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My Lords, we have asked the police negotiating board to explore and agree flexible arrangements which will give managers in the police service the scope to retain officers who are entitled to retire with maximum pension benefits where they wish to do so. We have asked the board to reach agreement in principle on a suitable way forward by the end of this month.
Capita, the company concerned with the consultancy work, has been commissioned to complete a report into ways of retaining suitable, experienced officers in the police service who have completed 30 years' service and can retire with maximum pension benefits. A copy of its report will be placed in the Library once Ministers have had a chance to consider the findings.
My Lords, I thank my noble friend for that positive and helpful Answer. Does he agree that it is grotesque to force people out of the police service after 30 years' work when they are at the height of their talents and usefulness, especially at the moment when so many officers are having to undertake security duties as a result of the tragedy of September 11th, leaving fewer officers to do their normal work?
In the circumstances, has the Minister had consultations with the Inland Revenue to discuss how it can and should change the tax arrangements so as not to tax the commuted pensions for people who stay on beyond 30 years?
My noble friend is right to raise this issue. On the one hand, Capita has proposed a scheme which we have asked the Police Negotiating Board to look into; on the other hand, there is the issue of whether we look at the skills and experience of officers or look at their operational performance. The consensus is that, after 30 years, it is their skills and experience that we wish to retain. My noble friend's point about the Inland Revenue is important and we are in discussions with that body. It is important to protect the tax-free status of the lump sum. If we do not make any changes, the tax-free status of that lump sum in the pension would be at risk, and that would not serve anyone's purpose.
My Lords, will the proposals being made impact on police pensions? I declare an interest as a former chair of a police authority. Do the Government have any plans to bring forward improvements to police pensions? The situation must be looked at very carefully because police authorities now have to pay up to 16 per cent of their revenue for police pensions. This simply cannot go on.
My Lords, police pensions are funded in a similar way to one or two other bodies—for example, the fire service. Clearly there is a considerable case for a funded scheme, but no final decisions have been made on that issue. A funded scheme would not be regarded as an easy option. Pension arrangements take a large slice of the finance available. I hope—I cannot be certain—that a police reform Bill will be introduced in this Session. A White Paper will precede the Bill, but all of these issues may not be covered in it because the negotiations being undertaken by the Police Negotiating Board will not be completed until the end of this month. But certainly it is to be hoped that in the early part of next year we will have a way forward.
My Lords, can the Minister confirm that an unusually large number of police officers will be eligible to retire from the service over the next few years as a result of previous recruitment peaks and troughs? Can he further confirm that this challenge will require innovative thinking and projects from Her Majesty's Government, police authorities and the police service if they are to meet this potential exodus?
My Lords, the noble Lord is right. This is also an issue for one or two other public services. No one should be surprised about the age profile of their workforce. However, given the force's recruitment plans and projections of wastage, we expect police strength to reach at least 128,000 officers by March 2002, with record numbers by 2003. That is built into the fact that many police officers will be reaching their 30 years' service. This brings me back to the original Question of my noble friend Lord Janner. We have to consider how we can retain the skills and experience of such officers in a way that is useful for them, advantageous to them and advantageous to the public.
My Lords, clearly many factors come into play in deciding whether or not a police officer should retire and whether he is suitable to stay on. Does the Minister agree that it is absurd—although, perhaps, not unusual—that the primary deciding factor is a question of fiscal regulation in relation to pensions, which, of course, is ultimately set through the Inland Revenue and back to the Treasury? Can the Minister inform the House of the discussions that are going on within the Treasury to try to resolve this particular difficulty?
My Lords, the noble Lord is right about the issue but I cannot answer the latter part of his question. We want the Police Negotiating Board to produce an agreed proposal by the end of the month. Obviously it will be to everyone's advantage if it is agreed. I imagine that part of that would include discussions with the Revenue to ensure that it does not have a negative effect. On the one hand, we hope to have successful negotiations; on the other hand, the Inland Revenue has strict rules right across the pension field. Pensions are pensions; they are not saving schemes as such. That is an important aspect. However, pension arrangements in the police service are quite different from other schemes in terms of age structure and the point at which officers leave.
I still owe the noble Lord a letter in reply to some very sensible questions he asked about the information that is available about the police. The age profile of police is not well known across the forces. We know how many years an officer has served when he leaves the service, but we do not necessarily have detailed information about his age at that point in time. The noble Lord has asked sensible questions and I shall give him answers in due course.
My Lords, will the White Paper which is to be produced during this Session address the situation that many police forces find themselves in at the moment, whereby an officer who has completed 30 years' service, who has good experience and is capable of carrying on in a civilian capacity, finds it difficult to do so because of regulations in respect of the creation of civilian jobs for former policemen?
My Lords, it is true that officers can be re-employed as civilians, in which case they are paid their salary and full pension. However, leaving a job one week and going back to the same employer the next week in a different status and with a tax-free lump sum can present a problem. Obviously that is open to abuse—not in the police force but in other areas—and that is why we need an arrangement that does not have a negative effect on other parts of the public service or on the police officers concerned.
My Lords, can the Minister assure the House that in the review currently being undertaken an open mind will be kept as to the rank at which those who would otherwise retire after 30 years may stay on? This will avoid the rigidities in the West Midlands force where officers so doing are automatically reduced to the rank of constable.
My Lords, the implication in the noble Lord's question is right. The compulsory retirement age for constables and sergeants is 55; ACPO ranks have a compulsory retirement age of 65. One imagines that their skills and experience are still valuable but that they are operationally less valuable. I do not wish to cast aspersions because of the nature of the membership of the House. However, it is a fact that rigidity will always cause problems because each individual is different. A set of rules is in place but it is undoubtedly the case that certain police officers who at 55 years of age now work as constables could carry on at a higher level. It seems barmy that senior officers are reduced to the rank of constable in order to continue their service. That is the kind of issue that Capita will need to examine; namely, to consider a scheme in which the skills and experience of officers who have completed 30 years' service can be used to best effect. We need to secure an agreement that will take this matter forward to everyone's advantage.
My Lords, does the Minister agree that one of the best ways of retaining skills and experience in many professions and other areas of work is to allow people to approach retirement more flexibly by continuing to work on a part-time basis? Can the Minister tell the House whether the Inland Revenue will soon finish its investigations into flexible retirement arrangements? Could more flexible schemes be put in place more widely than is presently the case?
My Lords, I cannot give the noble Baroness a detailed response. Obviously, discussions on the report published last year by the Performance and Innovation Unit on winning the generation game are important. I believe that over 3 million people in this country over the age of 50 but below retirement age are economically inactive. A whole series of barriers force many such people to remain economically inactive. We need to remove as many of those barriers as possible. To that end, I am very much in favour of flexible retirement age schemes. I myself have reached the beginning of the flexible retirement age.