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28 Jan 2003 : Column 856—continued
Mr. Andrew Stunell (Hazel Grove): One of his younger successors.
Mr. Laws: As my hon. Friend says, perhaps one of the Minister's younger successors, or the Minister himself, will have to come back to the House to tell us that he is changing his Department's policy and give us the reasons for that. However, that will be too late for many people who are facing compulsory retirement at 60 now. The Government should get a grip on the issue now and the MOD should change its policy now.
8.43 pm
The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): I congratulate the hon. Member for Yeovil (Mr. Laws) on securing the debate and pay tribute to his efforts in pursuing the cause that he is further pursuing tonight. He has made important points on an issue that I know is of real concern to his constituents who want to continue their employment in the Ministry of Defence beyond the normal retirement age. I am very sympathetic to the difficulties that retirement at 60 will present for some of them, so I want to explain why we have concluded that it is not, at present, in the wider interests of the Department as a whole to make a change in retirement ages.
The Ministry of Defence employs some 89,000 civil servants who work alongside military colleagues at all levels, from the London headquarters to operations overseas, to achieve defence objectives. We need a wide range of skills. Civilians in the Department include engineers, scientists, project managers, logisticians, commercial officers, claims and legal experts, accountants, and IT specialists—I need not go on.
We need people to do strategic planning and to develop policy on the size, shape and deployment of the armed forces. We need people to work on support operations, international defence policy and defence relations, defence diplomacy, the modernisation of NATO and enhancing European defence capabilities. We need people to do science and technology research and management, to acquire and support equipment for the armed forces, and to do logistics support for the armed forces. Other functions include finance, personnel and contract management. We are a large, complex and diverse organisation.
Ensuring that we have the right people with the right skills in the right place at the right time requires a personnel strategy that recruits suitable people, trains and develops them, deploys them, rewards and recognises them and manages their performance effectively. Retirement also forms a key part of that strategy, as it has a direct influence on recruitment, advancement and the availability of core skills, and on our ability to match our work force to the job that they need to do.
Since 1992, more than half the civilian employees in the Ministry of Defence, mainly industrial skilled and semi-skilled grades and junior support staff, have had the option to retire at any time between 60 and 65. The remainder, mainly those in professional and managerial
grades, have a normal retirement age of 60, although extensions beyond that age are allowed exceptionally where there is a business need to keep someone on for a short while. There are good reasons for this difference, based on the Department's needs for different skills, and the recruitment and retention position in our many different grades and occupational groups. That does not lend itself to a one-size-fits-all solution.
Mr. Laws: Is the Minister sympathetic to looking at the position of people who receive a recruitment and retention allowance or premium? They are clearly valued and needed by the Ministry of Defence. Could not they be given particular attention, given that they do not meet the criteria that the Minister listed?
Dr. Moonie: The hon. Gentleman raises an interesting point. I shall describe in a moment how we sometimes allow people to stay on, and hope to show how the circumstances that he set out are covered by present policy.
In 1999, the Government published their code of practice on age diversity in employment, and Departments were asked to review their employment practices with a view to implementing any changes by 2005. At the Ministry of Defence, our review has been of the case for giving those who have to retire at 60 the option to work to age 65.
The review was very thorough. We examined the business case, the impact on promotion and careers, on our diversity policies and objectives and on pay bill and redundancy costs. Our conclusion was that we should not make a change at the moment. I should like to explain our reasons for this.
Our starting point was the business needs of the Department. We concluded that there was no compelling business reason to raise the age of retirement to meet the Department's needs to keep people in employment whose skills we would otherwise lose. We have pockets of recruitment and retention difficulty, and some isolated skills shortages, but they are not necessarily of the kind that can be remedied by retaining staff beyond the age of 60.
Of course, like other employers, we face a challenging recruiting climate, with a reduced number of younger people becoming available for employment. The 16 to 25 age group will decline from its 1991 level of 16 per cent. of the population to 12 per cent. in 2011. However, keeping staff at the end of their careers is not a substitute for recruiting.
Retraining forms an important part of our strategy. It is vital that we are ready to equip employees of all ages to cope with new demands and challenges, but we need also to attract people who can bring with them new skills. Our retirement policy therefore needs to sustain a throughput of people to create the headroom for recruitment.
It is particularly important that the Ministry of Defence competes successfully in its traditional recruiting area to address a worrying upward drift in the age of our work force. The Ministry of Defence has a markedly older work force than the rest of the civil service: our age distribution peaks in the age category 50
to 54, whereas the rest of the civil service has a peak at 35 to 39. Nearly half of the Ministry of Defence's staff are over 45, with only 22 per cent. under 35. That compares with 30 per cent. under 35 in the public sector and 41 per cent. in the UK labour force as a whole. Only 10 per cent. of our junior managers are under 30. The peak age of staff in our key middle management grade has risen from the mid-40s to the mid-50s in the past decade.That age profile is a result of the reduction of about 40 per cent. in the size of the civilian work force since the early 1990s as a consequence of the changed international security situation. The achievement of that reduction by natural wastage and voluntary redundancy has meant that we have undertaken comparatively little recruitment over many years.
