WEDNESDAY 18 DECEMBER 2002

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Members present:

Mr Bruce George, in the Chair
Mr James Cran
Mr David Crausby
Mr Mike Hancock
Mr Gerald Howarth
Mr Kevan Jones
Jim Knight
Syd Rapson
Mr Frank Roy
Rachel Squire

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Memoranda submitted by the Ministry of Defence

Examination of Witnesses

DR LEWIS MOONIE, a Member of Parliament, Parliamentary Under-Secretary of State and Minister for Veterans, MS LIZ McLOUGHLIN, CBE, Director General, Service Personnel Policy, Ministry of Defence, and MR ALAN BURNHAM, Chief Executive, Veterans Agency, examined.

Chairman

Minister, welcome. Sometimes when you are appointed it is, "First the good news and then the bad news. The good news is you are going to be a minister. The bad news is you are going to have all the difficult issues in your remit"!

(Dr Moonie) I seem to attract them.

I think most of them are coming up this morning. Thank you very much for coming along. Please do not feel any sense of guilt about farming the questions to other people to your left or right, or at least three rows back. If you want any assistance from those representing the special interests, I am sure they would be more than delighted to give you advice too! We will start off with the first question on timescale for new pension and compensation arrangements. Are you still confident that the timescale for the introduction of the new pension and compensation arrangements will not be held up by the delays that we have experienced so far? Any further comment on the timescale?

(Dr Moonie) From what I can see the procedures are on track to be brought in on the expected timescale of 2005/6. I do not think the past delays in the process (many of which were related to having longer periods of consultation and I think were, therefore, reasonable) should have a bearing on the future. The important thing is to try and get the initial stages right and then develop it as effectively as possible. However, I think you would be surprised if any MoD Minister came in front of you and gave an absolute guarantee that anything in the future would be on time!

Are your officials confident that there is no further delay?

(Dr Moonie) Perhaps I should introduce Liz McLoughlin who is Director General of Service Personnel Policy; and Alan Burnham who, I am glad to say, is now confirmed as the Chief Executive of the Veterans Agency.

The Minister said he could not see any possible delays - do you see any?

(Dr Moonie) That is not what I said! I said I could not see any delays relating to what had gone on already. Obviously the scheme is very much dependent on the administrative systems which are brought in.

(Ms McLoughlin) Yes, I think the recent last few months have been spent very profitably. You will have your own views, no doubt, on that. The consultation process has been very productive. We are hopeful that we are now quite near completion, and aim to put the proposals to our ministers collectively very soon. Thereafter there is a fair amount of work to do in some respects on legislation and some of the instruments. There will be a lot of detailed work to do - you touched on that the last time you met - and it is important to get that right. So we have got a fair way to go. Clearly, as we said to you last time, our assumption at the moment is that the new pension and compensation schemes would be delivered through our new Joint Personnel Administration Systems. I think you expressed a view of MoD's ability ever to deliver major IT projects to cost and time. Clearly, we will be looking to see whether those timescales are still on track. At the same time then as doing detailed work, we will do some fallback options if there is undue delay on the delivery of JPAS, as we call it, which might lead us to have a different course of action.

The Forces Pension Society gave a note to us and indicated that the Joint Personnel Administration System "may have difficulty in meeting its own target date because of lack of resources". Is that a justifiable complaint? You are confident, I presume, that the Joint Personnel Administration System will be introduced according to schedule? Is it adequately resourced?

(Dr Moonie) The problem with complex systems like this is not one of resource. We are prepared to put the resources in which are necessary to do it. We are taking basically what is an off-the-shelf scheme and tailoring it to our own needs. You are talking to somebody who has had 25 somewhat bitter years often in bringing in new computer systems, but starting with an off-the-shelf system does give us an advantage. I would be loath though to give you an absolute guarantee that we would not run into problems with it, because these things can arise; but it is not a matter of resources.

That is unusual for the MoD. About the only pension scheme rattled through quickly was the pension scheme for senior civil servants in the Ministry of Defence. When we produced our report in May the MoD told us it was expecting to be able to present revised recommendations to Cabinet "by the autumn". In your memorandum we have just received you now say that "proposals are being revised and it is hoped to seek approval by departmental and other interested Ministers early next year". Can you amend slightly or add to what you said. Are we going to see it early next year, January or March?

(Dr Moonie) The reason for the last delays have been doing extra work with the major stakeholders or representatives like the Forces Pension Society and the British Legion to try to tidy up some of the individual proposals. I would expect it to be coming to us probably at the end of January, beginning of February; but that depends very much on securing approval from the other appropriate other departments. I would be very surprised and disappointed were it not in our hands and published by the end of February.

Rachel Squire

Minister, referring again to the views of the Forces Pension Society, it is their view that the Ministry of Defence uses the situation in the private sector to justify inadequate pension conditions for the Armed Forces. Do you agree?

(Dr Moonie) No, I do not agree, in brief. Perhaps I had better expand on that. We do use them as comparators, and I think that is perfectly fair. What are the functions of a pension scheme? One is to provide a fair reward for those who have given you service; and the other is to attract them into service in the first place. Clearly, if your scheme becomes more attractive than comparable schemes, where people are making choices, then it will enhance their decision-making, hopefully, in our favour. I think it is perfectly reasonable to use them as a comparator.

Following up on that, you think it is important, you would say, that the Armed Forces Pension Scheme seems favourable in comparison to private sector schemes?

(Dr Moonie) Wherever possible, yes. I would also like to think that it would bear a comparison with any other public service scheme as well. In fact, the norm in the private sector, which seems to be moving away from final salary schemes, has little bearing on a public scheme, where there is absolutely no proposal in mind to move away from that for any public scheme. Given the overall level of benefits for people, I think it is reasonable to make that comparison.

Your view is clearly that it is the comparison of maintaining what you see is a favourable scheme, that is the value of comparing it to private scheme pension schemes?

(Dr Moonie) I think it is. When people in their late teens and early 20s are joining the Armed Forces I suspect that, up until very recently, they have not paid too much attention to the pension arrangements, like most people of their age. It may well be that the great concentration on pensions issues in the public eye over the past few months has concentrated their minds on it, and will make them look much more closely at the overall package of benefits, rather than the bottom line salary from the start.

Mr Frank Roy

Minister, just carrying on in the same vein, the MoD claims that the benefits offered by the AFPS are "better than average and in a number of respects the most generous". You touched on that, but what evidence do you have of that which you could give us?

(Dr Moonie) If I could refer to one of the many bits of paper, and there are lot more than you would think, sitting in front of me here. In one of our memoranda we actually did have a small table, which was brought to my attention yesterday, which goes over it - things like normal retirement age, obviously; because of our retirement age that is looked on as a benefit rather than a disadvantage of the scheme, and is pretty well unique at the age of 40. It is a non-contributory scheme, although I have to say the Armed Forces Pension Review Body do take these things into account when they calculate salaries. These are all put in the upper levels of pension schemes. The pension and lump sum accrual rates again are in the upper track.

What is that as a comparison against?

(Dr Moonie) As a comparison against other public sector pensions, which I think is the appropriate comparator.

That is certainly not the view of the Forces Pension Society. I am quite sure they will speak for themselves. I am just worried when I read from a bland statement that, "We're better than average", or, "better than others".

(Dr Moonie) I would be disappointed if that had been made as a complacent assurance; but we have done the work to compare what we do with other schemes. As I say, the table does show that on virtually all of the individual aspects of the scheme ours is a very good scheme indeed.

More specifically, do you consider that the level of abatement as calculated by the Government actuary, which is currently at 7 per cent, is a fair reflection of the value of the pension to individual service personnel?

(Dr Moonie) I think I do; but it is really not for me to say that. This, again, is a matter for the pay review body, and they guard their independence from us very jealously. There is actually a decision which they made and they in general, from what I know, are satisfied with the level of abatement that is used.

Mr Howarth

We understand, Minister, you are considering extending the period of qualifying service for pensions and deferring the age from which preserved pensions are paid. Can you confirm that this is so?

(Dr Moonie) I think it is reasonable to confirm that we have been considering that; and that we would like to see people capable of accruing a larger pension, yes.

Are you also considering increasing the retirement age from 55; that seems to be the policy elsewhere?

(Dr Moonie) Not in the Armed Forces it is not. The retirement age will remain 55.

You have no plans?

(Dr Moonie) We have no plans to change that. That is a terrible thing for a minister to say, because that usually means we are going to do it tomorrow! I can assure you in this case that is not the case. We do not intend to raise the retirement age.

Mr Hancock

With no exceptions?

(Dr Moonie) There are a few exceptions just now, actually, medics for example. There is no doubt that in the past medical people in particular, compared with people outside the Service, have suffered because of some of the pensions. I think in general they are allowed to serve later. Lawyers as well, who would want to take them on. Chief of the Defence staff and one or two others but, by and large, the rule will be 55 and that will remain.

Chairman

Because of the shortage of personnel there have been people two or three years over the retirement age because we were so desperate to find people to undertake the tasks. Would there be any effect on their pensions if the special status is deployed to allow them to stay on, if it is not too physical a task?

(Dr Moonie) In the legal sense of the rules of the pension scheme, I am not sure.

(Ms McLoughlin) I think we are perhaps talking about two different things. One is the normal, general, usual age of retirement. The Minister has already said that already we have flexibility at the moment for people to go earlier or later, maybe according to their skills. The age at which pensions are payable - we have no plans to change the age of 55 as the age at which pensions are payable. The extent to which somebody might be able in future to serve beyond 55 and go on accruing towards a pension I think would depend very much on their length of service.

