Mr. Stan Newens (Epping)
I beg to move Amendment No. 14, in page 2, line 9, at the end to insert:
(3) The provisions of subsections (1) and (2) of this section shall be disregarded in determining the pension of any employee.
The object of this Amendment is to prevent any long-term restriction on a pension, which was surely not intended by the Bill. The intention of the Bill is to provide a limited standstill of incomes, but the possible effect of the Bill, as drafted, is to reduce the level of pension, it appears for the rest of his life, of a person at present employed. It is necessary for me to expand this by pointing out that some employees' pensions depend on the average earnings during their last years of employment.
For example, in the case of teachers, the amount of the annual pension depends on two factors: the length of service and the average salary earned during the last three years of teaching. Teachers get one-eightieth of the average of the last three years' earnings for each year of service. There are many superannuation schemes which have a similar form for salaried staffs in other occupations.
This means that if earnings during the course of the last year during which a person is employed are prevented from rising by the effect of this Bill, when it becomes law, then the average earnings for the course of the last three years, or whatever the requisite period may be, will be reduced and the best figure for calculating the annual pension of any person will be reduced. This means that the best figure for calculating the annual pension of any pension thus affected would be reduced and, accordingly, his pension rights for life. If an employee failed to qualify during the course of the last year for, say, £39, if my arithmetic is right, he would incur a loss of 5s. a week, or £13 per annum for the rest of his life.
This does not merely apply in cases of pensions paid out in weekly or monthly sums; it applies also in those cases in which a lump sum is paid out at the end of the employee's service because the lump sum is also based on a formula rather similar to the formula which I have described.
In the case of teachers, with which I am familiar, the lump sum is dependent once again on the last three years of [column 344]earnings. In fact the teacher receives by way of lump sum 3/80ths, times the period of service, times the average salary in the last three years, and similar arrangements prevail in other occupations.
At this time, I have no intention of wearying the House by adding to the example I have already quoted. It suffices to say that there are many employees who will suffer lasting loss as a result of the effects of this Bill. I believe it is totally unjust to deprive an employee of part of his retirement pension for life. It is surely enough for the employee to be obliged to tolerate the standstill and lose earnings during the final year of his employment, and it is really an injustice which was surely in no way envisaged or intended by the Bill originally that a person should be penalised for life, and I can see no reason whatsoever for perpetuating this arrangement.
In these circumstances, I very much hope that my right hon. Friend will agree to accept the Amendment. After all, if he does agree to accept this it will not in any way frustrate the purposes of the Bill which he has set forth as far as the period of the standstill is concerned. But if he will accept the Amendment an injustice will be prevented which will particularly apply as between different people who happen to retire at different times. One individual who retires, let us say, three or four months' later than another individual, might get an enhanced pension which his colleague, who retired a little earlier, was not entitled to. In these circumstances, I think there is a very good case indeed for my right hon. Friend to give very careful consideration to this Amendment, and I hope he will agree to accept it.
Sir D. Glover
I am astonished that the hon. Member for Epping (Mr. Newens) has had to move this Amendment. I cannot understand why the Government did not accept, long before we reached this stage of the Bill, what the hon. Member is after in his Amendment.
We all know that there is anger and bitterness among people who are deprived of the increases they otherwise would have got in their wages or salaries for one period of 12 months, but at the end of the 12 months with any luck they may [column 345]get their rises when the matter has been in front of the Prices and Incomes Board, and all they have lost is perhaps nine months' or 12 months' of their increases.
But when one is dealing with pensions one is dealing with a totally different picture. I am not going to delay the House, after the good example given by the hon. Member, but so many people's pensions are geared to their earnings, particularly in the last years, not just in the teaching profession but in many other professions; or it is an amalgam of their total earnings and their highest earning year affects their pension very severely. In some cases, such as in the teaching profession, it is assessed over the last three years of their earnings, and unless there is an alteration here we are providing for a permanent reduction in that person's retirement pay, not for one year but perhaps for 5, 10, 20 or even 25 years. It is not impossible for somebody who retires at 65 to live to be 90. I am told that the average age now is over 80. So there is nothing extraordinary in someone retiring at 65 and living to 90. Such a person will suffer a reduction in pension for 20–25 years.
