightly above that age, and I have to say that they did not look to me as though they would not get a job when they left. They are extremely resourceful—indeed, more so than some of the people from the poorer areas of Glasgow who come to my surgeries. I respect them very much, and if we suggest that they have a disability because they are over 40 we do them a disservice. However, I accept that we must help people when they leave the armed forces, especially older people, not only by preparing them for employment but in actively helping them to try to get a job. My hon. Friend the Member for Crawley made that point well.

What can I say about the speech of Mr. Wilkinson? His attack on my right hon. Friend the Secretary of State was outrageous, particularly in a debate in which Members on both sides of the House have made friendly contributions, even those who advised the Government to do more and wanted them to introduce a better package for a soldiers. The contribution of the hon. Member for Ruislip-Northwood added little to the debate, and his attack on unmarried partners, whether of the same or the opposite sex, was a disgrace. I thought that hon. Members were above such behaviour, and it is my sincere but sorry belief that he made a grave error. I shall be interested to see how the Opposition spokesman responds to his contribution.

Many of the soldiers to whom I spoke in Basra suggested that there was one way in which they could be compensated. As the hon. Member for Canterbury said, they were taxed unfairly in comparison with American soldiers. If we are going to compensate our soldiers for putting their lives on the line, one small thing that we could do that would not cost the country a lot of money is to exempt them from tax while they are fighting for their country. It is not fair that they should have to pay tax in Iraq, particularly as soldiers in the larger army to the north were receiving tax exemptions. Such provisions may not sit happily in the Bill, but they are a form of compensation. I have raised this matter before, and I urge the MOD to consider tax exemptions—perhaps not for personnel based in Germany, but certainly for those in Northern Ireland or on active service in Afghanistan, Iraq and Sierra Leone. It is only fair that soldiers who put their lives on the line should receive an immediate financial benefit.

I have expressed some concerns about the Bill, but I do not want to dwell on the difficulties, because I know that my right hon. Friend the Secretary of State and my hon. Friend the Minister will take them into account. The Bill is worthy of vocal support. It will introduce a progressive package that modernises the way in which pensions and compensation for the services are handled. It should be seen in the context of a rising defence budget that will secure the role and reputation of our armed forces, and it will work alongside a range of Bills that promote equality, fairness and decent rewards for those who serve the public so well.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West 4:08 pm, 22nd January 2004

The Bill is a welcome measure, and includes a lot of good things. My main reservation concerns the fact that we are being asked to sign a blank cheque, and give the Government powers to do something that is not yet adequately defined, even though they have issued documents that give quite a lot of information about what they have in mind. The Secretary of State's explanation that making the change in that way makes it easier to update arrangements in future is not acceptable. It would have been possible to include schedules in the Bill, and specify that they could be amended in future by statutory instrument. That would have been a better way to proceed, as we would all know what we were being asked to sign up to. My only hope is that although we do not have that, as we are having the debate today, the Government may be minded to listen a little to what many of us on both sides of the House have said, and may make some improvements in the final shape of the Bill before it becomes law.

I welcome the improvements in the death-in-service benefit, although that does no more than bring the forces' compensation up to the level that is now general among the population as a whole. Given the hazards that service people face, perhaps we all should have done that—we should have done it when we were in government, and the present Government should have done it—a long time ago. The same applies to the benefits for widows and other dependants. Those are all welcome, but have been rather long in coming.

Much in the Bill is worth while, but I question the suggestion that anybody with a full career in the armed forces until the age of 55 will be able to earn a full two- thirds pension. The Forces Pension Society calculates that anybody doing a full career would earn only 62.5 per cent., rather than the full two thirds. That is supported by the brief provided for the Bill in the Library, and my own calculations show that it is likely to be the case. It all depends on the age at which service is commenced and the age at which it finishes. For most people it finishes at 55, although three-star generals carry on a little longer.

The difficulty is that because that calculation assumes a very early career start, it overlooks the fact that there are other important aspects for the armed forces to consider. One is that in today's world it is important for the armed forces to be able to recruit extremely well qualified people. That means that they will not recruit graduates until their early 20s at least. If they are to recruit people who have taken masters' degrees or doctorates, which are becoming more important for the armed forces, those people will be in their mid or late 20s.

The biggest difficulty for the armed forces today, I am advised, is recruiting medical staff—qualified doctors, who have an even longer period at university before they can join the armed forces, so it is virtually certain that unless they go on to become three-star generals or the equivalent, they will not reach a full career pension under the structures proposed in the Bill. The problem with doctors is so severe, I understand, that the Army, together with Exeter and Plymouth universities, is sponsoring a scheme whereby people who have degrees in other but perhaps slightly related disciplines can, with Army support, go on to qualify as doctors and come in even later, because they have already gone through one lot of academic training. For people whom we need to recruit into the armed forces, there is a real problem in getting a full pension under the terms of the Bill.

I know that the Government's proposal to extend the age at which the pension can be taken is part of their overall proposals for the whole of the public sector, to cater for the fact that people are living much longer and therefore the cost of providing pensions is even greater. It is clear from the Government's White Paper that it is likely that they will extend that principle to many other parts of the public sector. It is wholly inappropriate that the armed forces should be the first to suffer that and be the guinea pig in the process that the Government are proposing. Members of the armed forces, of all people, are least qualified to cope with that. There may be many people who can serve in the public sector until the age of 65 and receive a complete pension, but members of the armed forces cannot, by definition. Most will retire before they are 55 and will have to take another occupation.

As many hon. Members on both sides of the House have said, starting another career, certainly in their mid-40s, may not be all that difficult for many service personnel, because in the armed forces they acquire skills that are admired by employers outside. However, for those who stay all the way through to 55 it may be much more difficult. However much we dislike it, the fact is that employers still discriminate against older workers. It is well known that people of 55 and over find it extremely difficult to enter new careers.

The Government are telling members of the armed forces, "If you go at 55, you will have to wait 10 years before you can receive your proper pension." Previously it was five years.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I sympathise with the point that the hon. Gentleman is making, but do not most people in the armed forces leave in their 40s, because of the physical nature of much of their work and the fact that the armed forces do not want them to stay on longer than they should?

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

It is true that the majority do. But I am talking about those who stay to 55 or close to that age. The army needs those people as well; they are a significant proportion of its work force. I am concerned that for those who stay on longer, this could be a painful process.

The Government should give consideration to that drawback, because the armed forces are in a unique position. I sympathise with the Government's idea that people will have to defer retirement. In general, that is a good thing. Members of Parliament, who at present can retire at 60 with a full pension, without diminution, should perhaps consider whether they, rather than the armed forces, should set a precedent. I know that we cannot always serve until we are 65, because the electorate or the boundary commission may intervene to prevent us. Nevertheless, I should have thought that we would be a more appropriate precedent than the armed forces. That is the only point that I am trying to make. Some people will have real difficulties as a result of what is being proposed today.

I wish to put a suggestion about housing to the Minister. I agree with hon. Members who have said that there is a problem of housing for members of the armed forces. It might be asked why they do not buy a property early in their career. They could live in it and then let it when they have to move out. One of the big deterrents to buying to let is that the Inland Revenue would not regard such a property as their principal place of residence, and so they would pay capital gains tax if they ever sold it. Could the Minister suggest to his right hon. Friend the Chancellor that in those circumstances, forces personnel trying to secure their place on the property ladder—or rather, with house prices as they now are, the property escalator—should, uniquely, be exempted from capital gains tax?

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston 4:19 pm, 22nd January 2004

Today we debate an important and just Bill, which will provide a fair pension for those who have served in the armed forces. The armed forces compensation scheme will also benefit many soldiers. The Government initiated reviews of both pension and compensation arrangements for the armed forces in 1998. Consultation documents were issued in March 2001 and decisions were announced in September 2003.

The Bill sets out a progressive policy that offers choice, equity and best practice, while addressing the special nature of the jobs of the armed forces. Personnel will be able to choose whether they want to transfer to the new scheme or to remain in the existing scheme. The new pensions scheme will provide a pension based on final salary rather than rank; give equal treatment to officers and other ranks; replace the immediate pension, which can be paid as early as at age 38, with an early departure payment; retain the normal retirement age of 55, but bring deferred pensions into payment at 65 instead of 60; increase widows' and widowers' pensions from 50 to 62.5 per cent. of the spouse's pension; increase death-in-service benefits from one and a half to four times pensionable pay; and extend survivors' benefits to unmarried couples, including same-sex couples. Mr. Wilkinson, who is not in his seat, made comments about payments to same-sex couples that are indicative of the views of many Conservative Members. The fact that such attitudes still prevail perhaps explains why they are not in government.