Mr Hancock

You would have to change the whole scheme?

(Ms McLoughlin) The new scheme is based on accruing over 35 years to an age of 55. All I am suggesting is, if a late entrant had been unable to accrue those 35 years then there would be flexibility for that to go beyond.

Chairman

It has to be, I would have thought, because it is very difficult for anybody, unless they were boy soldiers, to qualify for retirement at 55.

(Dr Moonie) It is possible to buy the AVCs, of course, and up your pension entitlement closer to the maximum level. You make a perfectly fair point there. Service in the Armed Forces is a young service. People have to be fit. They have to be fit for the task; and they have to be fit for their duties. The scheme is generous, not just because we want to be generous - although we do - but because it is to our advantage. We do require young, fit people; that is one of the reasons why we obtain the immediate pension as well. It is a fact of life in the Armed Forces that you do have a premium on fitness. Within that I can see areas, for example specialist NCOs, where there are shortages in the field, where you might well want to encourage them to stay on longer. That is really stepping outside the parameters of your question, Chairman, but we would try to be flexible in the way we do this. It is done both for the benefit of our people, as Liz McLoughlin has said, but also for the benefit of the Service.

Mr Hancock

How does the Government recognise its special responsibility to the Armed Forces in our society; and how do you feel that the pension and compensation benefits available to service personnel actually deliver that commitment that the nation has to them?

(Dr Moonie) In general, first of all, I think the Ministry of Defence has to recognise that it is important for us to retain our Armed Forces, and that means giving them a decent overall package; it involves pay; it involves pensions; it involves guarantees of what will happen to them if they are injured or fall sick; it is housing; a whole host of things. Many things, of course, have been largely hidden, things which we have not concentrated on in the past. As you well know, we are putting a lot of effort into people, and the specific role of pensions and compensation. Firstly, on the compensation side, people must feel reasonably secure that if they become ill or are injured as a result of their service, or not, that they will be cared for; and the scheme should be generous enough to ensure that they are properly cared for. As regards pensions, we have to satisfy both the needs of the Service and the needs of the individuals. I think the way we do that is by trying to make our scheme one of the most, if not the most, attractive in the public sector. That must be our guiding light.

I do not know if it has been brought to your attention, but it has been brought to our attention by the Royal British Legion, that during negotiations they had with MoD officials they were told that there was very little difference in the MoD's view between the Armed Forces and the emergency services, the blue light services, fire, police and ambulance. What is your reaction to that suggestion?

(Dr Moonie) There is, of course, a difference between them. There are similarities as well. At the end of the day, it is our soldiers, sailors and airmen who are required to put their lives on the line as part of their job; and they are required to do it as opposed to risk their lives, which is different.

You would not share that view?

(Dr Moonie) There are very definitely some qualitative and quantitative differences between the two. There are similarities as well - of course there are - but I would stress the differences.

You would suggest that that is not something the MoD officials in negotiations should draw comparison with?

(Dr Moonie) I think it is legitimate to draw a comparison with them because, as I have said, there are similarities with them as well. It is not a case of black or white.

Is the Head of Personnel aware of the suggestion that has been made by the Royal British Legion?

(Ms McLoughlin) I was not, Mr Hancock, until you just said it. Perhaps I can make a few observations on it. It would depend very much in the context in which this conversation was held. I think if they were talking perhaps about the normal age of retirement, some of the physical demands made on our people are also considerations in the fire service and the police. If they were talking about physical risk, you can draw some comparisons so I totally agree with the Minister; but comparisons do not take you all the way. Sitting at the heart of what I am partly responsible for, the Armed Forces' overarching personnel strategy, is a recognition that we basically employ our people on a 24 hour, seven day a week basis throughout the year. We have special responsibilities to them and their families. There is no other employer who has the same responsibilities to the individual and his or her family. As the Minister said, we do not ask anybody else to exercise legal force; and we do not ask anybody else to die, not as an accident but as maybe a part of an operational situation. I think all of those are well recognised. I am not saying we are perfect, but those certainly underpin the whole range of terms and conditions of service that are so important to our people.

Would you say that then carries on into the pensions; that that recognition is not only while they are on active duty as members of the Armed Forces, but the pension and compensation schemes actually reflect that after they have left the Service. There is a subtle difference between Armed Forces pension and compensation schemes, as opposed to other public service pension and service schemes?

(Ms McLoughlin) I think I would say that the pension scheme is part of the overall terms and conditions, the package of employment, and it is important that our pension scheme is fair and appropriate and rewards and recognises the special requirements we have of our people.

If that is the case, why is it then when the case comes up for changes to be made that the MoD will not support retrospective changes, so that there can be beneficiaries from previous service to be included? The excuse given for not doing that is because it would open a Pandora's Box when it comes to other public services, because they cannot be treated differently. You have just told us they are different. I want to know why you do not recognise that and allow retrospective benefits to be paid to Service pensioners?

(Dr Moonie) The allowing of retrospective benefits is not just a matter for the way in which we regard people who work for us; it is a matter of the law. The general advice is that retrospection, with very few exceptions, cannot in terms of a normal retirement scheme be applied to one part of the public sector without opening the door to others.

You cannot have it both ways?

(Dr Moonie) Yes, you can.

I do not think you can, can you? Your personnel do not think that, do they? They feel that there is a recognition that they are different; that their terms of employment and pension and compensation schemes are different. If you examine it you can see it in the accrual rate: the way in which the whole system works is different. How can you then suggest that you can make retrospective payments because the schemes are all the same in the public sector, when they are manifestly not?

(Dr Moonie) I did not say they were all the same. I said there were exceptions which we would take. There have been one or two in the past. In general, where you are talking about general conditions, these conditions must be applied against all these schemes. It is not a matter of not recognising - that is done through the overall benefits of the scheme. I think it would be quite invidious to select out one group of people who have gained a normal retirement pension and give them additional benefits retrospectively and deny these to others who have also given service to their country through public services.

You have already said that these people are different because they are the only group of people employed by the nation who, as a matter of duty, have to put their lives on the line as part of their career involvement.

(Dr Moonie) Absolutely.

I cannot understand how a change in pension and compensation affecting that very specific group of people would have to be reflected across the whole of the public sector. What possible reason could there be?

(Dr Moonie) I have just told you what the reasons are, Mr Hancock. The reasons are that there are certain laws in this country, such as the Convention on Human Rights, which now apply. People are entitled to be treated equitably. Exceptions can be made, and are made, and they underpin the statement that we regard our people differently. You cannot make widescale exceptions to that without opening the door to other schemes.

Has the MoD had legal advice on that point?

(Ms McLoughlin) Yes.

(Dr Moonie) We have, yes, and this is general government policy. This is not one junior minister sitting here in front of you expounding on it, I am afraid. The policy is quite clear. The exceptions cannot be made in a general sense; and they will not be made because we cannot afford them.

Could somebody write to the Committee with that advice and tell us what we have had?

(Dr Moonie) I think legal advice sometimes cannot be disclosed in that way.

Mr Hancock: I would like us to have some sort of explanation how people whose lives are on the line as part of their terms and conditions of employment cannot then be judged to be the same as people in the public sector, wherever they might work. If you have had advice that the Services cannot be an exception to that, I think the Committee should be entitled to see that advice.

Chairman

Either send us a version of it, or send us the advice.

(Dr Moonie) We will certainly look at that, Chairman, and do our best to satisfy that. I should point out, saying that people are different surely does not imply that in every single case and in every single possibility you have to look on them as being different. The whole package applies in this case. I think the whole package does recognise that people are treated differently. There will always be individual elements within it which we can find disagreement with.

Syd Rapson

Part of the legacy problems relate to positive reforms, and that is to be recognised, but unfortunately they rarely carry retrospective effect. Increased provision for widows, in particular, has not be retrospective, leaving some of them feeling instead of being the norm they are worse off. That is understandable because they are left behind and others have benefited from it. In the MoD memorandum it explains that "Improvements to pension schemes are not applied retrospectively as to do otherwise would make any worthwhile improvements unaffordable" If a particular pensions reform could be made retrospective at a cost which was not unaffordable, would you consider doing so, if you could?

(Dr Moonie) I am trying hard to think of an example of that. If you look at the past, small marginal changes have been made. It is reasonable to say that where the cost is very small you could look at it. It seems terrible always to come back to money but, at the end of the day, resources are finite, and every decision that is taken carries an opportunity cost for something else. If you spend it on one thing you cannot spend it on another thing. That applies to pensions as it does to everything else. Our government has spent a great deal of time and money on improving the general flow for pensioners. Were I given a choice, I would still say that is the appropriate way in which to do this.

I realise you have not got far to manoeuvre with this and we want to be fair, but is there a figure that says this is unaffordable and you cannot afford to do it?

(Dr Moonie) I cannot give you a specific figure, much as I would like to. As I say, we are always prepared to look at marginal changes; but in general, particularly if this crossed other public sector schemes, the costs multiply so dramatically that they very rapidly become unaffordable.

I feel sorry for pensioners who have been caught out through non-retrospection.

(Dr Moonie) So do I.

Is there any way that you can deal with their grievances, or is it just saying, "Hard luck, there's nothing we can do"; or is there any way in which they can be considered?