I am sure that this was never the intention of the Government when they started the campaign of freeze and squeeze. I am sure that it was never envisaged that this would happen to the pensioner on a permanent basis. I hope that the First Secretary will not give a reply to the Amendment bringing in the clap-trap, to use the expression used by his hon. Friend, that this is only a follow-up Bill from the previous Measure and that the other Measure was the father Measure. If in the father Measured there were some anomalies and injustices, I should have thought that the fact that the Government had to bring in another Bill would have given them an opportunity to put the anomalies right.
It is not sufficient to say that the Bill is based on what was in the previous Measure. If that is the case, the Minister ought not to have brought in a Bill which was a duplicate of the other Measure; he should have brought in a Bill to deal with the problem and remove the anomalies that we have been discussing on the Amendments moved by hon. Gentleman opposite. Those anomalies could have been removed had [column 346]greater care been taken in producing the Bill.
There is no party issue in this. There is not even an ideological issue in it between the Left and Right in the Labour Party. It is a matter of simple justice. In many cases the people concerned were able to assess 10 years ago how much they were likely to draw in pension, knowing their salary scales and the increments and also their expectations. But the freeze has upset their calculations about what they would have on retirement. They may have entered into the purchase of a cottage. Because of the arbitrary alteration their income will be reduced by £13, £15 or even £20 or more a year, which will make all the difference to their standard of living—and that will go on for the remainder of their life. This is just because the Government wanted to have a flat standstill for a period of one or two years.
What has astonished me throughout our debates tonight is the little appreciation that has come from the Government Front Bench of what really goes on on factory floors between human beings negotiating and what goes on in households. I hope that the right hon. Gentleman will be able to accept his hon. Friend's Amendment, because I believe it represents just simple justice.
Mr. Gerry Fowler (The Wrekin)
As a very firm supporter of my right hon. Friend's prices and incomes policy, I hope that he will be able to make a concession on this issue. Many of us have constituents who in the past 12 months have already been adversely affected by the policy. This is a matter of simple justice to most of us. It is very hard to understand why a man should be penalised for the rest of his life. In the majority of cases those affected are not likely to be among the better off sections of the community.
A person who has retired is not likely to have superfluous means and it seems unfair that, because of the provisions of a policy which, in its present form, is unlikely to last more than two years, a person should be penalised in this way for the rest of his life by being unlucky enough to have been caught in this period.
I must correct the hon. Member for Ormskirk (Sir D. Glover) on one point. [column 347]This does not really apply to a man who has been calculating for 10 years what he will receive well knowing that he is on a regular incremental scale. The policy has not affected the man on an incremental scale and the hon. Gentleman's point is therefore irrelevant. But the basic argument stands and I hope that my right hon. Friend will be able to make some concession.
Mr. John Page (Harrow, West)
I support the Amendment on grounds of common fairness and sincerely hope that the Government will accept it. It is improper to ask a small number of people to carry for the rest of their lives a burden which was placed on the whole country for a few years. I will give two specific instances of hardship caused by this aspect of Government policy. Both persons concerned were connected with Government service, one directly and the other in a nationalised industry.
The first concerns the extraordinary case of the engineering grades in the Post Office, where some of the senior grades did not have their review agreed before last July while some of the junior grades had their increases agreed. A man promoted from a junior to senior grade may be worse off, and if he retires during this promotion year he will actually receive, because he was promoted, a lower pension than he would otherwise have got.
The second case is that of a constituent who came to see me today. He retired in May. He was in a senior managerial grade of British Railways. He was not allowed to receive an increment in his last year of service, which could have been about 5 per cent. His loss in pension rights will be about £100 a year for good. He also suffered a substantial loss in the lump sum retirement payment.