Mr. Brazier referred to retirement at the age of 40. I remember losing my seat in the European Parliament at that age and having to go back into industry. In today's world, 40 is the new 30. I note what Sir John Butterfill said about the difficulties that may be faced by somebody aged 55, but many people who choose to leave the armed forces can start a new job and career.

The new compensation scheme will provide a lump sum payment for pain and suffering and a guaranteed income stream alongside higher-level tariff awards for those who suffer a significant loss of earning capacity. Unlike the current arrangements, the new scheme will provide in-service lump sum awards for pain and suffering, including injuries arising from warlike activities. Unmarried and same-sex partners will be covered, and there will be a time limit of five years on most claims. The hon. Member for Ruislip-Northwood said that five years was not enough, but his concerns were addressed by the Secretary of State, who said that he was prepared to consider exceptions. At present, there is no time limit on war pension claims, and those made within seven years are decided on the less stringent test of "reasonable doubt".

A new pension scheme for members of the reserve forces will be made separately under powers contained in the Reserve Forces Act 1996, including more protection for reserve force members who are injured, suffer ill health or die as a result of their service. At present, the rules of the armed forces pension scheme, or AFPS, are set out in prerogative instruments that derive their authority from the Queen and are not subject to approval, annulment or amendment by Parliament. For the Royal Navy and the Royal Marines, the prerogative instrument is an Order in Council under the Naval and Marine Pay and Pensions Act 1865. For the Army, it is the Army Pensions Warrant 1977 made under the Pensions and Yeomanry Pay Act 1884. That needs to be simplified, and the Bill will enable a single scheme to apply to all three services.

The AFPS also provides attributable benefits for servicemen and women who suffer ill health, injury or death owing to service, and there is a separate scheme for attributable benefits for reservists. The Bill provides for those different compensation arrangements to be combined in a single scheme—the armed forces compensation scheme. After this Government came to power in 1997, they initiated reviews of the compensation arrangements and the pension scheme, and two consultation documents were published. What we have today is largely the result of that consultation.

Between March and October 2001, the Ministry of Defence consulted both serving members of the armed forces and service organisations such as the British Legion and the Forces Pension Society on their proposals. On 16 December, the Select Committee on Defence published a report that recognised that the final proposals had taken account of many of the criticisms made during the consultation process.

The Bill reflects the Government's wider pension policies, which are designed to cut the costs of pension provision by encouraging people to work longer and raising the age at which people can claim their pension. Consequently, the final armed forces pension scheme will raise the age at which preserved pensions can be claimed from 60 to 65 and replace the current system with one of early departure payments, which will not be classified as pensions.

When we took office in 1997, the basic state pension was £62.45. Today it is £75.50 a week—an increase of 5.5 per cent. in real terms. That was not enough, so the Government introduced the minimum income guarantee in 1999 to protect pensioners who had no savings. This financial year, the Government are spending an extra £6 billion in real terms on pensions. That includes £2.5 billion for the poorest one third of pensioners. The Government are now ensuring that our armed forces receive equal and fair treatment. Companies that do not provide good pensions lose their employees' loyalty and that can only be bad for business. The Bill will ensure that forces personnel have a decent and fair pension and compensation provision, to match their service to our country.

People should have the right to retire when they want. Retirement should no longer be a cut-off point so that someone is a valuable worker one day and unemployable the next. It should be gradual and voluntary, not a process of compulsion.

The Government's document "Civil Partnership: a framework for the legal recognition of same-sex couples", which was published in 2003, makes it clear that public service schemes will be amended to provide survivors' benefits for registered same-sex partners and, if they can afford it, benefits will be extended to unmarried partners of the opposite sex.

After wide consultation, the Government are introducing a Bill that will allow members of the armed forces to have a decent and secure income in retirement. The measure is equitable, transparent and offers fair and consistent outcomes. It will focus resources on those most in need, especially through compensation for the most severely disabled. The measure will reduce cost and rationalise armed forces pension provision. It reflects best practice and is part of a progressive agenda to provide more equitable and just pension provision. It deals with the need to provide for veteran pensioners who live longer. It increases widowers' pensions by 25 per cent. and extends dependants' benefits to unmarried partners.

As my hon. Friend John Robertson said, in the 18 years of Conservative Government the armed services were deeply underfunded. The Labour Government have introduced the largest increase in the defence budget for 20 years, with an extra £3.5 billion by 2006. The fundamental changes that the Bill introduces will create a better and fairer pensions and compensation system for those in the armed forces. I believe that it will allow our servicemen and women to retire when they wish, with dignity, security and peace of mind.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs) 4:28 pm, 22nd January 2004

The man or woman on the Clapham omnibus might reasonably expect that, with all that has happened in the past few years, especially the past few months, no one could fail to appreciate the value of our armed forces. However, some of the actions of the past few weeks suggest that that assumption is rather wide of the mark. The proposals that we are debating leave it open to question.

Sadly, it appears that the Government will ignore their duty of care and exploit their position as the employer and only guardian of the armed forces' interests. The Government's position as sole guardian has been made clear often in the debate, not least by Rachel Squire in her excellent speech. The armed forces have no trade union for reasons that we all understand. There are no independent trustees; they are the only public servants who have no independent representation.

To compensate for the lack of independent arrangements, members of the armed forces have, for generations, had their pensions and benefits protected by statute—by Act of Parliament—as my hon. Friend Mr. Soames said. It is now proposed to remove that safeguard. Under clause 1, the Secretary of State will be able to make whatever fundamental changes he wants, without any reference to Parliament beyond a statutory instrument, discussed only by a little Committee that meets for a short time Upstairs, out of view. Yet there is no proposal to introduce any independent scrutiny element to the pension scheme.

The Bill, as several Members have observed, is a pig in a poke. The devil is in the detail of the proposals, but that detail will be revealed only when the Government get round to thinking about it. The Select Committee was right to say:

"It would be wholly unacceptable if Parliament were asked to approve enabling legislation without a clear understanding of its implications for Armed Forces personnel and their dependants."

Of course, the Government disclosed their hand when they stated that they would make the changes cost-neutral, rather than considering best practice and what the armed services deserve.

The Minister stated in evidence to the Defence Committee:

"All of any money that is saved . . . from one part of the scheme will be used in benefits on other parts".

Even if that were true, it would be a pretty large comedown from considering best practice, but during the consultation, the Government decided to lay the deck against service personnel. They expect that the current scheme will cost them more in 30 to 40 years' time because individuals are living longer, a problem for all pension funds. However, while the longevity of the individual serviceman is increasing, the fact that numbers in the service have decreased by so much during the past two decades is a major contributor to a move in the opposite direction. The Ministry of Defence currently makes payments to pensioners drawn from a much larger work force than that to which it is currently paying salaries, so its overall pensions bill will decrease at much the same time as the effects of increased longevity take hold. Individual service personnel will thus be expected to bear the cost of their own increased longevity through the diminished total value of their expected individual pension packages, while the Treasury creams off the entire saving through the reduction in numbers.

That is not the end of the matter. In the public services as a whole, longevity can be compensated for by increasing the retirement age from 60 to 65, which is what is proposed. That is to be extended to the armed forces but there are two objections to that proposal, as has already been pointed out. First, as my hon. Friend Sir John Butterfill said, it is very unfair that the armed forces should be the first guinea pigs for that scheme, because their lack of an independent voice makes them uniquely vulnerable. Secondly, very few members of the armed forces ever have the opportunity to serve beyond the age of 55.

The very nature of a career in the forces requires a complex system of pensions and benefits to aid recruitment and retention. That reflects the fact that a service career never extends to a full working life, and a serviceman or woman is often left with limited earnings potential after service. Under current arrangements, the small minority who stay in the service until the age of 55 or beyond receive their pension on retirement. The huge and crucial financial cut to be introduced—details of which we still do not have—is the early departure scheme for those who leave before the age of 55, which is the vast majority of service personnel. Those people will not get their pensions before they are 65, receiving instead the early departure payment. The Government admit that that will be paid at a much lower rate, and it will not be annually uprated. That will leave those people much less well off when they retire than at present.