(Dr Moonie) There are very few specific ways, given the strictures that apply on us in which that can be done. We can listen sympathetically to what is said; we can make small changes. For example, this year we managed to upgrade the war widows pension for lower and other ranks to the NCO level. It was a very small change, I have to say, but it was not made retrospectively, no. We can make changes, but they tend to be prospective rather than retrospective. Retrospection is a rule which all governments have looked at very, very severely indeed. I try to maintain very good relationships with my pension societies, war widows and other groups. A sympathetic ear and a soft word turneth away wrath. Not always, but one does one's best in what can be very difficult circumstances. I have every sympathy with them, but the government has decided that a line will be held and the line is held.

Chairman

If we could find some examples of retrospection and then you can write to the Treasury and point out the anomalies of their own interpretation.

(Dr Moonie) I am not going to use the phrase "lost causes", but difficult causes have always attracted me. I would be happy to give it my best shot, but with no real expectation of success.

Mr Cran

Minister, you will recall, because I dare say you read our last report on this subject, we took a very dim view of cost neutrality. It was not nearly as dim a view as the Forces Pension Society, which really does take a very dim view - it calls it a straitjacket. The question the Committee want you to answer is, how do you justify that the needs of the Armed Forces can be met within this, as the Forces Pension Society calls it, straitjacket?

(Dr Moonie) This "straitjacket" phrase is being used and no doubt will appear again in the future. There was a straitjacket to apply a "no additional cost per annum". The cost of pension schemes is rising anyway with increased longevity in society. As I said earlier, we have to balance all our decisions on how we apply our resources. Resources are scarce; the demands on them are virtually infinite. There will always have to be decisions made like this. We have had no choice, and I support that decision, although I was not responsible for it at the time. I think we had no option but to try to alter the scheme within its existing parameters. We do not have the resources to do anything else.

We can see, I can see, and everybody can see the question of resources is one key element and I could not argue with you. The question, however, that I was really trying to get to ask was: are you absolutely confident that this will not in any way damage the ability that you must have, given the role that the UK plays, in attracting the calibre of people you need into the Armed Services; because your critics would say that it does?

(Dr Moonie) I think that the new scheme, from what I have seen of it, is an improvement on the existing one; and, therefore, we have no evidence whatsoever that the present pension provisions are in any way a disincentive to people who, despite that, are really trying to make them more attractive. I think the new scheme is better and will be better in many ways. There are substantial changes within the overall parameters of the scheme. I think it is also fair to say that if any savings are made then an attempt will be made to apply those to pay for additional benefits.

I take it you are saying very clearly to the Committee that there will be no deleterious effects on recruitment and retention through the pension fund?

(Dr Moonie) That is a very, very difficult claim for me to make; but I have no evidence to suggest that it would be, and we have been looking at it very closely. Obviously, as I have indicated, young men and women pay very little attention to their pensions provision until they get considerably older. The fact that it does not impinge on their decisions does not necessarily mean it is a negative or positive thing; but just means they have ignored it completely. We are trying to improve and increase the volume of information given to people; and this will be a key feature of the scheme, to ensure that people know exactly what is going on and how it is sold to them as a concept.

It would be true to say, would it not, that cost neutrality has really stifled the range of options open to you, has it not, in terms of any improvements you could have made to the pension scheme; or in terms of any improvements which the Forces Pension Society and others have made?

(Dr Moonie) We would not have been able to make any improvements retrospectively, anyway; they would apply to existing people and future entrants to the scheme. Yes, financial restraints do apply strictures to the way in which we have to behave. There is no doubt about that. I am not going to apologise for it. All governments have to do that. Yes, it would be very nice if we had an open-ended budget where we could have made some wider arrangements, but we did not. I have to defend that.

My final question is simply this: because of the view you have taken on cost neutrality you really have opened yourself to the charge, have you not, that you see your obligations to Service personnel merely in terms of financial obligation; really the minimum you can get away with without damaging recruitment and retention? That is what your critics would say and, indeed, are saying to you?

(Dr Moonie) It is very definitely not that. The fact is all decisions on whatever we do are resourced-based decisions - they have to be. At the end of the day somebody has to put their hand in their pocket and pay for them. That does not alter the way in which we look on our people; we value them; we value the risks they take on our behalf; and we want to give them the very best provisions that we can afford. We believe that our scheme is a good one; and that is why we felt that it could be reformed within the existing budgets we had.

Chairman

Minister, if you are operating within this "straitjacket" are there any examples, and if there are will you tell us, where if savings are found the Treasury tries to claw them back before you have the opportunity of transferring any savings from one sector of the pensions scheme to improve another sector? Do you have absolute power to change within the MoD budget, or do you have to report to your masters first?

(Dr Moonie) Obviously since pensions in general are unfunded, in the sense that they are paid from taxation, then the Treasury have a role in all of these things. All I can say to you is that we will attempt to deploy all the savings which are likely to be made to produce improvements to the scheme. I can give you no absolute guarantee that we will be able to do that; but we will be substantially successful. As I have indicated, of course, the cost of these schemes is rising anyway, and the Treasury is well aware of that.

If the Treasury does claw back money from the existing budget I am sure you will be only too pleased to inform us so we can write to the Treasury?

(Dr Moonie) I think it would become very clear if that happened, Chairman.

Mr Hancock

Is the pension fund within the MoD ring-fenced? For example, if a high proportion of servicemen never draw a pension, and leave before for various reasons, the money that has been paid in on their behalf what happens to that?

(Dr Moonie) Money is not paid in; it is not done like that. It is an unfunded scheme.

It is completely unfunded?

(Dr Moonie) It is paid for out of current revenue.

As and when they retire?

(Dr Moonie) Yes, so in that respect it is an open-ended scheme. The earlier they retire and the longer they live, the more pension they are paid.

Mr Crausby

We have touched on this to some extent, and the Chairman asked a question about clawback. I guess it is difficult to be completely cost neutral, absolutely cost neutral. The Forces Pension Society have expressed some concerns about that. They are concerned that money saved in one area might not be ploughed back into pensions. I accept that it is difficult to be completely spot on, but are they justified in that; in the sense that the further work that the review team is doing on the final proposals, we understand, includes ideas for a further reallocation of resources. Can you confirm that the government will use the outcome of this particular further work as an opportunity to reduce the overall cost of the scheme and then turn the review into a savings exercise? I accept that no-one expects it to be better than cost neutral; but I think there will be some very big concern if it was substantially worse than cost neutral.

(Dr Moonie) I do not think it would be substantially worse anyway. Obviously this is a matter for discussion with the Treasury once the savings are identified, and once we see what we want to spend them on. I am reluctant to go into details of a paper of which I have only sketchy knowledge at present, until the full thing is put to me next month. I am quite sure we will be having other sessions on it, and I am happy to defend whatever decisions are made. To the best of my ability I would say that any resources which are spared will be devoted to improving the scheme. I cannot give you any guarantees.

I would not expect any guarantee of these things, and I would not expect a guarantee on the margin. As I say, I think it is absolutely impossible to get cost neutrality right. I think it is important for people to expect that the principle would be not to make savings.

(Dr Moonie) The principle would be that wherever possible we employ any money we have available to make the scheme more attractive.

Mr Jones

Minister, the internal MoD review of the Taxation of Armed Forces Invaliding Pensions that we have seen says that there are something like 1,200 cases where taxation was improperly levied. The recent internal review links the errors between 1995 and 1999 with management failures. Why was this allowed to exist for so long? The review blames poor management for some of the failures. Can you tell me what action has been taken since to improve the situation? Can I ask a supplementary to take the wind out of Gerald's sails - what is actually being done with the individual cases in terms of people with grievances still ongoing?

(Dr Moonie) The period of the late 1990s was a very difficult ones for the pensions administration in the MoD. There were substantial change with regard to relocation; changes to top management; and, at the same time, substantial downsizing in the number of staff involved. A relatively small number of managers had to take on a very great deal of responsibility. I do believe sincerely that this was an undue burden placed upon them and allowed mistakes to continue in practice which should not have done. This was, as you have said, identified in 1999 and we took action from then on to correct it; although it only become widely available and public earlier this year, but that action was and is still being taken to remedy that. With regard to individual managers, I think because of what I have said, it would probably be invidious to single out individuals. We will, however, look at it, if nothing else, to see and make sure the important thing takes place - which is that in future we do things better.

I asked what changes have been put in place, and what is actually happening in the individual case?

(Dr Moonie) They are being dealt with as quickly as possible. There is still a huge number of records to go through. As has been pointed out in the report, which I know you have all had copies of, it is vital it is done properly, because it such a complex area and it is possible still to make mistakes in it. It is done by experts. It takes a long time. We are going to spend six months over it. The vast majority of the errors have now been identified and payments have been made. We will do our very best to ensure that all others are made as quickly as possible; and try to prioritise older cases, for example. I have to say though, for many of the people who get in touch with us about their records, because it was such a long time ago records are sketchy, it is a very difficult exercise. I think my people are doing very well indeed and would compliment them on it.

Mr Roy

Minister, the 1,200 cases of people improperly taxed, and probably more, I am sure you will agree that those people at this stage have been feeling ripped off and quite angry and also very concerned that if mistakes have been made with them they do not want it to happen in the future, because sometimes that can really burn into people. What steps are you going to take to make sure that there is closer cooperation amongst the agencies to make sure that they do speak to and understand one another and are able to move on?