My constituent had an interview with the Senior Personnel Director of British Railways, who explained that if the British Railways Board could grant him the increase so far as his pension was concerned, it would willingly do so. But the Board has been in touch with either the Treasury or the Ministry of Transport and has been told that it is not Government policy that this should be done, and that it may not do it. This is a definite intervention with a nationalised industry by Government Departments [column 348]who have said, “You may not take into consideration the increase which this long-service senior employee would have received and he will now make this sacrifice.”
He would be prepared, as would many other pensioners in the same position, to forgo an increase in pension at the full rate for a year or two.
I understand that the advice tendered by the Government is that it is illegal for British Railways to make these arrangements or that the making of these arrangements would be contrary to the spirit of the Government's policy. I think the distinction is very germane.
I must be careful here. As I understand it, strong pressure was brought on the British Railways Board not to grant this. If I said it was illegal, I was speaking outside my definite knowledge. However, it asked for the advice, the advice was given, and it accepted the advice and is proposing to act on it. If I said it was illegal I was probably wrong. Nevertheless, the pressure was strong enough to make it take the action that it did.
I was saying that I am sure that pensioners in this position would be willing to forgo for a year or two, or during the period of a continued squeeze or freeze, the increase which would be legitimately theirs. If it was put to them I am sure that they would accept it, but they do not consider that it would be fair or equitable or just that they should be asked for the rest of their lives to carry the severe handicap which is their lot, because they happened to retire during the lifetime of the present Government. I therefore sincerely ask the Government to accept the Amendment or make a proposal similar to it.
Mr. Sydney Bidwell (Southall)
If I sense the mood of the House aright, it has just about had enough. I am conscious that this is not my finest hour, but since I have been sitting here for many a long hour waiting to take part in this section of the debate. I should like to add a couple of points and make an appeal to my right hon. Friend. I also justify my intervention at this late, or early, hour on the ground that I have [column 349]had several representations from constituents from time to time raising this very point.
I have looked at the Amendment very carefully and I have some knowledge, because of the kind of work that I did before I came to the House, of pensions and superannuation schemes, which vary enormously from industry to industry and from occupation to occupation. Sometimes there are none at all, as we recognise in our Labour Party policy on national superannuation ideas etc. Nevertheless, I accept the wisdom of the Amendment that has been suggested. If it is not possible to accept the exact wording, I hope that my right hon. Friend will at least accept the spirit or the intention of what was required.
Pension schemes can be fixed schemes which have little relationship to earnings, but are assessed from time to time and are sometimes the subject of employer and trade union negotiation. On the other hand, superannuation schemes depend very much on worker-employer contributions based on a percentage system, and schemes of this kind can be adversely affected. Although automatic annual incremental scales are not very much affected, such things as merit money and merit payments in industry are affected and that can have an adverse effect on pensions, and that is not right.
Not long ago, I was reading that boards of directors of limited liability companies salt away funds for pensions rights for directors, sometimes to a tune which exceeds what is paid in directors' fees. This is in order to ensure that directors do not have a big reduction in their standards of living when they start to get on in life. I would not like a Labour Government of all Governments to have been instrumental in exercising one law for the poor and another for the better-off sections of industry, who are better off than the average worker can hope to be.
In view of the sequence of events and what my right hon. Friend the First Secretary has said about the way in which this policy has developed, from the declaration of intent to the freeze, to the period of severe restraint and now into a period of restraint, making this first concession and accepting what [column 350]is implied in the Amendment would go along quite comfortably with the whole notion of the future period of restraint. If the Government cannot accept the exact wording of the Amendment, I hope that they will accept its spirit and intention and will closely study it.
The hon. Member for Southall (Mr. Bidwell) prefaced his remarks with a charming and understandable apology for detaining the House at this hour of the morning. He should not be so modest, for at this hour vigilance and will-power are often more needed than ever before. It is just an accident of time that we happen to be considering this Amendment at a quarter to five in the morning. That is no reason why we should take a more leisurely attitude than if we were discussing it at half-past eight or half-past nine. I know that this will appeal particularly to the hon. Member for Poplar (Mr. Mikardo), because if there is anything which we have learned from the Prices and Incomes Act it is that when it was tested in the courts, it was often adjudged to be other than hon. Members had assumed on the guarantee of the Treasury Bench.