That proposal will affect even those who choose to stay in the existing scheme. The weasel words in the submission to the Select Committee were that, from their future service—in other words, from next year onwards—those people will receive diminished benefits, in the kind of two-tier arrangement that my hon. Friend the Member for Mid-Sussex described so eloquently at the Dispatch Box. When the Prime Minister and the Secretary of State for Defence visited our servicemen and women in Basra, I wonder whether they told them that they are in the process of substantially reducing their pension expectations, whether they choose to go for the new scheme or stay with the old one.

Interestingly, the Select Committee, which rightly picked out this issue as the most important single problem, said:

"Consultation with Armed Forces personnel on raising the preserved pension age to 65 is particularly important, because this change will affect the Armed Forces very differently from the rest of the public sector."

The Government's reply to the Select Committee report—I saw many replies when I served on the Select Committee—is one of the most blatant brush-offs that I have ever read. The reply at paragraph 27, page 10, states:

"The change to the age for the payment of preserved pension reflects a wider change to Government policy for the public services on which there has already been public consultation. It would not therefore be appropriate to consult Service personnel on the general principle of this change, which is agreed Government policy"

They have not only brushed off the Select Committee but done it in thoroughly misleading words. Other people will still be able to get it from 55—only the armed forces, and the vast majority of their members, will have to wait until 65, with, in the meantime, this much smaller early departure payment, which is not annually index-linked.

Under the existing scheme, if service personnel leave before the age of 55, the immediate pension takes effect at slightly different ages—38 for officers and 40 for other ranks. I have no problem with bringing those into line, and I agree with Laura Moffatt, who said that it was time that they were brought into line. My concern is not that a couple of years' difference exists between senior officers and non-commissioned officers but that eligibility for a proper pension payment, with all the protections that pensions have from Treasury raids and everything else, will not be introduced until 65 for both. Immediate pension payments constitute about a third of the total value of all payments under the existing pension scheme. Those choosing to switch to the new scheme will lose the equivalent of three years' salary and pension benefits over their expected lives. That point is made in the Select Committee report.

I want to return to a further point that was kindly picked up by a Labour Member from my intervention: the huge disadvantage that the armed forces, but particularly the Army, who are the manpower-intensive service—three fifths of our regular service personnel are in the Army—face in the housing market. While I welcome the Minister's enthusiasm in his announcement about a new initiative on housing, I am afraid that he is barking up the wrong tree. All the evidence from the last housing survey that I saw, a couple of years before we left office—I am happy to share it with him, as I still have a copy on my shelf—is that once members of the Army purchase houses, they are far more likely, particularly those with marketable skills, to leave the Army than if they continue staying in rented accommodation.

The difficulties of trying to rent a property and living hundreds of miles from it are massive. People pay tax on any rent that they get in, but do not get tax relief on the rent that they pay out. They have problems with people disappearing, damaging the property and so on. The other additional problem is the inequity. Some service bases are in areas where there is readily available property, so people posted there are liable to want to stay; if they get posted away from it, they leave the forces. Others live in areas where there is no readily available housing, or live abroad.

In many cases, the only way in which members of the armed forces can hope to square the desperate disadvantage from which they suffer in the housing market when they leave the armed forces is by commuting a large part of that immediate pension to provide a large additional payment over and above their gratuity, to go some way towards making a reasonable house affordable. The huge cut in the immediate pension and its replacement by the early departure payment will effectively bar that route.

My father was a career Army officer who served for 30 years. His father fought through both world wars: he was wounded in the first and decorated in both. One of my sons is a member of his school cadet force and is considering dedicating his life to the service of his country by joining the Army. I would be very proud for him to do so, but if the scheme goes through in its present form, I will have to take him aside and explain what it will mean for the rest of his life, particularly when—as I imagine he will—he has a family. It will put him and his family at a great disadvantage.

I could spend time talking about a few of the improvements to the new scheme, which are welcome but relatively inexpensive. Instead, I simply want to say that the proposals will adversely affect recruitment and retention. More significantly, I believe that they are a cynical betrayal of huge numbers of people who serve in our armed forces and have no voice of their own.

I am sure that most of the hon. Members who have spoken in the House today share my concern about the fact that the Secretary of State's main advice has come through the service personnel staffs. They have no concern with people when they leave: their job is to consider the next generation coming through. People who have given the best years of their working lives to the service of their country in uniform deserve better.

Finally, I return to compensation. It has been thoroughly debated, not least in the excellent speech of the hon. Member for Dunfermline, West, who is standing in for the Chairman of the Defence Committee. I wish to add just a little to what she said. As my hon. Friend Mr. Wilkinson said, many medical conditions caused by service life do not emerge for many years. Furthermore, young servicemen are often inclined to ignore a nagging ache or pain; it may have emerged within five years, but they may not do anything about it until afterwards.

Both having a five-year cut-off limit in most cases and raising the burden of proof are not fair. In the civilian world, the doctor has nothing to do with the employer, which is not comparable. The British Legion wanted the Veterans Agency in the then Department of Social Security, at arm's length from the Ministry of Defence, but it is now all being shoved into that Ministry. It is grossly unfair that the whole system will fall under the Ministry of Defence.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

I am interested to hear the hon. Gentleman talk about the responses of the veterans. My role as the Minister for Veterans is a cross-Government role based in the Ministry of Defence. During the 1992 to 1997 Parliament, the hon. Gentleman's party vigorously opposed the creation of such a Minister.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

I was a Back Bencher in that Parliament, and the Minister will know that I rebelled on several defence-related issues. During that period, I wanted what the British Legion wanted—a single unified Veterans Agency under the then Department of Social Security, now the Department for Work and Pensions. The second-best arrangement was the old arrangement; the worst of all is having the whole lot under the thumb of the Ministry of Defence. The one conclusion that came out of all the Select Committee debates on Gulf war syndrome and a string of other issues was that, because of an obvious conflict of interest, we cannot have the people responsible for looking after veterans under the control of the current Ministry of Defence. The parallel with America, where the veterans' administration is completely independent of the Pentagon, could hardly be more striking.

Finally, we owe the people who go through their careers without experiencing the horrors that are associated with serious injury or the loss of their husband or, in some cases, the loss of their wife, a decent pension package. The Government will reduce that package. For those people whose lives have been wrecked by severe injuries, the least that we can do is maintain the traditional standard of proof that has served our armed forces well for 60 years. We should allow them to come back at whatever time to receive proper and fair assessment. Through this penny-pinching measure, the Government are attacking people who cannot speak up for themselves.

Photo of Mike Gapes Mike Gapes Labour/Co-operative, Ilford South 4:45 pm, 22nd January 2004

I apologise because I was not here at the beginning of the debate. I have been involved in matters concerning the Westminster Foundation for Democracy. I also have to leave to take an urgent telephone call at 5 pm. Unfortunately, I shall be absent for a short period, so I apologise to the House.

I was a member of the Select Committee on Defence from 1999 to 2001, and I am now again a member of the Committee, and I want to say something about what I have seen as a member of it. Although I welcome many of the Bill's provisions, I want to explain my reservations. I agree with the case that was eloquently put by my hon. Friend Rachel Squire, a fellow Select Committee member.

I saw in Sierra Leone the conditions in which British service personnel lived. I saw the appalling conditions that our people in Kuwait had to experience, and I have seen in operations in Kosovo and elsewhere the professionalism and excellence of our servicemen and women. When we introduce such a change, it is important that we ensure that it does not have adverse effects on the morale and expectations of the men and women in our services. I hope that the Minister will be able to assure me that everything will be done over the coming weeks and months to explain what is happening and to deal in Committee with issues that Members on both sides have raised in the debate.

The Bill is not perfect, and it is necessary to consider the points raised by members of the armed services, by the Forces Pension Society and in the Select Committee's report. Problems are clearly associated with any change to any pension system. If changes are made, there will be losers as well as winners. If one adopts a process that is based on cost neutrality, improvements for some people will inevitably be made at the expense of others. The Select Committee had to point out that fact of life.

As the Select Committee pointed out, the proposals involve some welcome improvements. It says:

"For personnel who die or who are injured in the service of their country, for personnel who choose not to marry, but have a registered unmarried partnership, and for personnel whose actual salaries are greater than the representative salaries for their rank, there are undoubted advantages to the new schemes over those currently in operation."

There are also advantages for dependants, as is pointed out in paragraph 138 of the Select Committee report. It is important that those points are made because, from some of the comments made today, one would think that the Ministry of Defence's whole intention was to penalise, and take away from, people serving in our forces.