(Dr Moonie) It is an interesting point. As you know, the first thing we have done is appoint a Veterans Minister who actually has responsibility clearly defined for seeing that this thing takes place. I am accountable for the way in which things happen from now on. We have a situation here over a period of many decades where three individual haphazard service-based schemes with different parameters grew up, with the Veterans Agency, and the War Pensions Agency, responsible for compensation payments which was separate and actually administered by another department from about the 1940s onwards. It is not a situation which is conducive to good management. However much we may talk about joint working in government, it is much easier to work if you are doing it from within one department. Bringing the War Pensions Agency into the MoD was a start. What we have to ensure is that there is effective management all the way through the system; that we have a decent system that operates (and, quite frankly, the quicker we get a proper computed based system in and working the better), that the staff are properly trained, properly supervised, and the proper audits are carried out to make sure things remain accurate. Some of the errors are random errors. They are errors where people have been paid, and have been given tax free pensions when they should not have been. Rather than any systematic error on one side, there were general errors taking place in the system. I believe now that effective management has been, and is being taken to ensure that does not happen again. Most of the cases have been identified. I have a table here to look at. We have reviewed 126,000 files, of which roughly 125,500 were correct. We still have a great many files, 13,000 to go through, but these are the ones we have to look at in detail.

You look at those files in detail - do you contact those people to say, "Just as a matter of course, we think you should know we have looked at your pension"; have you done that?

(Dr Moonie) No. The minute we identify an error we would let somebody know.

I understand you would do that. At the same time, once you identify that a person's pension is fine, do you also reassure those people?

(Dr Moonie) I am not sure.

It seems to me there are an awful lot of people out there who do not know you are doing the review in their particular case. If you were reviewing my case ten weeks ago and I was fine, I would like to be told you had done it and it was fine.

(Ms McLoughlin) Some of the reviews will be as a result of enquiries that were invited by advertising; and to that extent the enquirer clearly would be told the result.

The Minister has just told us he has done 120,000-odd. Have you contacted those 120,00-odd people to say, "We have looked at your case and, as a matter of course, this caring government has looked at your case ....."

(Dr Moonie) No, we have not. Most people are very well aware of whether their pension is taxed or not taxed, and whether it is being done properly or not. Frankly, we have seen no need to do that. Concentration has been on rectifying errors.

Surely, there is a need to be proactive instead of just reactive when there is a problem? Surely it is a classic case where you could be proactive just to reassure people that everything is fine?

(Dr Moonie) I think if we had any great feeling from our pensioners that they were concerned we might have done that, but we have not. It is an interesting suggestion and possibly a valuable one. I think we should look at that.

Chairman: The concept that MoD does things right is well worth transferring to the rest of the world and should be done more often!

Mr Howarth

Minister, can I follow on with this line of inquiry. I represent an individual case on which you and I have corresponded about Major Lee Perkins. Quite clearly in this case here is a man who was discharged from the Army in 1959 on medical grounds; he retired on account of disability on 28 February 1959. As a result of Major Perry bringing to light these blunders which have occurred over several governments, several administrations, he then felt he had an entitlement. I cannot understand why, when the pensions appeal tribunal has found in his favour, the results of your discussions with the Inland Revenue have meant that he is not entitled to claim back the tax which he has paid on that war disability pension. Notwithstanding the provisions of the Income and Corporation Taxes Act 1988 which, for the benefit of those perhaps not immediately familiar with it may I quote from section 315; "(1) Income from wounds and disability pensions to which this sub-section applies shall be exempt from income tax and shall not be reckoned in computing income for any purposes of the Income Tax Acts. (2) Sub-section (1) above applies to- ... (b) retired pay of disabled officers granted on account of medical unfitness attributable to or aggravated by naval, military or airforce service". That seems to me to be crystal clear. His case seems to exemplify the principle that seems to be wrong here, which is that the MoD, perhaps in cahoots with the Inland Revenue, are seeking to find every reason why these men should not recover the income tax?

(Dr Moonie) I can assure you on that last point that is not the case. We would do, and in fact always have done, our best to ensure that everybody gets what they are entitled to. I am reluctant to go into too much detail on Mr Perkins as an individual case, but what I can say is that we argued it very strongly with the Inland Revenue and their rules, because of the fact that when this award was initially made it was made at zero per cent, the award was a technical one in the sense ----

I do not think it was. I think it was subsequently found, but he is not ill now. He was clearly discharged.

(Dr Moonie) The fact is though that his pension was calculated at the level of zero. Where that occurs, the Inland Revenue say that you are not entitled to make the rest of the non-attributable pensions tax free.

Mr Hancock

But it does not say that, does it, in the legislation? It does not say there is an exemption. If you are dismissed from the Service because you are unfit, and that has been generally recognised because of your service, it does not say in the legislation that of course if you get no enhancement for that, it is zero, that you will have to pay tax on that pension, does it?

(Dr Moonie) I have to say that this is a matter for the Inland Revenue, Mr Chairman, and not for me. We have taken it up with them, they are their rules and that is how they stand.

Mr Howarth

But, Minister, my point is that we have got at least 1,200 cases out there, and there may well be many more, of people who have served their country who are operating in complete confusion as a result of a disagreement between two government departments.

(Dr Moonie) No, they are not.

Well, the Ministry of Defence wrote to Major Perkins ----

(Dr Moonie) That is one person, Mr Howarth.

Well, this is someone writing on behalf of the MoD and this is in 1998. "It is now clear under section 315 of the Income and Corporation Taxes Act 1988", the paragraph I quoted, "...any Armed Forces pension payment should be tax free...(reading to the words)...where this has resulted from service". The point at issue here is that over a period of time there has been a degree of confusion and it is not fair that those who are in your charge should hear one message from your Department which is then contradicted some years later by the Inland Revenue. I am trying to be helpful as to how you as a Department and you as the Minister responsible for veteran affairs, and I salute the fact that you have taken it on the chin and had this inquiry, you happen to be the Minister at the moment, how you wrestle with this problem?

(Dr Moonie) We wrestle with it by wrestling with the Inland Revenue. We took the view that the pension should be paid and they took the view that it should not. They are the final arbiter on taxation matters, not the Ministry of Defence. We had no other course. The fact remains that there is no read-across to the other 1,200 whatsoever and I cannot understand why you are trying to suggest that frankly. There is no read-across whatsoever to the other cases.

Can I then turn to the action so far taken to rectify errors which have consisted of restoring the tax to pensions together with the repayment supplements due on a statutory basis. This restitution consists of simply interest only. Can you give an undertaking today that those pensioners whose invalidity pensions have been incorrectly taxed will receive the full amount of the compound interest which they would have received had they lent the money to the Government in the first place?

(Dr Moonie) In short, no, I cannot guarantee it, but what I can say is that it is being looked at very closely and we will take a decision as early as possible on it. I have the greatest sympathy for those who have lost out as a result of mistakes by my Department in the past and I would like to see them properly compensated for it. However, it is not just a decision for me and I am sure Mr Howarth will recognise that it is an argument I have to conduct within the Department and I hope that it will be successful.

Chairman

You will pass on our immense irritation at this appalling, appalling anomaly please.

(Dr Moonie) Absolutely. There is no doubt about it. This has been a bad situation from start to finish. We started to put it right three years ago effectively. We have come a long way towards it. It was aired in public. I felt it was essential that I should make it absolutely clear to people because for some reason, although we announced it, it got no public notice whatsoever in 1999, but it did this year, so I made a statement on it. I then asked my officials to look very closely to see if there were any other errors and we found some, so we asked the National Audit Office to conduct an inquiry into the whole process and I think it was very right that we did it. I am determined that this will not happen again, but I could give no guarantee 100 per cent that when you are dealing with hundreds of thousands of people, you will not make mistakes. What is important is that the mistakes are picked up and we do not repeat the errors in future.

Mr Howarth

Minister, I would entirely agree with that and in terms of dealing with this issue of compound interest, I seem to recall somewhere in the voluminous papers on this, which I know you recognise, that in the 1970s there was a maximum interest rate applicable and I hope that that will not be applied given that there was a high rate of inflation at the time.

(Dr Moonie) In the interests of being absolutely clear and open about this, the Inland Revenue have discharged their responsibilities. It is now up to the Ministry of Defence to decide what additional compensation should be paid and that lies at our door.

You said you will do this as soon as possible, so can you give us any kind of ballpark date?

(Dr Moonie) The senior official responsible for advising us on this is currently on leave. As soon as he comes back from leave, he will be dealing with it. I have indicated in my private office that I want advice on a decision very quickly and thereafter we will have to give it. I would certainly expect this to be done within the timescale of the other cases we are reviewing which we hope to have completed by the summer, and I would hope I would get it done much more quickly than that.

You are satisfied that all the potential claimants have been not identified, but that you have taken all reasonable precautions to ensure that those who should have an entitlement are in a position to know what you are up to?

(Dr Moonie) I cannot be 100 per cent certain, particularly where the claimant has died, but to the very best of our ability. The errors which may remain are relatively small in number and they will be within the files we still have to look at in that period.

Mr Crausby

It appears that even after the review started, there were further errors in 1999, as the MoD report says, so to what extent will that be externally looked at? You mentioned that there has been some sort of review of all of that, but is there not a case for a rigorous, external audit of all of these cases to ensure that the review has been properly conducted?

(Dr Moonie) There are two questions here. One is the process and whether that has been properly looked at and I think that the NAO, in their excellent report, have looked at the process and at the errors which took place. The other is whether the review itself should be conducted internally or externally. Frankly, I think that we had to ensure that the people doing this review were experts in assessing pensions and that is largely why we decided to do it internally rather than externally. We put our best people on to it and I think the results speak for themselves.