The hon. Member for Epping (Mr. Newens) has rightly drawn attention to the fact that this legislation might have a continuing deleterious effect on pension rights and that the pension of anyone might be affected by a standstill on his earnings for six months. I do not read the Bill as indicating that inevitably someone will suffer the harmful consequences of the Bill to his pension rights.
I am prepared to believe that many more nuances can be read into this than I, as a layman, possibly could, but it is quite clear that it is possible for an employer retrospectively to pay whatever increase was delayed by the Prices and Incomes Board, and this leads me to think in terms of pension arrangements. It would be possible for some retrospective arrangements to be made. It is not clear, and that is why the House should properly concern itself with this at this hour. We want clarification and clarification of a rather higher order than on the Act last year, because we do not want the House to be held to ridicule by adverse and distinguished judicial [column 351]comment on the quality of the legislation when it was finally tested in the courts by the kind courtesy of Mr. Clive Jenkins.
I support this probing Amendment for a reason touched on by the hon. Member for Southall—that it seeks to say that the provisions of subsections (1) and (2) shall be disregarded in determining the pension of any employee.
Subsection (1) opens:
“Where by virtue of a reference to the National Board for Prices and Incomes. …”
We are constantly going back to this problem that we are discussing a catalogue of people who will be placed in a specific situation because they have been selected for reference to the National Board for Prices and Incomes. We cannot peer into the future and determine with any exactitude what kind of people are likely to be referred, but it is pretty clear that it is likely to be people whose incomes are collectively determined, perhaps Government employees, perhaps those organised by what the Government deem to be a militant union.
When we discussed pensions, the hon. Member for Southall rightly drew attention to the considerable development of pensions schemes for many people who are certainly non-unionists. I will not engage in what might be thought pejorative words about executive suites, but the provision of top hat pension schemes is encouraged by this legislation, with the more sophisticated payment of total emolument, if one wants to use these rather ponderous terms, and the trend is increasingly towards fringe benefits for this kind of person. It is perfectly reasonable for the hon. Members for Reading (Mr. John Lee) and for Southall to see in the working out of this policy, if it is ever put into legislative action, a discrimination which will tend to be to the disadvantage of the lower-paid. I think this is a fair inference.
The Secretary of State may say that I am conjuring up a totally false proposition, but if the alternative is that the Prices and Incomes Board is to be diverted to considering the incomes of the odd two or three individuals, the counter-proposition is to my mind even more improbable. I think that the hon. Member for Epping is to [column 352]be congratulated on putting down this Amendment, and I hope that if hon. Gentlemen opposite are not satisfied with the answer they get from the Government they will make history by voting against their own leadership.
Mr. Eldon Griffiths
I wish briefly to support the Amendment, in particular on behalf of a group in which, as the House knows, I have a special interest, namely, the police.
There are three features of police pensions which will make them particularly vulnerable to the Bill if it is not amended in the way proposed. First, many policemen are compulsorily retired at a very early age, owing to the physical nature of the job. There is, therefore, no question in their case of hanging on for a few years until the prices and incomes policy has left us. They have to go at this early age. They have no choice.
Secondly, they receive their pensions at a relatively early age, in many cases by the age of 50. This means that they are sent out on pension at a lower rate than they could have expected to get without this policy, and there is a very much longer period of their lives during which they suffer from this discrimination.
Thirdly, the police pension is relatively generous. This is not, perhaps, the view that I take when I am dealing with the Whitley Council, but it is a relatively generous pension, in large measure because it is contributory. Therefore, to the extent that there is discrimination, it is apt to be one that is more felt by this group.
From the contacts that I have had with the official side of the Whitley Council on this matter, I have formed the strong impression that the Government are not at all happy about the situation, and that there is real hope that they will deal with this question. I hope that when the right hon. Gentleman replies to the debate he will, if he is not able to give us complete satisfaction, at least give more hope—I believe that there is already some—to these people in the public service who are particularly concerned about the present situation.