Like my colleagues, I dissociate myself from the outrageous remarks of Mr. Wilkinson, who is not in his place. In the 21st century—perhaps even in the 20th and 19th centuries—such remarks are not and were not in tune with the thinking of a large proportion of the population. It is time for right hon. and hon. Members in all parts of the House to recognise that homosexuals have served in the Royal Navy, Army and Royal Air Force throughout history. Some lost their lives doing so, while others led our armed forces into combat and on to great victories. That is true of the Napoleonic wars, the second world war and more recent conflicts. Their contribution should be recognised equally with that of all those who have been prepared to put their lives at risk for our country.

Photo of Colin Breed Colin Breed Liberal Democrat, South East Cornwall

I entirely agree with the hon. Gentleman that when changes are made to a complex system—particularly after 30 years—there will be winners and losers. If the schemes are to be modernised, enhanced and improved, would he expect more winners than losers or more losers than winners?

Photo of Mike Gapes Mike Gapes Labour/Co-operative, Ilford South

I hope that there will be many more winners than losers and that the Treasury will permit the Ministry of Defence to be flexible when interpreting costs. When the Minister gave evidence to the Select Committee, he said that there might be some transitional payments, which could not be taken into account in the overall cost-neutral formula. If the authorities rigidly keep to cost neutrality, it will not be possible to introduce a scheme that is broadly acceptable to the armed services. That argument is more for the Treasury than the Ministry of Defence.

The Select Committee pointed out that there is a Treasury-driven assumption that being a member of the armed forces is the same as any other public service occupation, but clearly that is not so because of the nature of personnel deployment; the requirement to serve abroad and away from one's family, perhaps for many months at a time; the risks involved; and the period of service. All those factors should be taken into account but I am not convinced that that has been done.

The Select Committee also pointed out that members of the armed forces often perform tasks that are more dangerous than, but otherwise similar—and occasionally identical—to those performed by the police and fire services. One thinks, for example, of Army personnel who drove Green Goddesses. However, only a small minority of those in the armed forces will receive their pension at 55. The majority will do so at 65. I hope that further consideration will be given to that and other aspects of the Bill in Committee.

On balance, the proposed legislation should be supported. The Bill contains some good things but as it continues its passage through the House, we ought to examine in detail some of the issues highlighted by the Defence Committee. I hope that Ministers will receive the support of their Treasury colleagues for any changes that they may wish to make.

Defence Committees under all Governments have produced critical reports over the years but have always endeavoured to do so on a consensual basis, in speaking up for the men and women who serve our country and the international community through implementing the expeditionary strategy to build a safer and more secure world. It is crucial that those men and women believe in their hearts that our actions are in their long-term interests. We need to explain the benefits that will come from any changes that we bring about.

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons) 4:54 pm, 22nd January 2004

I begin by saying what a pleasure it is to follow Mike Gapes, who made an extremely well-informed and balanced speech. The House is grateful to him for that. I also enjoyed the speech made by Rachel Squire. I have been a Whip for nearly two years now and have listened to a great many speeches by hon. Members of all parties. I can honestly say that her speech was one of the best I have heard; the House is very much in her debt.

For the purpose of complete transparency, I should draw the House's attention to the raft of entries under my name in the Register of Members' Interests. I remain part of the Regular Army Reserve of Officers, which means that I shall be eligible for a pension at the age of 60. I have married since leaving the armed forces—a fact that will become relevant later. In addition, I have a small business consultancy with Schroder Investment Management, and I worked in the field of institutional pensions before entering Parliament.

Two important principles must always be borne in mind when matters relating to the armed forces are considered in this House. The first, and by some distance the more important, is the fact that the armed forces are different. They are also special, but I shall settle for different. Why are they different? There are a number of reasons. The armed forces have unlimited liability. The use of violent force, by them and against them, is a regular feature of armed forces life. Members of the forces operate under a separate code of discipline, with a resulting loss of freedom. They have liability for reserve service, and that still applies to me: I left the Army in 1995, but will remain liable for reserve service until 2012. The families of armed forces personnel face upheaval and disruption, which also limit the careers of family members. Careers in the armed forces are generally short, and armed forces personnel are selectively excluded from much legislation. In that connection, mention has already been made this afternoon of the national minimum wage.

Why do members of the armed forces need to be different? There is one very simple reason—they are expected to fight, and sometimes to die, for their country. That makes armed forces personnel wholly unique among public sector workers.

The principle of the difference of the armed forces is important in this debate for three reasons. First, Parliament must protect and cherish that need to be different, because of the particular tasks that the armed forces must undertake. Secondly, the pension and, if anything goes wrong, the compensation provisions for the armed forces must reflect the extra commitment and responsibility that Parliament and the country expect from their members. Thirdly—and I offer the House this one warning—we, as parliamentarians, must never inflict on our armed forces social legislation or politically correct measures that could inhibit or dilute their ability to fight and to carry out the very special role that we require of them.

A second main principle that must be borne in mind has been mentioned already by other hon. Members—that the armed forces have no body to represent their interests as employees. There is no trade union or similar organisation for military personnel. As a result, they look to us, as parliamentarians, to protect their interests. If the hon. Member for Dunfermline, West is anything to go by, the members of the Select Committee on Defence do that admirably. In short, the armed forces are a special case, and Parliament must therefore take special care when scrutinising any legislation that affects them.

It is a matter of profound regret for me, and for other hon. Members, that the Bill is only enabling legislation. That means that the House, which has a particular duty of care in respect of our armed forces, cannot scrutinise the Bill in a way that will permit a clear understanding of each and every implication that it will have for members of the armed forces, and for their dependants.

The Bill has four main elements. It provides powers to make new occupational pensions, and to establish a new compensation scheme. In addition, it amends the appeals procedure, and institutes changes to the Royal Patriotic Fund Corporation. I shall examine those four main elements part by part.

The first is the power to make a new occupational pension scheme. Because the Bill is enabling legislation, it is difficult to give an authoritative opinion, but I can safely say that large parts of it are welcome. I particularly welcome the commitment in paragraph 17 of the explanatory notes to remain with a final salary or defined benefits scheme. I do not say that because I am against defined contribution schemes—indeed, the movement of the markets may, in time, make them more profitable than defined benefits schemes, but the key word is "may". Because of the nature of their service, the armed forces need the certainty of final salary schemes.

I welcome the removal of the distinction between widows whose partners' deaths are attributed to service and those whose partners' deaths are not. An unfortunate by-product of the removal of that distinction is that, in addition to non-attributable widowers who are already a legacy issue, a new group will be created with an extra grievance—those whose other half dies between now and the start of a new scheme. I hope that the Government will address that point, but the general change is welcome.

I also welcome the equal treatment given to officers and other ranks. That principle is not universally applicable across everything to do with the armed forces, because officers and other ranks carry out different tasks with different levels of responsibility and exposure, but its application here is clearly welcome.

I particularly welcome the increase in death-in-service benefits from one and a half to four times pay, which has been welcomed this afternoon by hon. Members on both sides of the House. I was going to say that I could live with the replacement of the immediate pension with a less generous early departure payment, but having heard hon. Members' arguments this afternoon, I will examine the point more carefully. I am sure that more imaginative solutions, particularly involving money purchase schemes, could be the answer. Whatever happens, we must recognise that the armed forces need to encourage people to serve for longer than a short career—typically for between 10 and 25 years—but not to serve until they are 55.

It would be wrong to say that I welcome all the provisions in the Bill, and some points particularly concern me. First, there is the lack of independent governance. I said at the start of my contribution that the armed forces have no body to represent their interests as employees. Their pension provision needs some sort of body or group of people to represent them and act in their interests. In years to come, the Ministry of Defence may face a straightforward conflict between the need to control expenditure and the need to provide appropriate pension arrangements for members of the armed forces. Some measure of independent governance would remove much of the suspicion surrounding the issue.

Secondly, there is an element of unfairness in deferring the payment of pensions from 60 to 65 if the retirement age for members of the armed forces remains at 55. That is a big cost saving, which comes directly from the pensions of servicemen and women, particularly because the increase in longevity at the other end of the scale—if I can put it in that slightly crude way—is not yet five years.