There are some that would accuse you of delaying effectively through legal processes so as not to pay, and it is almost instinctive sometimes of large organisations to delay in that way. Is there any justification in those accusations? You have made the point that if someone had failed, they really should not delay questions of compensation.

(Dr Moonie) I think I pointed to management difficulties in the 1990s which led to the vast majority of the errors at that time.

Why has it taken so long?

(Dr Moonie) We have spent three years on it. We have looked at 120,000 files in that time. That is a lot of files and there is a relatively small number of people whom we can use who are really capable of assessing them properly. We do not have a nice, clean, coherent record-keeping system, which we would rather hope to have in the future using the JPAS system, but I do not believe that there have been any deliberate delays. I think there are tendencies in bureaucratic organisations to disbelieve things, to say, "This cannot be so, it must be right. We have always done it this way", but these are general rather than specific facts. I have seen no evidence, nor did the National Audit Office, of any deliberate delay or any deliberate obfuscation, with the exception of a very rare, if you notice from the paper, instance of the Admiralty in the 1950s which tried to discourage people from applying for pensions on the grounds that they wanted to change the system. The system 50 years on has still not been changed.

There are people dying in between. Is it not open to you to put the record right?

(Dr Moonie) Yes, it is and that is why we have gone through them as fast as we can. There are quite a few people who are still dying and it is a matter of very great regret to us. Let there be no mistake about it, this is something the Department is taking very seriously indeed and something which we are determined to put right. That is no compensation and no consolation for those who lost out over the years when the money would have been of most value to them.

Chairman: We will move on to widows' pensions.

Mr Hancock

Perhaps I could draw your attention to the situation in 1973 when the widow pension scheme was changed from a third to a half and at that time those members of the Armed Forces who were still serving were offered the option of buying in for previous years to count for the half pay for widows. Your fellow Minister, Mr Ingram, has said that any change would be cost-neutral if you offered the facility for pre-1973 retirees to actually buy into the scheme. If it is cost-neutral, and you said you have to pay special attention to that, and you allowed the Service personnel pre that date to buy in, why will you not allow the 1973 Service personnel to buy into the scheme?

(Dr Moonie) Benefits like that are given at the time they are issued. Once somebody has actually retired, they are no longer actually a member of the scheme. They are recipients of the benefits of the scheme, which is different in a legal sense. It has always been the practice across government that those pensioners are not allowed to buy back in. They are not allowed to cherry-pick the bits of the previous benefits which they did not have and I see no reason to change that in this case, sympathetic though I am to the fact that they get paid less than other people. The system was changed in 1973 and for those who were serving then, the options were changed.

But when there was a previous change in 1964, there was a retrospective allowance given to those Service personnel who served before 1958. I cannot quite understand how it was right to give retrospective benefits from a third to a half. Your colleague on the right seems not to agree with that.

(Dr Moonie) I am afraid I did not know. Neither of us has any knowledge of the 1964 change which you are referring to.

Well, there was a change in the pensions of pre-1958 Service widows which was retrospectively uplifted from a third to a half. I am suggesting that if that could be done then, why is it not possible to do it again?

(Dr Moonie) I very much regret I will have to give you a note on that because I do not know the answer to it.

Chairman

And you will look at the word "retrospectively" please.

(Dr Moonie) If I could say, I am aware of this in general terms as one of the occasions on which an exception was made. What I cannot remember are the reasons why it was made. I have a feeling in the back of my mind that there was some sort of trade-off of benefits made across the board which allowed us to do it, but it would be quite wrong of me to speculate in front of you this morning.

Mr Cran

Minister, this is also on the question of the half-rate widows' pension and the reason the Committee is asking this question and really wants a reassurance is because a Member of this House has raised a question of a constituent. I am not asking about the specific details of this case at all, but it is the case of a constituent who was widowed and remarried after retirement. He had bought into the half-rate widows' pension, but it transpires, so the Committee understands, that the benefit going to be received is a fraction of the one that he expected. Is that a scenario that you recognise and, if it is, could you explain it and could you give us an assurance that the full value is given to cases like that?

(Dr Moonie) I do not know whether that is case-specific or not. Presumably the widower had remarried?

Yes.

(Dr Moonie) In which case, the benefit would have originally applied to the wife who sadly died and the remarriage would only take account of whatever service was applicable at that time given the rules which were in play at that time, so far as I know.

Could you just say that again and clarify it?

(Dr Moonie) I doubt it very much, speaking on the hoof as I was answering ----

(Ms McLoughlin) I think, if I may, we would have to look at the specifics of this case. It would depend very much on the individual's length of service and indeed the extent to which he bought back. I do not think, Mr Cran, that you are raising a generic point, but I think this is a specific one that we would obviously have to look at and answer.

So just to take the general point, you can give the Committee a reassurance that full value is given where a half pension is bought given the number of years and all the other parameters?

(Dr Moonie) The point I was trying to make is that in the past, and this will not be a feature of the new scheme, I do not think, but, for example, if the marriage was post-retirement, you were not entitled to the benefit, that was then changed in the late1970s, but it was only after that date, so if this person had been paying or had bought in for the period prior to that, but then remarried after that, the remarriage provisions would only apply to the contributions which had been made since 1978, not to the past ones. They would be lost because that was applicable to the first wife. You are not talking to a pensions expert here, so forgive me if that is slightly not right, but that is my understanding based on the very sketchy knowledge I have of what you are saying.

I understand that you will be reflecting the rules of the scheme, but I have to say that on the basis of what I heard, and I do not know what others feel, it is pretty rough justice.

(Ms McLoughlin) Would it be helpful if we provided a note with a number of illustrative examples about people with different lengths of service, different buying into the scheme, marriage and remarriage?

That would be a start, yes.

(Dr Moonie) And the other thing of course is that if the individual Member you are referring to wants to write to me about it, obviously we will take a detailed look at the individual case.

But you did not answer me, if I could press you, that it is rough justice, is it not?

(Dr Moonie) Well, I am very much afraid that it may be, but that is why I was trying to give you my own impression that, because of the rules and the times, it may well be rough justice, yes.

Jim Knight

This question is on the heavily trailed issue of the widows' pension for life and attributable and non-attributable widows. We have discussed retrospection in principle and we are very interested in this exception made in October 2000, prior to which any widow of a serviceman who subsequently remarried or co-habited lost their pension. I am very pleased that in October 2000 the decision was made to end what was effectively a discrimination against remarriage for attributable widows and that that was retrospective in that it applied to existing widows as well as future widows. It is clear that the change you are applying for non-attributable widows applies to future widows, but not to current widows and, therefore, that is not retrospective. Given everything that you have said about retrospection, why was one an allowable exception and the other not?

(Dr Moonie) It was allowable because the exception was made in the case of attributable death where effectively somebody had died in service. On the one hand, we felt that we wanted to be particularly generous to the widows, often young, bringing up families. On the other, quite frankly in discussions with other government departments, it was clear that this was an exception that could be made without a read-across.

Because of the death?

(Dr Moonie) Because of the relatively limited numbers of people involved. It is not just death in combat of course, but any attributable death which is covered, but in discussions with other government departments, they were satisfied that we could do this and put in a small element of retrospection without it applying across departments, so the general rules on retrospection were able to be disregarded. I must not anticipate what I rather think is coming next.

Well, that is very interesting, Minister, in that the reason why you could not make exceptions were legal when we discussed it earlier, but the reason why you appear to have made this exception is because the numbers were limited.

(Dr Moonie) Yes, we have an encapsulated group of people where there is no read-across to other departments, so they were content for us to bring the change in.

And that would be permissible in law because it is such a limited number?

(Dr Moonie) That is not a question of law. The law applies equally. The question is whether anybody is likely to challenge the decision or not.

Sorry, you have confused me.

(Dr Moonie) If you make a change in one scheme and that change has a read-across to another two million people in another scheme, somebody out of the two million is going to challenge in the courts and under human rights legislation, they are probably going to beat you. That is the legal advice that we have had, therefore, it may immediately have a read-across to other schemes and instead of paying out what with some of the things we are talking about here may be £500 million, all of a sudden the cost goes up to £2-3 billion. That is why it is only in certain, very clearly defined cases where you do not anticipate any legal problems elsewhere that we are able to make these changes.

So where you can have a discrete group of people of a limited number, then you would look at the exceptions to the retrospective rule?

(Dr Moonie) I am always prepared to look at that, but I can give no guarantee as to whether that look will result in any change.

(Ms McLoughlin) I think maybe I gave a false impression earlier. What we are talking about is a combination of issues of policy and the legal position. The Committee asked if we had legal advice to our position and what I was going to say was that when challenged in the courts, case law has supported the Department's view that a member's entitlement to benefit relates to the benefits of the scheme during his or her membership and there have been a number of cases which have come up before which have supported the Department's position and that is what I meant by the legal position. Whether you will or will not extend benefits, as the Minister has very clearly explained, are issues of policy and public policy at that.

I am grateful for that issue of principle and clarity about exceptions on retrospection. When do you plan to introduce the changes to allow non-attributable widows to remarry without losing their pension entitlement?

(Dr Moonie) That will be part of the new scheme, so for any existing people who buy into the scheme and for all future entrants to the Armed Forces, it will apply to them.