I should make it clear that nothing that I have said should be taken as implying that, as a Department, we do not value the contribution that older people make to the defence effort. In many areas we could not do without their experience and commitment and, as I have explained, a majority of our staff can already work to the age of 65. However, the health of any organisation depends upon maintaining a balanced age structure, with a regular intake of new blood and good opportunities for people to progress.
Mr. Laws: I am most grateful to the Minister for giving way a second time. Can he confirm that by 2006 his Department will have to scrap compulsory retirement at the age of 60 because of the European Union equal treatment directive?
Dr. Moonie: I shall come to that point later in my speech.
Raising the retirement age would simply exacerbate our current imbalance. That brings me to a further reason for making no change at present. If we were to keep people in employment for longer, there would inevitably be an adverse effect on the opportunities for advancement and promotion of people in lower age groups. Our review included some detailed statistical analysis and modelling, which highlighted in particular a worsening of promotion prospects at our key middle management level. That would be damaging to one of our key personnel priorities: refreshing our work force by bringing in and bringing on talented people at all levels. It is important that decisions that improve the lot of one section of the work force are not at the expense of others: we need to have regard for the interests of everybody, whatever their age.
Our final consideration was the potential additional cost to the defence budget. At a time when the MOD faces continuing manpower reductions as we find new and more efficient ways of delivering defence capability, it would make little sense to allow some people to go on working beyond the age of 60 while paying redundancy costs to encourage others to leave below that age. That would not be a sensible use of taxpayer's money.
I recognise, of course, that a number of MOD employees have compelling reasons for wanting to work beyond the age of 60, and would undoubtedly be capable of continuing to deliver valuable service but at present cannot. I also understand that, for some, retirement at 60 can bring a degree of hardship, and I
naturally regret that anybody should find themselves in that situation. I have to say, however, that the retirement age of 60 has been in place in their terms and conditions of service since the early 1990s, and there has thus been time for them to make supplementary pension provision.Those people who are aware that they will have fewer than 40 years' full service by the time that they retire have the option to buy added years of reckonable service, which increases the individual's pension and lump sum from the permanent civil service pension scheme on retirement, and the benefits payable to their family after death. Should an individual decide to buy additional years, they will receive tax relief on the payments.
In an ideal world I would, of course, want to extend the option to work beyond the age of 60 to anybody who wanted to do so. That has not been an easy issue for the MOD, and we have had to make very fine judgments in the light of a wide range of factors, many pulling in opposite directions. It is a matter of balancing the needs of the Department, our work force as a whole, and those who aspire to work for longer. We have concluded that for the moment our overriding priority must be to redress our age imbalance and to improve the upward flow of talented people. Moreover, maintaining a steady flow of recruitment and upward movement are the key levers in our strategy to widen diversity in the MOD by increasing the numbers from under-represented groups who join and reach more senior levels in our organisation.
However, the legislation that the Government have undertaken to have in place by 2006 to implement the EU equal employment directive on age discrimination will have wide-ranging implications for age retirement. It will extend the facility to all civil servants to work up to the age of 65. In the particular circumstances of the
MOD, it makes real sense for us to plan for our changes to happen in parallel with the implementation of that legislation rather than to rush into a change now that would not serve the wider interests of the Department.That will also enable us to take into account the package of reforms set out in the recent Green Paper on pensions to encourage proper pension provision by individuals and employers and to encourage greater participation of older workers in the labour market. That included a proposal to raise the pension age in the civil service from 60 to 65, and we shall therefore at the same time be able to bring pension age and retirement age into line.
In my view, the key to all this is to encourage flexible retirement alongside longer working lifetimes. We must in future be able to provide options for people to retire at a time that meets their particular circumstances, and to step down or go part-time as they approach retirement. My Department will look at that as part of its further review, with a view to introducing flexible arrangements that meet the needs both of our business and of the people who work in it.
I hope that the hon. Gentleman will see from what I have laid out tonight that this is a complex decision that the Ministry of Defence has had to take and not one without some regret on my part. Having looked carefully at the issue within the Department, I feel that at present we have no option. When the Government introduce legislative changes that mean that we must comply with the new directive, of course we shall do so, but we need the additional few years that that delay gives us to correct the age imbalance in our work force and to provide proper opportunities for all of them for the future.
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