The third concern is that even those who serve a full career will be denied the opportunity to earn a full career pension, which is two thirds of final salary under current Treasury guidelines. For example, someone who started their career at the age of 20 and served until they were 55 would probably accrue 35/70ths of their salary. On most independent calculations—my hon. Friend Sir John Butterfill confirmed this—adding in the lump sum makes about 62.5 per cent. of the final salary, and of course that is the best-case scenario, which is enjoyed by very few. The MOD should examine increasing the retirement age or the accrual rate towards the end of service, or, more imaginatively, consider part-funded additional voluntary contributions. All those proposals would remove that problem.

Finally, hon. Members on both sides of the House have pointed out that the impression remains that the review has been conducted on the basis of cost, and not on the basis of what is best for our armed forces. That is greatly to be regretted. The sad fact is that there will be one sure-fire winner: the Treasury. The proposal is cost-neutral, payments are deferred from 60 to 65 and the overall fall in the number of service personnel means that there will be fewer pensions.

The second aspect of the Bill is compensation. As Members who heard the earlier part of the debate will know, I believe that the compensation culture that has taken hold in much of British life—including, sad to say, in the armed forces—is intensely damaging. The MOD should seek where it can to close down on the propensity of ex-servicemen and women to sue through the civil courts for large sums of money. That process brings the MOD into considerable disrepute, as it takes an enormous length of time. The case is always fought against the Ministry, which does not help at all. However, the MOD should compensate by increasing provision for those injured as a result of service life.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

I am sorry to interrupt the flow, as the hon. Gentleman is making a thoughtful contribution. Would he like to see us following the American line?

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons)

The hon. Gentleman has me in one, as I am not wholly sure what the American line is. If he will tell me, I shall answer his question.

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons)

I think I am entering a dangerous area—I do not know enough about the American system; it is above my pay grade.

A simple principle should apply: the country owes a duty of care to those injured in its service. I would much prefer it if the provision made by the MOD was expanded to take account of that and if it closed down the opportunity for servicemen and women to pursue their cases through the civil courts, for larger sums and with all the consequences that we have discussed—especially for the MOD. That is why I greatly regret the changes that the Government intend to make to the proof of entitlement. As my hon. Friend Mr. Djanogly said, Royal British Legion research indicates that 60 per cent. fewer pensions will be awarded under the new rules. I am prepared to bet that that will be accompanied by a vast increase in the number of cases going to civil litigation. That cannot be good, either for the litigants or for the Ministry of Defence.

To pinch a military analogy, the Government have engaged the wrong target. The proposal will be very damaging to the public perception of the MOD and will create enormous controversy and unhappiness in the future. I am only delighted that the existing arrangements will continue to apply for injuries and illnesses incurred before the start of the scheme, including—vitally—Gulf War syndrome.

The Bill also covers changes to the appeal process and to the Royal Patriotic Fund Corporation, which seem perfectly sensible. I had some dealings with the Charity Commission a few years ago, before I entered Parliament. Will the Minister confirm that the planned changes to the Royal Patriotic Fund Corporation conform to any new arrangements that will be set up under the charities Bill that is due to be introduced later in the Session?

There are several legacy issues that the Government have ignored in their review, such as post-retirement marriages—I declared an interest earlier. A couple of months ago, a constituent who had just retired from the Army, at 55, told me that, owing to the increase in unaccompanied tours, he had been forced to put off getting married for the last three or four years of his service. He married as soon as he left the service but, as a result, his long-time partner—now his wife—was not eligible for his pension if he died. As he is aged 55, it is perfectly reasonable that they could be married for 20 years, so there is something unjust about that provision.

Questions have also been put about pension troughs, non-attributable widows' pensions for life, and the pre-1973 one-third-rate widows—one has to be careful how one says that phrase. I realise that the Minister may not have time to deal with all these points in his summing up, but will he write to me with the MOD's best estimate of the cost of correcting those four legacy issues?

In conclusion, every hon. Member would accept that the armed forces need to change—indeed, in recent times, they have changed—and of course their pension arrangements should reflect that. However, we as parliamentarians must recognise that the armed forces are different—critically, they need to be different—and that the armed forces have nobody, save us, to represent their interests as employees. We in this county expect our armed forces to fight and, very occasionally and regrettably, to die for our country. That commitment, in my opinion, should be rewarded by security in their retirement. The challenge for all hon. Members is to safeguard that as the Bill passes into Committee.

Photo of John Randall John Randall Opposition Whip (Commons) 5:10 pm, 22nd January 2004

It is a great pleasure to follow my hon. Friend and colleague Hugh Robertson. I have been listening to the debate, and such a wealth of experience has been apparent on both sides of the House that I feel slightly humble, as I can honestly say that I have very little experience of military things. I think that the highest rank that anyone in my family reached was bombardier. With such a wealth of officer material around, perhaps I should be speaking for the other ranks.

One of the reasons why I was quite pleased to leave business behind was that the complexities of pensions were getting too much for me and I thought that I could leave that to the experts. It was a great pleasure therefore to hear my hon. Friend Sir John Butterfill, who is probably acknowledged as the House's leading expert on such matters.

I am very fortunate to have RAF Uxbridge in my constituency. That station contains a great many personnel not only from the RAF but from other armed forces. The Army's legal services are based there, and many people go through there in transit. In fact, I have had quite a lot of experience over the years of dealing with the armed forces in my capacity as retailer. Over many years, I was involved in serving many families there. I remember, as a small boy, opening the post in the family business, when lots of our armed forces were all over the world, and we had a depository. So I have got to know a lot of the personnel, not so much as members of the RAF and the other armed forces, but as ordinary members of the community. Although I very much accept that service personnel are special, as my hon. Friend the Member for Faversham and Mid-Kent said, they are an integral part of the community.

In Uxbridge, the station is almost in the centre of town—it is possibly one of the few such stations—so the personnel are not isolated from the community. That is very important because, although when we are talking about issues such as those in the Bill we have to realise that the armed forces have to be treated in a special way—and, yes, certain conditions apply—they are also, in many respects, just like everyone else: they have families and partners and they face the various situations that we all encounter in our ordinary lives. They are very important not only to the local economy but to the local community.

Some of the personnel will play in the local sports clubs. I mention that because I was interested to hear what John Robertson said about injuries. I wonder what will happen if people injure themselves while playing for non-service sports clubs.

I was concerned to hear that the Bill is unfurling as an enabling measure, because I am concerned that we will not have ample opportunity to discuss it. More importantly, I should like to be able to discuss the Bill with my constituents and bring their thoughts to the Chamber—an opportunity that I will obviously be denied.

I have a great deal of respect for Mike Gapes, who made his points well. I am always concerned when I hear that some people will benefit from a measure that is cost-neutral because, as he said, it almost inevitably means that someone else will lose out. Several hon. Members talked about the compensation culture, which is becoming a bit of a blight on society in general. It is unfortunate that it is entering the armed forces, so I hope that it can be contained and kept under control.

Having heard what I have heard today, I shall ask my right hon. and hon. Friends to keep me abreast of what goes on during the Bill's later stages so that I can ensure that the valuable members of my constituency who serve in the armed forces will be able to find out what is going on and what the Government propose.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence) 5:15 pm, 22nd January 2004

We have had a good, wide-ranging and, as usual, informative debate on defence matters. I cast my mind back to the picture in The Times one or two days ago that showed the Chamber more or less deserted during a debate on truancy. We can verily say unto its staff, "Where are you when we are here debating a matter that, by common consent, is of great concern to the people of this country and those whom they regard as being among the most deserving—Her Majesty's armed forces?"

I once again apologise to the House for the absence for the winding-up speeches, of my hon. Friend Mr. Soames. He wrote to the Secretary of State, whom we are pleased to see back in the Chamber, to explain that he cannot be here because he has an unbreakable engagement. I am grateful for the courtesy of the House in understanding why he is not here.

It is significant that all hon. Members who contributed to the debate referred to the unique role of the armed forces and the high regard in which they are held. Like many hon. Members, I pay tribute to Rachel Squire. It was a pleasure and privilege to serve on the Defence Committee with her for about two years, and I say to her, as an insider in that regard, that she acquitted herself extremely well. The members of the Committee who could not be here today will feel that she did justice to them and to the Committee when talking about the piece of work that my hon. Friend the Member for Mid-Sussex saluted in his earlier tribute. Her speech was brave because she was quite critical of her Government, but I do not think that the Secretary of State or the Under-Secretary will hold that against her because they, like the rest of the House, regard her as a fair-minded person who is knowledgeable about such matters and prepared to speak up on behalf of those who need to be spoken up for.