The Forces' Pension Society, in their memorandum to us dated 4 December this year, said: "The MoD has conceded the principle [of retrospection for widows]; it has introduced it for war widows and plans to do so for other widows in due course, but it will wilfully create a new group of disadvantaged people, ie, existing non-attributable widows and those widowed between now and the date of introduction. These people will have to choose between financial well-being and happiness in a future relationship. This is morally indefensible." What is your response to that?

(Dr Moonie) Well, my response, I am afraid, is the standard one, that those who entered our schemes did so in the full knowledge of what they were being offered and they have no legal right in law to challenge that.

That is a good standard response.

(Dr Moonie) It was, was it not!

The Forces' Pension Society talks about moral defensibility. Can you defend it morally?

(Dr Moonie) I think I can, yes. I think I have to. I believe very passionately that it is the correct principle to apply the law properly, that when you went into a scheme, you got what you were expecting. Were we to forgo the opportunities to improve any benefits in future because it increases the relative disadvantage to someone else, however much personal sympathy we feel for them, I think it would be quite wrong. I think we must try to improve the scheme and we also, sadly, have to recognise that they cannot be made retrospective, one, because we cannot afford it and, two, because the people you are talking about are not actually entitled to the benefit. However, having said that, I think it is incumbent on the Government in general to do what it can to make financial provision for people who are worst off and I think we have managed to do that through the income guarantee scheme that we have got for pensioners and I would like to see that increased. These improvements have to be made across the board.

Rachel Squire

Can I move on to compensation issues, Minister, because the Committee understands that the Government has proposed moving from the position where it must prove beyond a reasonable doubt that a condition was not caused by service to more of a balance of probabilities standard of proof. I am sure you are aware that representations from this Committee have made clear our own very serious concerns about moving from the current position to the standard of proof. Can I give you this opportunity to try and convince us that the balance of probabilities is an appropriate burden of proof for compensation claims when it seems it is already far from easy to obtain compensation under the current system of the Government proving beyond reasonable doubt that a condition was not caused by service?

(Dr Moonie) To some extent, I would take issue with your last point. I think that our system is a generous one and that it does not put undue barriers in the way of claiming compensation, quite the reverse. The test which is applied by the war pensions, the attributable test of effectively the most tenuous link between the condition which has been developed and service, was built up originally from the best of motives post-World War I when it was very clear there were no other current benefits available to people and there was a general tendency to try to get everyone inside the net as was possible. Contrary to the general belief that the Government always tries to keep people out, there was an effort to keep people in. This was recognised at the end of World War II and proposals were made to revise it which were not followed up, for whatever reason I do not know, but in the 1960s this attribution of what is often just ill-health was substantiated by case law based on the test which was being applied. That led to a situation which, as a doctor, I find indefensible, which is that general illnesses of life apply the very loosest association to service when that service is purely incidental to it. I, therefore, feel that the modern test of the balance of probabilities is the correct one to apply. I think it is morally correct, I think it is medically correct and I think it is legally correct. I do not think I will convince you with my argument, but that is what I believe.

I think it is not just the Committee that would find difficulties in being convinced of your argument. Indeed the Royal British Legion, which certainly represents the interests of veterans from World War I and more recent conflicts, feels that the current burden of proof situation in which the benefit of any reasonable doubt is given to the claimant is vital. That is their view, so given that that is the view of others who are very well qualified and deal very closely with claimants, again why are you committed to altering the burden of proof and how would you answer those who would say it is simply because the Ministry of Defence wants to reduce the number of successful claims?

(Dr Moonie) There is no doubt that going over to the balance of probabilities will affect the number of claims. I believe sincerely that we are allowing claims to establish that we should not be allowing and however much sympathy one may feel for people who become ill while they are in service, if that illness is not directly related to service, I do not think that compensation should be paid as a matter of right. We have other means of ensuring that if somebody becomes ill and is unable to serve, they may still have a medical discharge and still be paid a pension, but I do not think that an inappropriate test of that should be done. I think the balance of probabilities is correct, particularly when you look at the other ways in which we are changing the compensation scheme in general in future, to bring in the income guarantee scheme for those who are most severely disabled and the tariff payment. I am afraid that people will disagree with me on that, but I will not change my mind.

Would you like to give any specific examples of where compensation has been awarded which, in your view, should not have been?

(Dr Moonie) Individual cases? No, I would not wish to do that, but I would ask you to take on trust my views as a doctor of cases which I have seen which have been awarded a pension which were based on the balance of probabilities, which I feel were very difficult to justify in practice.

What about the condition of a particular form of cancer where someone feels that developing it was directly related to their service? Is that something that you feel is justifiable? Does that come within your category or your view that it is a balance of probabilities and such claims should not be successful?

(Dr Moonie) I think the balance of probabilities is the correct test to apply, yes. People get cancer every day of the week in this country. It is a sad fact of life and I do not think an attributable pension would be appropriate unless there are reasonable doubts for supposing that exposure to something as a result of their service had actually resulted in that illness. I think it is wrong.

Rachel Squire: Chairman, I think this is an area where we may agree to disagree with the Minister.

Chairman

I must say, I agree with the Minister. We are coming on to the Gulf War Syndrome, but I hope nobody thinks that one question exhausts our interest in this subject.

(Dr Moonie) I am sure it will not!

Mr Jones

I think this Committee, in its previous incarnations, looked at Gulf War Syndrome and it is something which is ongoing in the press, although I understand the MoD do not recognise the use of the words "Gulf War Syndrome".

(Dr Moonie) Indeed.

You do recognise that there are certain conditions which have resulted from people's service in that part of the world. I do not want to talk about an individual case, but I also sat in the recent Pensions Appeal Tribunal case where the MoD were criticised for not using the words or the terminology of "Gulf War Syndrome". What are the practical difficulties of the MoD in actually adopting the use of the words "Gulf War Syndrome" and what research has been done on information which has been put forward to minimise any future possible condition or conditions which are recognised by the MoD resulting from people who have served in the Gulf?

(Dr Moonie) Using the term "Gulf War Syndrome" is merely a description of a series of symptoms. It adds nothing whatsoever to the diagnosis, it adds nothing to the treatment and I can assure you it adds nothing to the benefits which are paid. The benefits are paid on the grounds of disability, on the grounds of illness and they are, therefore, paid on the grounds of what you are complaining of. One does not complain of Gulf War Syndrome, but one labels one's condition as Gulf War Syndrome. As somebody with some experience in the field, I have to say I have seen no evidence whatsoever, and that is backed up by every reputable study which has been done, no evidence that there is a single Gulf War Syndrome which can reasonably be labelled as such and, therefore, I believe that medically the term should not be used. However, let me stress that it makes no difference whatsoever to the benefits which people get. If people are disabled as a result of their service, then the benefits are paid and calling it "Gulf War Syndrome" will not add a penny to what they are paid. Having said that, you are quite right that something happened to people during their service in the Gulf. They expressed a wide variety of symptoms covering a wide number of effects to the body. What are we doing about it? Many things, some of which, I have to confess, I have set in train myself and there is a relatively tenuous medical basis, like the very detailed study on depleted uranium which we are still trying to bring in, despite the fact that the conditions bear no relation to any medical condition I could think of related to uranium poisoning, but the fact is due to the amount of concern which was expressed and the fact that we do use depleted uranium and will continue to use it makes it incumbent on us to take further action, so there is an underpinning there. On vaccinations, I can assure you that our Armed Forces are very much aware of the disapproval and displeasure which was expressed by Ministers of anybody who was in the Service without the appropriate vaccination or the appropriate treatments, in the case of malaria, for example. That has been made very manifest to them by myself and my colleagues, so the general preparations are going to be much better than they were. The record-keeping of people, just really knowing where they were and what they were doing, which in a war-fighting situation is so difficult to establish, will be done much better. It is still constrained by the fact that we do not have proper electronic records for people and that is a matter of great regret to me, so it is a spending priority which I would like to see advanced up our list. As to what we can actually do about the Syndrome itself, and perhaps I should not say that having just said what I have said, but it shows how easily, just as you did, Mr Jones, one slips into using the terminology, I do not know is the answer. I think that our psychological preparations for war get better with every action we take part in. I would like to see more retrospective research done which is much more valuable in epidemiological terms in trying to identify the causes. At the end of the day we are well aware that there are things called "war syndromes" which have occurred throughout history and which have been well documented, but presently we have no means of preventing them. One particularly where the practice is much better than it was because of increased knowledge is in the general area of psychological management of people, although it is still very difficult and we still have no predictor to say, "This person will become psychologically disturbed as a result of the experience and this one will not". I think that is probably about as wide an answer as you would want on that.

Are you satisfied that those individuals that are suffering from some sort of illness because of their service in the Gulf are actually receiving the pension or compensation that they are entitled to?

(Dr Moonie) Of those who have claimed, yes, they have and I would encourage anybody who has not made a claim who feels ill to come forward and be assessed. There is no guarantee that they are going to be successful, but we have our own Gulf veterans' programme of medical assessments, the War Pensions Agency, which always stands ready to assess people. I am satisfied that those who have been able to show a link, however tenuous, with their service in the Gulf to the condition they are suffering is being paid the pension they are entitled to. I think there are over 1,300 of them.