Mrs. Margaret Thatcher (Finchley)
I, too, would like briefly to support the Amendment, because many of the points have been advanced in some detail, and [column 353]we have learned exactly what is in the mind of the hon. Member for Epping (Mr. Newens).
I think that Michael Stewartthe First Secretary will remember that we have discussed this before, when we discussed the White Paper on the standstill and severe restraint. As I understand it, the position is that people who are on the point of retiring now will already suffer from the period of standstill and the period of severe restraint during which their salaries or incomes have been virtually frozen. Thus, in so far as they retire now on pension, and the pension is determined by reference to a fraction of their final salaries, or their salaries throughout their working lives, they will suffer considerable damage, which at the moment we can do nothing to restore. Without the Amendment, they will suffer further damage. The Amendment seeks to prevent that further damage from being suffered, and therefore to mitigate the consequences on these people.
I suspect that the First Secretary will say that it is impracticable to do it, and very difficult, and so on, because there are so many different ways of calculating pensions. He will probably say that a person who is 10 years before retirement will also suffer if his pension is calculated by reference to one-fortieth of his yearly salary. This is true, but the people who will suffer most are those whose pensions are calculated by reference to three years of final salary, and who are about to retire now.
I join my hon. Friends and hon. Gentleman opposite who have pleaded this case, and I think that we must press the right hon. Gentleman to ensure that as far as possible the effect on the people to whom I have referred is mitigated. The Amendment is wider than was indicated. It could apply not only to pension entitlement, but to existing pension rights. Although it refers to the pension of “any employee” and not that of a former employee, a number working for one company could be on pension.
What is the position of those with rights under occupational pension schemes, which cover about 12 million people, although only about two or three million are drawing the pensions under Sections 379 and 388 of the Income Tax Act? There are also a number of [column 354]gratuitous pensions. These pensions could also be referred to the Board under the 1966 Act, because they are “other kinds of income” . We asked about this position in discussing the White Paper on severe restraint. Perhaps the right hon. Gentleman would make it clear that, if any company wished to put up the pension of former employees, it would not be referred to the Board.
This should not be done, as these people must suffer a considerable drop in income in any even event. For those on pension every extra £ or few shillings contributes directly to a standard of comfort or standard of living. I hope that the right hon. Gentleman will be forthcoming both on the calculation of pension entitlement—enabling us to mitigate the effects on those whose entitlement is still being determined—and with the assurance that, if any firm wishes to put up occupational pensions which are being drawn, there will be no reference to the Board.
Mr. M. Stewart
The speeches have been made with knowledge and feeling in this debate. The hon. Member for Finchley (Mrs. Thatcher) said that I could point out the great procedural difficulties of complying with the Amendment, but I do not propose to do that, although it would involve a thorough search of pension schemes and probably the alteration of a number of Statutes. But even those formidable difficulties would not be sufficient reason in themselves for refusing the Amendment.
There are, however, difficulties which have not been fully understood. First, I fully accept what has been said about the position of those affected by the stand-still, but the Amendment does not and cannot affect them. We must ask what group of people could be affected and in what context we are now considering the pension problem. It is quite different from that of people who have been hurt under the standstill which is now coming to an end. Implicit in the Bill is that any agreement should be notified before it is negotiated, and employers and employed are asked, in deciding whether to press a claim or make a settlement, to have regard to the criteria prevailing during this period, which are, of course, different from and more generous than those of the past. [column 355]
The only groups of people to whom this Amendment could apply would be those who had agreed with their employers on a settlement which was, in fact, out of line with the criteria which had been explained and which they knew in advance. If they had done that and if, as a result and following a reference to the Board, a standstill Order had been made in their case, if this Amendment were made it would apply to them but to them only.
Contrast their position with a group of employees whose employer had declined to make an agreement in conflict with the standstill. They would not benefit from this Amendment. Once again, this would be the kind of Amendment were anybody—any group of employees or employers—who had agreed, without pressing things to the point where the standstill Order was made, to respect the criteria that prevailed during this period, there would be no question of benefiting from this Amendment. The only group who could benefit from the Amendment would be those who first endeavoured to make a settlement but contravened the criteria, and in consequence had a stand-still Order made against them. That would not be a position that one could defend.