The hon. Lady made several interesting points, one or two of which I shall select. She said that the Bill contains no requirement for Ministers to consult and that such a provision should be included. I have taken that on board and I shall do my best to add such an amendment to the list to be moved in Committee. It is good to put on record the important point that she made when she said that she did not think that young people who joined the services immediately thought about the retirement package that they would get. She is right—God help us if young people queue up at the recruiting offices and the first thing that they say is, "Well, I'd like to join the Colours, but first tell me what my pension arrangements will be." That is precisely the sort of person whom we do not want in Her Majesty's armed forces. We want people who are robust and determined, and who have a certain sense of adventure and courage. I am not entirely convinced that asking about the retirement package at the outset would demonstrate the attitude that we are looking for in those who join up.

The hon. Lady also drew attention to the compensation arrangements which, by common consent throughout the House today, have been criticised. It is important to remember that the Government moved to the five-year time limit only as a result of the pressure that has already been brought to bear on them. The initial proposals, as Members will recall, provided for a three-year time limit. We welcome the extension, but the point has been made on both sides of the House that illnesses that are attributable to military service may manifest themselves only after the five-year time limit is up. I do not think that any Member would want to answer to ex-servicemen or women in their constituencies complaining that they had been unable to get compensation for an illness that, according to medical opinion, was attributable to their service simply because they were debarred by the time limit. I hope that Ministers have taken that on board and will think again.

The hon. Lady also made the point that medical records are held by the employer, and that should not be lightly dismissed. Of course none of us believes that any of the civil servants who administer these matters would wilfully withhold information, but it could happen. Records could be lost. Clearly, at the very least, there is a conflict of interest in the matter, and Ministers will have to consider that.

The hon. Lady referred to the lack of consultation with personnel and the lack of a system to provide statements of how their existing benefits will pan out, let alone information about how they will be affected by the new scheme. The Under-Secretary suggested that existing service personnel who will have the option, between 2005 and 2007, of deciding whether they want to remain in the existing scheme or move to the new one, will be on their own. It is clear that he was saying, "Don't expect any help from us." I understand why he said that; he does not want his employees—NCOs and officers—giving advice to their fellow soldiers, sailors and airmen for which they could be held to account but which they were not qualified to give. The question has to be asked, however: where are those people to go for information? As my hon. Friend the Member for Mid-Sussex said, is the Under-Secretary proposing a new khaki battalion of independent financial advisers to organise that, or will servicemen and women simply have to go to the high street? We need an answer.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

Are we going to get one? I give way to the hon. Gentleman.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

The hon. Gentleman has taken my remarks slightly out of context, which is no surprise. I was talking about licensing under the Financial Services and Markets Act 2000, with which he is perfectly familiar. The Government had to introduce it because of the mis-selling of pensions by a Government in the 1980s of whom he was a supporter.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

I am sorry that the Minister chooses to make a slightly grubby point when there is a real issue here. It is the Government who are seeking to change the armed forces pension arrangements. There is agreement on the need to do so, and many of the provisions are welcome, but the Government have also heard a litany of complaints about their proposals. One of the issues is who will advise the scheme's current beneficiaries as to whether they would be better off staying with it or moving to the new scheme. We need an answer, and the Minister has not given us one.

Mr. Breed, who speaks for the Liberal Democrats, raised the issue of the advice given to servicemen to enable them to make an informed decision. I agree that they have been left in limbo, and something must be done about that. He also drew attention to the quartering arrangements in Devonport near his constituency, and pointed out that some of the provisions extending benefits to unmarried partners and so on will have a knock-on effect on those arrangements. Like everyone else, he said that our armed forces are our greatest asset, with which we all agree.

Laura Moffatt, a former member of the Defence Committee, shared that view, and rightly said that it is the duty of the House to respond to the Committee's report. Having served on the Committee for most of the relevant period, it is fair to say that the issue is complex, even if one understands pensions. If one does not, it is even more complex. It is not quite as difficult as local authority finance, but it is nearly as hard. Considering it in Committee was an interesting experience. The Government spent more time than it took the allies to defeat the Germans in the second world war to come up with an answer in their review of armed forces' pensions, and the Committee spent a couple of years on the issue. The House should salute the extremely good job that it did, and we owe it to the Defence Committee to ensure that the points that it made are pursued carefully in Committee and subsequent discussions, perhaps in another place.

My hon. Friend Mr. Wilkinson made a number of interesting points. He said that our hon. Friend the Member for Mid-Sussex made a great speech, and I agree. He also said that senior non-commissioned officers are the backbone of our armed forces, so it is important that we try to retain them for as long as possible. I agree entirely—anybody who has visited service establishments will be keenly aware of the role played by senior NCOs, who not only have experience but set an example to others, particularly new recruits. They are on hand to help junior officers when they first have the responsibility of ordering men around. Without the NCOs, many junior officers—some of my hon. Friends have held such posts in the past—would find life much more difficult.

My hon. Friend bravely grasped the nettle when he raised the Government's proposals on benefits for unmarried partners. As the Secretary of State confirmed, those proposals will extend to people in single-sex relationships. It was disappointing that my hon. Friend was the object of a personal attack. As my hon. Friend the Member for Mid-Sussex said, these are contentious and difficult issues to wrestle with, so it is unfortunate if people who take a particular view are attacked in an unpleasant fashion. There is a risk that political correctness is inhibiting members of our armed forces and preventing them from voicing anxieties. The Secretary of State will not be aware of that because members of the armed forces are wary of sharing their concerns with Ministers. A two-star officer told me the other night that if he expressed some of the views that I have expressed he could experience great difficulties in his job. It is incumbent on the House, of all institutions, to allow freedom of expression, as political correctness is attacking freedom of expression in our country. My hon. Friend made a brave contribution and sought to address real concerns.

If I may address the issue—I suspect I might get ambushed on it in any case, as I am on record as having expressed a view in the Defence Committee, so there is no point in pretending otherwise—my views are known by a number of those who participated in the debate. My hon. Friend the Member for Mid-Sussex set out some of his concerns, which I share, not least the practical implications of assessing who qualifies. I want to give the Minister time to answer and tell us what assessment has been made of the likely litigation that could arise from judgments that people are not in an enduring, substantial relationship.

My own view is that there is a clear set of moral values that underpins service life and service commitment. We agree across the Floor of the House that the armed forces need to be different. They must take orders in a way that no other section of society would accept. We do not ask them to replace strict obedience to an order with a process of consultation that might apply to the rest of society. People who cannot take orders cannot be in the armed forces. That concept is not acceptable in any other part of society. In the interests of military efficiency, it is necessary for the armed forces to reject practices followed elsewhere by the society they serve.

Furthermore, the Government have made clear their belief that marriage is the best framework for bringing up children, yet by extending the privileges of marriage to those who spurn the option of marrying, they contribute to the undermining of the institution they regard as so important to the rearing of children. The Government must address that issue, as well as dealing with their equality agenda, as my hon. Friend the Member for Mid-Sussex called it. We are more concerned with the armed forces than with the Minister's equality agenda.

My hon. Friend the Member for Ruislip-Northwood raised the issue of the pension trough, as did my hon. Friend Hugh Robertson. That issue is of concern to everybody, but I hold up my hand and say that the Conservative Government did not do anything about it. At this stage it is probably unlikely to be resolved, but we need to bear it in mind. Should we collectively win the national lottery, those who suffer from the pension trough ought to be considered on that happy day.

John Robertson is not a member of the Defence Committee, but he demonstrated in spades the merits of the armed forces parliamentary scheme, if I may say so. The fact that he did not learn all the lessons is to be regretted, but I am glad that he has participated in the scheme, and he is an example of its importance. I hope that others who are contemplating going on the scheme and do not have experience of the armed forces will learn from him, and that he will encourage them to do what he did.

I thought the hon. Gentleman was needlessly partisan, but in the spirit of good will and fellowship, I shall leave that aside. Some of his views place the Government's priorities the wrong way around. He was more concerned with what he called the social-progressive range of policies than with the armed forces, but in the end he redeemed himself admirably by praising my hon. Friend the Member for Mid-Sussex for an excellent speech.

My hon. Friend Sir John Butterfill, whose recent knighthood I salute, as I am sure the whole House does, brings knowledge to our proceedings that is much appreciated. He is chairman of the parliamentary pensions fund and it is good to have someone like that in the debate, although he is not in his place now. He made the point that graduate recruits will qualify only from the date of enlistment. The Government must address that. If graduates join up at the age of 22, they will be adversely affected.