Mr Hancock

I have heard a number of Gulf War veterans, including a member of my own family, raise this issue about the injections they have received and you have admitted on previous occasions and so has the MoD in evidence to our former Committee that there were not proper records kept about who was given what, on what occasions and what for. Some of the servicemen who have spoken to me and who have given evidence have claimed to have been injected on a number of occasions and were not told exactly what they were being given. Now, have the Ministry of Defence tried to replicate the circumstances in which those injections and inoculations were given for various reasons and has a proper detailed analysis of the possible effects of those injections which have been given in the time-frame given and in the physical circumstances of being in the Gulf? Some of these injections were actually given to people who were on the front line and within days of being given them, sometimes within hours, they were being "MEDEVACed" out of the area because of the seriousness of the deterioration in their health. What evidence has the Ministry of Defence got which they have not put in the public domain to rebut the claim that many of these servicemen have made that their illness, the Syndrome, is as a direct result of the mismatch of inoculations they were given when they were there?

(Dr Moonie) The epidemiological work which we have done, or we have not, but it has been done on our behalf, has failed to show a major link. There are very loose links with the actual receiving of vaccinations, but no direct clinical links whatsoever. I think that based, as I say, on the loose evidence that people complain of much the same symptoms, but to a greater degree, I think it is fair to say, when they were given a larger number of vaccinations, I think that is bad practice and it should be stopped and it has been stopped. We ensure now that people are given the correct vaccinations over the proper period and they are all up to date before they go out to active service. Having said that, most of the vaccinations which are being given have been used in clinical practice often for generations and the potential interactions between them are very well known. There is no a priori medical reason to suppose that giving many of them together would have some mysterious effect. Having said that, we are looking still at potential interactions to try and find out if there is something that we have overlooked and we will continue to carry out research where any reasonable hypothesis can be advanced as to why some can take place.

How can it be reasonable to say that when the MoD have not been able to furnish details of what servicemen were given in the way of injections so that their reaction to it can be properly gauged, when the MoD themselves cannot give a straight answer to what Serjeant X was given two days after his arrival in the Gulf?

(Dr Moonie) The fact that that cannot be given does not in any way justify the making of assumptions as to the effect on people's health. The fact is that when you have a situation where you are using products which are well known, whose effects are well known, whose interactions are well known, the fact is that when you are doing that it is reasonable to argue from the general case to the specific that if they do not have any effects anywhere else, they will not have any effects here. That is a reasonable assumption to make. I am not trying to defend the fact that we do not keep records. We should have kept proper records, and I will give you 100 per cent on that. However, it is unwarranted just to look for various mysteries in the fact that that was it, that they used depleted uranium, so that was it. There is no scientific basis whatsoever for saying that.

I am sorry, but we are talking about fit young men who went to serve their country and within hours of having injections, they were so ill they had to be flown out of the area back to hospitals in the UK and in Germany. They have a perfect right to say, "Please tell me what it was you gave me and is it a fact that it is these injections which have mucked up the rest of my life?" They are perfectly entitled to an explanation.

(Dr Moonie) I am not saying that there are no reactions to vaccinations; there are and they are very well documented and if any such cases occur, there will be a medical trail for them and we will see what the illnesses were. If you wish to give me details of the cases, we can follow them up. The fact is you are attempting to make a general argument from specific cases and frankly medically that is wrong.

I am sorry, but ----

(Dr Moonie) This is wrong. I am a doctor. You are not.

Are you saying that all of the evidence and the tests that you carry out are now in the public domain?

(Dr Moonie) Not necessarily, no, but individual medical records are confidential.

Not individuals.

(Dr Moonie) I thought you were talking about an individual.

You have now said you will make available through parliamentary questions any reasonable request for a former Service personnel's medical records. I am not asking that. Are you prepared to make available the results of all of the tests that the MoD have either commissioned or carried out themselves in respect of the possible effects of the various cocktails of injections which were given?

(Dr Moonie) Absolutely. Everything which is done will be put in the public domain at the appropriate time. Yes, of course. I am not going to put it in before the research has actually been reported on.

Can I ask then of all of the research which has been completed and has been made available to you as Minister, has that all been put in the public domain?

(Dr Moonie) As far as I know, yes. I can think of nothing in terms of research which has been done which has not and if there is anything, then I will make sure that it is. I am pretty certain that there is nothing. The only thing which is not yet in the public domain is the research which is not yet completed.

Chairman

If you will elaborate on what you said earlier, we would like to know what action has been taken and preparations made for the current developments, if you would not mind, in some detail.

(Dr Moonie) I would be happy to do that.

We are still smarting after the last deployment and we want to make sure that as far as possible nothing happens

(Dr Moonie) Absolutely. What I can assure you, in addition to what I have said, is in general medical terms I think things are much better organised they were.

Again, if I might say, could we have a further assurance, even though you have had a report apparently saying that there is no such thing as Gulf War Syndrome, that this is not going to affect any existing programmes or any funding that the research will need?

(Dr Moonie) I am happy to give you a categorical guarantee that any reasonable line of research, and I suspect some few unreasonable ones as well, will be followed up. I want to get to the bottom of this as much as anybody. I will insist always that any statements which are made or any descriptions which are made are based on rigorous medical evidence. I think that is reasonable. I can give you an absolute assurance. Suggest reasonable lines of inquiry and we will put our hands in our pockets and we will fund them.

Chairman: Thank you. We will return later on in this session to the theme. Thank you, Minister. Now to asbestos-related diseases. Mr Hancock.

Mr Hancock

Thank you, Chairman. If I could draw your attention first, Minister, to the fact that you asked me to give you the names of people in the Gulf. I submitted a case study of 20-odd servicemen suffering asbestos-related illnesses, in some instances death. That was over 12 months ago and the MoD still have not replied to that very comprehensive case study on each of those individuals from right around the country ranging from an admiral down to an able seaman. Sadly, the admiral, who was one of the better case studies, subsequently died and did not get a response from the MoD and I am still awaiting one. I am a little surprised, to say the least, that I have not had that. If you would bear that in mind. The Government believes that the law should not be changed to allow service personnel to claim compensation for illnesses resulting from service before 1987 because, you say, "there is no logical point at which to draw a line..." and you go on to suggest that examples of unfairness and injustice would be difficult to clarify. What exactly does that mean and would it?

(Dr Moonie) With regard to your first point on the cases, I am not sure whether it is because of length of time or the fact that there is currently a case under appeal as regards asbestos and that is the reason why a reply has not been sent to you. I will make sure that is looked into. With regard to the general principles of retrospection it is difficult to draw a line. I do not like to use the word "retrospection" again, I am sure it raises people's hackles.

Chairman

Or expectations.

(Dr Moonie) Shall I give you a general answer. It is very easy to look back with the hindsight of modern medical knowledge and say "Something wrong happened to me 30 or 40 years ago". Something wrong did happen to the people 30 or 40 years ago, but the fact is 30 or 40 years ago we were unaware of the reasons for certain conditions occurring. One should not apply the knowledge of today to the problems of yesterday, you have to look at them. That is one of the reasons why we are having such difficulty in looking at what happened at Porton Down because standards 40 or 50 years ago were very different from those there are today. It is a generally accepted thing in medical practice that if the current standards are applied then there is no negligence involved in the case. We have looked at this very closely because with modern knowledge it is well-known that asbestosis, and particularly mesothelioma, is related to asbestos and literally nothing else. I knew people in Scotland in clinical practice who made it their life's work studying this particular tumour. That does not alter the fact that the law pre-1987 was as it stood then, Crown Immunity applied, and a general decision has been taken across Government that no retrospection will be allowed and the law will not be changed.

And yet the Government made exceptions in this respect, did they not, with regard to miners. They accepted that miners suffering from illnesses which were related to working in the coal industry would be given blanket compensation.

(Dr Moonie) Paid for out of the surplus in the Miners' Fund, I have to say.

Mr Jones: That is not totally true. There is also a cut-off date.

Mr Hancock

I am interested to know what claims other than asbestos-related diseases the Government is concerned might raise substantial numbers if the abolition of Section 10 of the Crown Proceedings Act were made retrospective? How much thought has been put into this? I cannot think of too many other examples.

(Dr Moonie) There are not many quite as florid as the relationship between asbestos ingestion and mesothelioma, which is the main issue I suspect. The general one of psychological problems is the other large number of cases still subject to various actions in courts and not something I can talk about in detail. That is the other obvious large group and, again, one where modern practice has changed and is being applied to past experience. That is the obvious other one. I can think of no great other numbers, no.

Does your colleague wish to add anything?

(Ms McLoughlin) All I was going to add, although it is probably blindingly obvious to everybody else bar me, is to make the point that there is a difference, of course, between compensating for an impairment and as far as I know there is no reason at all why people should not claim for a war pension.

Mr Jones

If you get mesothelioma you die within 18 months.

(Ms McLoughlin) Sorry.

Chairman

It is all right, carry on, Ms McLoughlin.

(Ms McLoughlin) I said earlier that the distinction was something was a matter of policy, not law, and here we have a matter of law and what the Crown Proceedings Act and the repeal of the Crown Proceedings Act does is just not enough and that is being tested at the moment and we will see. That has no bearing at all on people's ability to claim for war pensions as a tribute towards their service.

Mr Hancock

Except the war pension is not very good, is it, if you have got something that is going to kill you very quickly?

(Ms McLoughlin) It is not a substitute.

No, it is not. I would like to know how do war pensions awarded to those service personnel who have been successful in getting them compare with what a civilian employee would have been able to get by suing the Government? I would suggest considerably less.

(Dr Moonie) You cannot really equate any standardised pension scheme with the effects of a legal action, which are variable for a start. In terms of the actual compensation which is paid at present to people in similar circumstances, they are broadly comparable.