I have considered, therefore—and I considered this the more as I listened to the debate—whether there is any way round this difficulty. Could one, for example, not only bring into pension calculation a definite increase that had been agreed and then disallowed by virtue of a standstill Order, but also start working out what increases people might have got and what increases their employers might have agreed to if it had not been for the whole tenor of the policy and the whole nature of the economic circumstances in which we are now living? I have regretfully come to the conclusion that really that would be an impossible task.
Do we not here meet something that is inherent in all pensions problems? If the man's pension is calculated, as some are, on the average of, in some cases, the last three years of his salary, it will be apparent that somebody who had the ill [column 356]luck to reach the end of his working life during a period, for any reason—whatever Government action might be—when money wages were not tending to rise, would be in a worse position than somebody whose last three years of working life occurred during a period when money wages were decidedly going up. That is the real anomaly about which hon. Members are complaining.
That could not be remedied by an Amendment of this kind. Remedies might be sought in other ways. For instance, some might argue that this indicates the unwisdom of calculating pension solely with reference to an average of the last few years of working life—although, of course, there are arguments in favour of doing it that way; but it seems to me, however one argues this, that one cannot come to the conclusion that this Amendment remedies what is the real nature of the problem.
All the Amendment would do would be to produce what I suggest is the unsatisfactory result that people who had accepted the criteria would not benefit and that people who had tried not to accept the criteria and then had been required to do so would benefit. It is possible, as the hon. Member for Oswestry (Mr. Biffen) suggested, that the employer himself might decide that if there were groups of his employees who were likely to be specially hard hit by this, he might take action to remedy it. It would be quite wrong of me to say anything that would encourage retrospective payments, but they would definitely not be illegal.
I find it difficult to answer completely the question asked by the hon. Lady, which summons up rather hypothetical circumstances. Her question of whether certain pensions would be referred to the Board in certain cases is rather complicated. So far as I can answer such a question off the cuff, I must reply that I cannot envisage circumstances in which it would be right to refer such an increase to the Board. I am afraid that that is as far as I can go.
Mr. John Page
I followed most clearly the points the right hon. Gentleman has made and see the snags in the Amendment. Would it be within the spirit of Government policy for an individual who has not received an increase [column 357]in the last year before retirement to come to an arrangement with his employer to receive a pension on the basis that he had received such a payment? Would that be something that the right hon. Gentleman would advise?
I could not possibly advise it. I cannot say more than I said in reply to the hon. Member for Oswestry, that it is clear that the Bill does not make that illegal.
What does that mean?
It means exactly what it says. One can imagine a great many courses of action which are not illegal but which we would not necessarily advise people to pursue.
Mr. Eldon Griffiths
It is one thing for a private employer to take the view that an action is not illegal, but it is a very different matter for the official side of a Whitley Council. It would require rather more direction than the right hon. Gentleman has given.
I could not advise this course of action. That is plain enough. I remind the House that one of the things we must keep in mind in the whole argument about prices and incomes is that in the end what matters to all is the real value of the money they receive. If, as a result of not being as restrictive as circumstances oblige us to be, we greatly [column 358]damage the value of money, pensioners will be among those who suffer most.
There has been mention in the debate of letters that hon. Members have received about the policy. I too have received letters about it, and hon. Members may be surprised to learn that some of them cheer me on and encourage me in the implementation of the policy. The one I have in mind now, which represents not an individual but a whole group of people, was from a pensioners' association, which felt that it was to people like its members that the maintenance of the value of money was of the greatest importance.
I hope that the House will believe that I have listened to the debate sympathetically and tried to see if there were a way of dealing with the matter. I refuse the Amendment only because I honestly do not believe that there is, except in a way which would only be enormously administratively difficult. That would not by itself be an overwhelming objection, but it would in addition create more anomalies and injustices than it sought to rectify.
Therefore, I must with regret, but without hesitation, ask my hon. Friends to withdraw the Amendment.
Question put, That those words be there inserted in the Bill:—
The House divided: Ayes 108, Noes 141.