Mr. Hendrick told us that he lost his Euro seat and had to return to industry. That reminds me of a wonderful car sticker that I saw when my wife and I were on holiday in the west country. This sticker, on the back of a Volvo, read "Make your MP work. Vote for somebody else." His electorate obviously did that to the hon. Gentleman.

My hon. Friend Mr. Brazier is so knowledgeable and such a dedicated supporter of the armed forces that he never fails to speak up for them. We appreciate that. He asked how the Government would consult the armed forces on the postponement of the preserved pension from age 60 to 65. That is a very serious issue, to which I will return shortly.

Is it proposed to provide any step indexation from 40 to 65? That is a long period to go without having the pension, or the payment in the case of early departure, without any increase in the amount of money. If the early departure scheme is there to help people leave at 40, and they will now have to wait until they are 65 for a pension, has the Minister any plans to provide step indexation of any description?

My hon. Friends the Members for Faversham and Mid-Kent and for Uxbridge (Mr. Randall) also made valuable contributions. I agree with my hon. Friend the Member for Faversham and Mid-Kent—I receive many communications from members of the armed forces saying that they want to stay on. The Secretary of State talked about justifying some of his arrangements on the ground that people should be able to work longer in the armed forces. The truth is that not enough is being done in that direction. Greater opportunities should be given for people to serve longer when they want to do so and are able to do so. My hon. Friend said that he spoke for the other ranks. As a Whip, he is on a par with the formidable company sergeant-major. We valued his contribution, too.

The Government have treated both the armed forces and Parliament with grave discourtesy in bringing before us an enabling Bill with much of the detail underlying the proposals incomplete. It is a hollow Bill. Worse, any changes could be effected without further reference to Parliament, except possibly by way of a one-and-a-half-hour debate on a statutory instrument, provided the Opposition prayed against it.

As my hon. Friend the Member for Bournemouth, West said, the Government could have put the detail into a schedule. I cannot understand why that was not done. It would have been a better service to Parliament and to those in the armed forces. As my hon. Friend the Member for Mid-Sussex said, the situation is unacceptable. We shall therefore look to move in Committee amendments seeking to place in the Bill certain key issues. Some were mentioned by the Select Committee in its report, in which it suggested:

"These principles might include, for example, the final salary basis of the pension scheme; its non-contributory nature; and the accrual rate of 1/70 of pensionable pay for each full year of service; the standard and burden of proof for claims under the compensation scheme; and the basis of entitlement to compensation."

They are a very good starting point.

Members of the armed forces may not have on their payslips a line showing how much has been deducted as a contribution to their pension, but in calculating service pay the Armed Forces Pay Review Body provides an allowance or abatement which it deducts from the pay level that it would otherwise award. That rate is currently 7 per cent. It is therefore unreasonable to claim that this scheme is non- contributory.

We would like to see an element of independent governance introduced so that the Government are no longer judge and jury in this matter. As the hon. Member for Dunfermline, West and my hon. Friend the Member for Faversham and Mid-Kent both said, the fire service has trade union representatives to argue its corner and the police have the Police Federation and other associations to speak up for their members. The armed forces have no one, save for the Forces Pension Society and the Royal British Legion, which do a splendid job but do not stand in the same relationship to today's servicemen and women as do the organisations I have mentioned in relation to the others. The Minister says that trustees are necessary only for funded schemes, but I believe that a way could be found around that.

To conclude, we ask our servicemen and women to give a unique commitment to our country. That is why the Secretary of State was unwise to justify some of the reduced benefits on the ground that Tesco is asking its staff to contribute more. Every speaker has saluted the service and dedication of our servicemen and women. There will not be a vote tonight—the consensus is that there are some welcome improvements. However, overall, the scheme that the Government propose needs to be improved if it is to meet the collective view that such a unique commitment demands that we consider the case on its merits. Our armed forces are the best. They deserve the best.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence 5:39 pm, 22nd January 2004

We have had a good debate on the Bill, which, as Mr. Howarth said, deals with a complex issue. I thank all hon. Members who took part, including my hon. Friends the Members for Crawley (Laura Moffatt), for Glasgow, Anniesland (John Robertson), for Preston (Mr. Hendrick) and for Ilford, South (Mike Gapes), and the hon. Members for Uxbridge (Mr. Randall), for Faversham and Mid-Kent (Hugh Robertson), for Canterbury (Mr. Brazier) and for Bournemouth, West (Sir John Butterfill). I may return to the hon. Member for Uxbridge in a moment. I also welcome the contribution of Mr. Breed, as well as that of my hon. Friend Rachel Squire and the work of the Select Committee on Defence. I was pleased that, notwithstanding certain comments, we were able to publish our response before today's Second Reading.

My hon. Friend the Member for Crawley made a powerful speech about equality, and recruitment and retention, in our armed forces. She has vast experience in such matters, and her contribution was welcome.

My hon. Friend the Member for Glasgow, Anniesland drew on the experiences that he recently gained in Basra—not as a reservist, but on the armed forces parliamentary scheme, the success of which I join him in welcoming—and the knowledge of veterans' issues that he has gained from his membership of the Royal British Legion, which, I assure him, was consulted throughout the process.

My hon. Friend the Member for Preston, who has considerable interest in defence matters, made a thoughtful and detailed speech that showed that he has read and considered the framework documents attached to the Bill. When I asked Mr. Wilkinson if he had done so, he was honest enough to say no. Hon. Members have a duty to read them, however, because they contain much of the detail.

My hon. Friend the Member for Ilford, South made an important, if brief, speech. I always welcome his observations, because he, too, has a long-standing interest in defence and foreign affairs.

I am almost speechless when thinking about what to say about Mr. Soames, although I enjoyed his comments, if I can call them that. He said that we want clarity on all sides. That was outrageous, because my right hon. Friend the Secretary of State gave the House clarity in his opening remarks, especially on the legislative issues. Parliament is, rightly, deeply interested in the Bill, as we note in our response to the Select Committee.

All hon. Members need to reflect on the issue of primary and secondary legislation. The current schemes have to be amended two or three times a year to reflect wider changes in Government pensions policy. My right hon. Friend mentioned pension sharing on divorce, and other legal changes that regularly arise. It would be neither sensible nor fair to require such changes always to be the subject of primary legislation, which is, I think, what the hon. Member for Mid-Sussex was suggesting.

The hon. Member for Canterbury asked about parliamentary scrutiny. The current pension schemes do not allow for parliamentary scrutiny, because their details are set out in prerogative instruments over which Parliament has no such right, as my hon. Friend the Member for Preston explained in his thoughtful remarks. The proposals are based on the same primary enabling legislation as the schemes for the civil service, the national health service, the police and the fire service, with the details contained in secondary legislation—statutory instruments. That is a perfectly reasonable way in which to proceed, and I hope that we can progress from there.

I congratulate the hon. Member for Faversham and Mid-Kent on managing to ask a question about the Royal Patriotic Fund Corporation. I had no idea that anyone would ask about that, but the answer to his question is yes.

Every speaker mentioned the compensation scheme, which we shall discuss in greater detail in Committee. The current arrangements fail to provide adequate cover for those who are most severely disabled and they fail to address pain and suffering. They discourage and penalise rehabilitation and provide awards that do not discriminate properly between those who will never be capable of working again and those who can expect to return to a relatively normal life.

The current arrangements are rooted in an understanding of medicine and the scope for rehabilitation of 60 years ago. Several speakers expressed wider concerns about moving away from the provisions of the current scheme, but it would be wrong to continue with them, given the scheme's shortcomings. Our armed forces deserve better and that is why we are proposing the new compensation scheme. The arrangements that it offers are fair and simple to understand. They also tackle different sorts of disablement, and are well up with the best type of scheme that employers offer in the United Kingdom.

Several speakers, especially my hon. Friend the Member for Glasgow, Anniesland and the hon. Member for Mid-Sussex, mentioned time limits. The time limit of five years is not to settle the matter but to lodge the claim. We said before today's Second Reading that we accept that some conditions will take longer to emerge. My right hon. Friend the Secretary of State repeated that today. Allowances are made for that because there are exceptions to the time limit. However, it is in everyone's interest that we try to settle those matters as speedily as possible.