I would then suggest to you the case of a 44 year old warrant officer in the navy who died two years ago in my constituency, having been a PTI, a field gunner on three occasions, an instructor on two, and the best he could get for his wife in the few months he had between being diagnosed and dying was that he would get some sort of war pension. Bear in mind that he was 44 years old and he had been a boy sailor and he could prove at the time when he was infected by asbestos. He had only ever worked in the Royal Navy, he had no other employment. He had been involved in the de-lagging of asbestos of a ship in a dockyard whilst he was on barracks duty. He spent three months de-lagging a ship. He knew chapter and verse what happened and how he got it. The difference between what his family will receive through the war pension and what he could have got if he had been a civilian employee ran into many hundreds of thousands of pounds. How can it be right for us to recognise that and say to people "you can have a war pension"? There has got to be some judgment made by Government that this is manifestly unfair.

(Ms McLoughlin) All I can say is the judgment was made by Government during the passing of the original legislation and in 1987. That is just where we are.

Can I ask you then, Minister, if you would be prepared to see your Department now review that with a view to making a change in that legislation for people like this young family, a young mother with two young children of 12 and 14 who could have expected, and should have expected, 30 more years probably of their father being around? I cannot understand why you cannot see that it is time to review that situation. Would you accept that the Government owes it to these people?

(Dr Moonie) I am afraid that the law is as it stands. It is not a matter for the Ministry of Defence to change it, it is a matter for the Government as a whole and there are no plans to do so.

Mr Hancock: I am very disappointed and so will a lot of people out there be. Thank you, Chairman.

Mr Jones

Can I just press you on this issue because I think in this case, for example, civil litigation is dated knowledge, when the knowledge was that you were actually being negligent. In the asbestos-related industry it goes to the 1940s because the Minister of Supply actually supplied the engineers, the Shipbuilding and Employers' Federation, with a letter thanking them for their war work and warning them of the dangers of asbestos. I understand why the Government perhaps would be reluctant to open up this pre-1987 case but in the case that Mr Hancock has outlined, I remember dealing with cases when I was the GMB's legal officer and a case like that of someone who is 44 would have been worth, he is quite right, conservatively hundreds of thousands, if not more. There are people who are going to be suffering and actually dying very painful deaths and not being able to access a pension for a long period of time because I think the maximum that someone lives who has mesothelioma is about 18 months, it is a very quick and very painful death. Are people here not losing out on a hell of a lot of money in proportion to what you would do if you had exposure in a shipyard, for example?

(Dr Moonie) I think there may well be cases where that is true. My personal sympathies, and they are great, have nothing to do with this case, I am sorry.

Mr Hancock

It is a great pity that Parliament, through the MoD, does not change the law.

(Dr Moonie) The trouble is the hard cases like this are the ones which we likely use to illustrate it but you could not just apply the law, or any change in it, to affect these because many, many more would be affected as well.

Mr Jones: The difference here is that if the MoD was a private company these individuals would be able to sue because the date of knowledge, I think you said, was the 1940s.

Mr Hancock: Or if they had been merchant seamen.

Chairman: Thank you. I sense from the brevity of your answer, Dr Moonie, that you are not totally opposed to what is being said but as we do not have gestures recorded no-one will know. The last issue we want to deal with this morning is one again that has involved the Defence Committee over a long, long period and we have had not the slightest impact upon the Ministry of Defence policy and that is why I have given the question to my colleague, Jim Knight.

Jim Knight

Thank you very much. I will just read this summary so it is clear to everyone what we are talking about. "The UK conducted 21 atmospheric nuclear tests in the 1950s. Some 28,000 UK service personnel were involved in the test programmes, most in logistic support", such as a constituent of mine who has contacted me, Richard Wallace, who is 67. He was serving in 1956 in Maralinga on Canberra aircraft that were monitoring atomic clouds and in some cases collecting samples. He serviced those aircraft, refuelled them and so on and claims very limited protection was given to him at the time. "Service personnel from Australia, New Zealand and Fiji were also involved. A number of veterans of the test programme have claimed that their health was damaged by deliberate or accidental exposure to ionising radiation. However, the Ministry of Defence has consistently rejected these claims, on the basis that stringent safety precautions were in place at all times." You have commissioned a series of studies into this by the National Radiological Protection Board and staff from the Imperial Cancer Research Fund, first in the 1980s which looked at over 100,000 records and traced the service records of 22,000 participants and a control group. "The results of that study were published in 1988 and a follow-up study was conducted in 1993. Both studies concluded that participation in the test programme had no discernible effect on the participants' life expectancy or on the risk of developing cancer or other fatal diseases." That is the background. I have followed this fairly closely in recent weeks since my constituent contacted me and I have read the Hansard on the Westminster Hall one and a half hour debate that occurred a couple of weeks ago and looked at the correspondence you have had, Minister, with Mark Todd. You say in the letter that you wrote to Mr Todd on 2 December this year that "the designs of the studies have some limitations". Could you just tell me what limitations they are?

(Dr Moonie) The design of which studies?

The 1988 and 1993 studies.

(Dr Moonie) Not offhand, no. I would need to look at the work in detail.

You go on to say that they are considered generally reliable.

(Dr Moonie) They are generally reliable but like all studies a great deal of work had to be done in collating records and things. There were many inaccuracies, people left out who should have been there and others who were put in there who should not. I would have said the limitations are largely due to the fact that again as an epidemiologist you are looking at it retrospectively when what you ought to be doing of course when looking at these populations is prospectively, but that is a bit nit-picking. I do not know of any specific methodology problems with these studies. I would have to go back and check my reply and see why that particular sentence is there.

You have now commissioned a third study. Why have you done that when the previous two studies you say are considered generally reliable?

(Dr Moonie) I think it is appropriate to follow up research. We are talking about a period now that is about ten years on from the last one. We want to look at specific areas, the development of cancers for example. I think it is appropriate for us to carry on. In view of the concerns which have been expressed, despite my vehemence in insisting that there are no grounds to them, the only way I can show that is the case is by conducting some good research and offsetting some of the less good research that is conducted by others.

Will this third study look at some of the higher risk types? There has been some criticism reading through the debates and so on that by going for such a broad sample of 22,000 you are averaging out some of the particular peaks in the results in relation to those that were under particular risk as part of the test.

(Dr Moonie) I think it will be interesting. The study of course has already been completed and is due to report, so I cannot change it now. This point was made to me, and it is one which I will discuss with my medical people, as to whether we can select out the group and whether we can tell from the records the group that were known to have had it. I have to say there is very little overlap between them and those claiming to be damaged by radiation.

If you were able to do that, that would be helpful.

(Dr Moonie) It would be interesting to do that. I am not sure how much detail we have of those who had higher doses and there are relatively few of them.

Sure. There has been comment upon the New Zealand government's decision to fund an independent study commissioned by the veterans themselves. Is that something that you have considered, I am sure you have, and if you have rejected it, why have you rejected it?

(Dr Moonie) Because I did not consider the research to be of sufficient quality to justify funding it. I will look at any proposal to fund proper peer reviewed research. I will not fund anything that is not. Can I finish that. I will also not fund research which duplicates the independent research which we already commissioned through the NRPB and the Imperial Cancer Research Fund which I consider to be of exemplary quality.

When the third study reports and the veterans have had a chance to properly examine that, if they were to come forward to you with a research proposal which potentially would add new information to what you have already studied and is of a sufficient quality, as far as you are concerned, then you would be happy to look at funding?

(Dr Moonie) I would certainly look at it and give it consideration, yes.

Beyond the studies, the veterans have also asked for some other recognition of their service and the particular risks, given that what we know now is different to what we knew then. You talked about that in relation to asbestos. They have talked about the possibility of an apology. I do not know whether that could be in a form of those that may -

(Dr Moonie) For what?

For those that may have suffered.

(Dr Moonie) Let's just stop, can I stop you a minute. Let me make it very clear. I have looked in great detail at what went on. There have been two books published by an independent historian, Lorna Arnold, looking at the history of British tests which looked at all the records that we had. I have looked at the individual records of the Grapple (?) experiments, there was no deliberate attempt to expose people to radiation other than in a few volunteers the so-called Dr May's group of volunteers, to do the work which we did. Nobody among our personnel was deliberately or carelessly exposed to radiation through some systematic failure in the system, nobody, there is no evidence to the contrary.

So you would rule out any kind of qualified apology, no apology---?

(Dr Moonie) Absolutely not. I am sorry, absolutely, I am sure you changed the sense of that sentence at the end there.

And would you similarly rule out any kind of medal for veterans for nuclear testing?

(Dr Moonie) Medals? Do you know the trouble I have over medals? Sorry, I must not be facetious. The people who are involved in this do believe that they are affected by radiation. I do what I can to convince them otherwise. I do the research. You are well aware of the policy with regard to medals. It is not customary and it is not only the military because many civilian people were involved as well. If people feel strongly enough about it they can try to get some sort of memorial for their group but it is not something the government gets involved in, we do not get involved with any memorial. On the medals side there have been a few scars over the past few years from attempts to get medals.

Mr Knight: Looking through the list of Early Day Motions there is a constant catalogue of claims for medals.

Chairman: Thank you very much. Perhaps you might drop us a note on the subject of retrospection because I am sure there might be one or two things you were not able to say and it would be helpful. Thank you all. Ms McLoughlin, I forgot to say you should have had a medal many years ago for your role in parliamentary liaison but, as the Minister says, not all tribulations or injuries or disasters are always recognised by medals. Thank you all very much.