Photo of Mr John Wilkinson Mr John Wilkinson Conservative, Ruislip - Northwood

The Under-Secretary is making an important statement. I asked a specific question about excessive doses of radiation leading to illness in later life. Can the hon. Gentleman honestly say that an individual who has had an excessive dose of radiation will know in five years that he will be ill later? The illness emerges after 10 or 15 years, and the scheme will not specifically cover it.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

The hon. Gentleman asks an interesting question. I want to answer many questions, and I shall try to answer that one.

Mr. Djanogly asked about the Royal British Legion's claim that 60 per cent. of those who currently receive compensation payments will not get them under the new scheme. Indeed, the hon. Member for Faversham and Mid-Kent and some of my hon. Friends also raised the matter. As I said earlier, we have worked closely with the Royal British Legion in developing our proposals for a compensation scheme. We take account of its views, which are serious; we must ensure that we do that.

We have extended the time limit from three years in the original proposal to five years, to deal with the concerns of the veterans' community. I hope that that is satisfactory. We have examined the figures from the Royal British Legion and we do not expect 60 per cent. of claims to fail. No claim will fail when there is reasonable evidence that the condition was caused by service.

A point was made about record keeping in the context of compensation. The Select Committee rightly referred to paragraph 17 on page 7 of the Command Paper. I hope that hon. Members who have the chance to reflect on that will understand that I have made an absolute commitment. First, we shall legislate to ensure that any failure in record keeping will be the Government's responsibility. The statement in paragraph 17 makes that absolutely clear, and I hope that it reflects hon. Members' views.

Photo of Hugh Robertson Hugh Robertson Opposition Whip (Commons)

Before we leave the subject of compensation, will the Minister answer a question related to one that he asked me? When I said in my speech that I favoured less civil legislation and a more all-embracing scheme run by the Ministry of Defence, the Minister asked me whether I should like the American model to be adopted. Presumably the MOD considered that option. Why was it rejected?

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

I discussed that model with the Americans when I was in Washington, but we do not think that it would be right for our armed forces. We believe that they should have the rights that any other citizen has, so the civil courts should be an option if they are needed.

In recent years there has been concern in the House, and more widely, about the adequacy of pensions provision for the dependants of those who die in service. The new pension and compensation schemes include major improvements to address that concern, notably the significant increases to widows' pensions and to the rate of death-in-service benefit. Those changes have been welcomed on both sides of the House. However, our reforms go further. They recognise that society is changing and redress long-standing unfair and unjust distinctions. The pain of loss, and the economic hardship that follows it, for the partners of servicemen and women who are killed is the same whether their loved ones are gay or straight, married or unmarried. My hon. Friend the Member for Crawley made a most powerful speech on that subject, and I would certainly recommend it to some Conservative Members, in particular the hon. Member for Ruislip-Northwood.

In pensions for retiring service personnel, the same distinction has existed for years. Under the Bill such artificial distinctions will be a thing of the past, and a good job too; I know that Labour Members, at least, warmly welcome that. It is worth noting that in the unlikely event of the hon. Member for Aldershot or the hon. Member for Mid-Sussex—we all know his record on such matters—ever finding themselves running the Ministry of Defence, many families, and others, in such situations would be turned away from their door.

For instance, on criminal compensation, the hon. Member for Aldershot told a Standing Committee:

"I have a difficulty with the idea of paying out compensation to same-sex partners because I believe that it undermines marriage."—[Official Report, Ninth Standing Committee on Delegated Legislation, 15 March 2001; c. 10.]

When my right hon. Friend the Secretary of State rightly decided that people's sexuality would not be a bar to their entry to the armed forces, the hon. Member for Aldershot described that as

"caving in to the European Court of Human Rights"—[Hansard, 11 April 2000; Vol. 348, c. 264.]

Would he care to tell the House, and those serving in our armed forces today, whether he still draws a distinction between the rights of homosexuals' partners and those of their heterosexual comrades? Is he for or against the extension of unmarried partners' benefits in this Bill? That is the question that we want to ask him. He has spoken from the Opposition Front Bench, at the Dispatch Box. Will he answer that question? Is he in favour of the extension of those benefits to unmarried partners—yes or no?

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

My hon. Friend the Member for Mid-Sussex, to whom I report, has made his position and that of our party absolutely clear.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

The hon. Member for Mid-Sussex is not known for clarity, and he certainly was not clear earlier today.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

My hon. Friend is known for claret.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

I shall certainly not undermine that comment.

My party has no such qualms on these matters. We have addressed the shortcomings of current compensation and pension arrangements for all service personnel, regardless of those issues.

The hon. Members for Aldershot and for Mid-Sussex also raised a point about legal challenge. The criteria that we will use, contained in the annexe to the memorandum of the Select Committee, are exactly the same as those in other similar public sector pension schemes, such as the civil service scheme, so we do not anticipate that they will be subject to legal challenge.

I can confirm to the hon. Member for South-East Cornwall, on behalf of Mr. Keetch, who asked my right hon. Friend the Secretary of State about the number of awards that we have made to unmarried partners since the policy was introduced last March, that we have already made awards to six partners, using the criteria that I set out to the Select Committee.

Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence

I am afraid that I shall have to get on, as I have very little time. Several points have been made about consultation, and I have a leaflet here that was sent to all members of our armed forces during the Bill's initial stages. There will be immediate further communication through their payslips, which I am sure will attract their attention.

Briefly, I want to address the issue of cost neutrality, which was raised by all hon. Members who contributed to the debate. The new pension scheme is broadly cost-neutral compared with the current scheme, taking into account the effects of improved longevity. The savings produced by the replacement of the immediate pension with the early departure plan and the slippage of the deferred pension to age 65 have been used to improve dependants' benefits and to extend them to unmarried partners. We cannot do just one part of that equation, however.

An independent review of the scheme shows that it is good and, in key areas, at the top compared with comparator schemes elsewhere in the economy. The Watson Wyatt report says in its executive summary that in most respects, the new armed forces pension scheme is relatively generous when compared with the benefits currently offered by both private and public sector pension arrangements. The value of the scheme in total was therefore considered to be well in line with that of comparator schemes elsewhere in the economy, and Watson Wyatt found that the scheme, which met the manning needs of our forces, could be delivered successfully on a broadly cost-neutral basis.

A number of Members have raised the issue of the early departure plan. It is designed to respond to the Government's move not to allow the payment of pension benefits before the age of 55, which means that the immediate pension currently in play could not be a feature of the new scheme. By devising a system of compensation payments that sits outside the pension scheme, we are providing a valuable and unique benefit, which should ensure that the required manning profile of the armed forces is maintained, while also providing a cushion to a second career for those leaving in mid-career. The armed forces rely on a fit, young work force, but there is also a need to pull a proportion of that work force through to the age of 40 and beyond to meet requirements. That pull is currently provided by the payment of a lump sum and an income stream for those reaching the immediate pension point. The chiefs of staff and the chain of command are confident that the early departure payment scheme should meet that need in the future. A key reason for that is that we are satisfied that with better transferable skills and a healthier population than when the current scheme was introduced in 1973, we do not need to provide the same level of payments for those leaving in mid-career as we do at present.

I want to thank hon. Members who have contributed to this afternoon's debate, particularly the hon. Member for Bournemouth, West, who is an expert on pension affairs. On some of the detailed points, I propose to write to hon. Members to give them their answer, prior to the commencement of the Committee stage of the Bill the week after next.

The packages on pensions and compensation that we have debated today represent modern, relevant and first-class benefits for service personnel and their families. They dispense with much that is outdated, old-fashioned or plain wrong, and they acknowledge the social and financial realities of 21st-century Britain. In purely financial terms, the significant improvement in dependants' benefits has rightly been welcomed on both sides of the House. We recognise the need to retain a high-quality scheme as an attractive recruitment and retention tool, and because we know that it is no less than our armed forces deserve.

Our values of social justice, fairness and equality are at the centre of this Bill—fairness to all who join our armed forces, fairness to those currently serving who want to choose to transfer to the new pension scheme, fairness to those who become ill or disabled, and fairness to partners, including same-sex partners, in the benefits that we provide. The Bill proposes new schemes that truly reflect the society in which we live and this Government's excellent equality agenda and policies, which have been consistently opposed by the Conservative party—even this afternoon, sadly. The Bill places our core values of social justice at the heart of what we do for our armed forces, now and in the future. They deserve that and no less. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.