Armed Forces (Pensions and Compensation) Bill

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Mr. Desmond Swayne (New Forest, West) (Con): Has the Minister taken account of the fact that military pay, unlike pay in other public sectors, increasingly takes account of the special responsibilities of servicemen? That is certainly the case with Pay 2000, so surely the Minister's approach to the issue should be slightly more flexible?

Mr. Caplin: This is how it works: taking the best of the last three years of service means considering the highest figure for pensionable earnings with the earliest two years of service, properly uprated for inflation and RPI, and the highest figure counts in pension calculations. In most cases, pensionable earnings in the last 12 months will be the highest. One

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change that we are not discussing in this debate is the use of salary, not the hypothecated rates that we use under the current scheme.

Let me comment on the amendments. Amendment No. 1, which I have already dealt with in detail, concerns the right of the Secretary of State to modify schemes. That right is implicit in the legislation, so it is not necessary to specify it in the way suggested in the amendment.

Mr. Howarth: Will the Minister point out where in the Bill there is a specific power for the Secretary of State to modify?

Mr. Caplin: It is implicit. The Interpretation Act 1978 makes it clear that express power to make statutory instruments includes the power to invoke, amend or re-enact them. Because of the implied powers, amendment No. 1 is unnecessary and I urge the Committee to resist it, although I hope that the hon. Gentleman will accept my explanation and withdraw it.

Amendment No. 3 would prevent the new scheme from offering non-defined benefit additional voluntary contributions. Technically, it would also apply to the early departure scheme, for which the term ''defined benefits'' has no meaning. Even if it were to apply more narrowly, the Government would not consider it appropriate. The Secretary of State made it clear on Second Reading—and I repeated it last week—that, for many of the reasons we have stated, it is inappropriate to introduce scheme details in primary enabling legislation. The approach that we propose is consistent with that adopted by most of the other public service pension schemes, with enabling legislation and scheme rules set out in secondary legislation. That is sensible and I hope that the Committee will reject the amendment if necessary, although I urge the hon. Gentleman to consider not pressing it.

The hon. Gentleman or one or two of his hon. Friends might have owned up to this last Tuesday: so far as I can see, new schedule 3 is a direct lift from our framework document, with a few minor changes. It has not been drafted as a legal document and it is not, therefore, suitable for its purpose. Scheme rules, particularly those for pensions and compensation, need to be precise, given that they confer rights on the individual. There should and must be clarity.

Mr. Andrew Robathan (Blaby) (Con): When the Minister talks about clarity, I could not agree more. However, the problem with the clause—we might be debating amendments to it, but we are also considering the legislation—is that it has no clarity. Everything is in his gift—how can that be clear?

Mr. Caplin: I can reassure the hon. Gentleman: if he thinks that we have nearly finished debating the clause, he is much mistaken. I have a long clause stand part speech for him to enjoy later, and it will round up a lot of the issues. The hon. Member for Hereford (Mr. Keetch) will particularly enjoy it, I am sure. It will be

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more appropriate to pick up those issues at that point than to do so in relation to this narrow group of amendments.

We intend to resist new schedule 3 because of how it would impact on primary and secondary legislation. We firmly believe that the approach that we suggest is the right one; it is consistent with those adopted for most other public service pension schemes. We discussed the matter on Second Reading—in broad terms, of course.

The arrangements that we have for armed forces pensions do not allow parliamentary scrutiny. Governments—I use the term generically—have not abused the schemes by introducing disadvantageous changes. Key changes that have been made in the past few decades have included extending the introduction of attributable benefits for ill health, injury and death to unmarried partners; improved widowers' benefits; post-retirement marriage benefits; and preserved pension entitlements. Also, I note that much of the language used in these proposals is based on our framework document, which was not written as a legal document and is therefore unsuitable for that purpose.

9.15 am

In concluding my remarks, I point out that, despite what the hon. Member for Aldershot thought I was starting to say, we have had a useful debate on the issues. I see no reason for the Government accepting any proposal in the group. Furthermore, given our lengthy debate, I hope that the amendment will not be pressed to Division. If it is, I shall ask my hon. Friends to reject it.

Mr. Robathan: I also welcome you to the Committee, Mr. Griffiths. I think that we were going to have lunch with the Indonesian ambassador today, but sadly that is not now the case. I also apologise for not attending the debate on Second Reading. I would have liked to do so, but sadly I was elsewhere on parliamentary business. I was also unable to attend the Committee's sitting last week, but I am sure that hon. Members understand the pressures we are under. Indeed, the hon. Member for Hereford was not present either, I recall.

To dispel any doubts, I should again declare an interest, in that I am in receipt of an armed services pension. The amount is not huge—it would not get many people up in the morning—but I have been in receipt of it since 1989. It keeps coming in, every day and every night, throughout the year, whether I am under the arch at Charing Cross station or here. I am a beneficiary of the current scheme, so the changes will not affect me, but they would if I were 20 years younger and still serving.

The clause and the proposed amendment to it are the meat of the Bill, which, at the moment, is more like a skeleton. Everything is about enabling. I do not distrust the Minister or doubt his good intentions, but the purpose of parliamentary scrutiny is to ensure that the will of Parliament is done, rather than the will of a Minister at an arbitrary moment in the future. My hon. Friend the Member for Aldershot has done us a great service in tabling new schedule 3. Although it

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may be based on the framework document, he has tried to say exactly what the Bill will mean for those currently serving and for those who will serve in future.

As has been said, pensions are not the reason why people join the armed forces. The situation would be distressing if people looked at the terms and conditions of service and said, ''Gosh! That's a really good pension. I think I'm going to serve in the Black Watch or the Coldstream Guards, because I'm really looking forward to getting my pension,'' be that at 55, 60 or 65. Nevertheless, the young people who join—we need young people rather than aged people such as me—expect to be looked after. They join for adventure, but later, when they think about their futures, as I did, they ask themselves what they have earned during their service of, say, 18 years. I was pleasantly surprised to discover how much I had earned, but young people who are thinking of joining now will discover that they accrue somewhat less.

We need to understand that the pension is part of a package, including the conditions of service, for which people join up. As we discussed last week, we know that pay is abated to take account of the fact that there is a pension. One does not see that on one's payslip, but pay is reduced because one contributes towards a pension. I would say that one in 100 of the young men who served with me, if that, knew that they were earning a pension at the time. They had never considered the matter, but their pay was nevertheless cut for that reason.

The clause and the amendment go to the heart of the issue. The Bill will undermine the package. That must be the case, because, as we shall discuss later, the situation is revenue neutral. However, we are providing extra for people who are not currently covered, particularly unmarried partners and others. If the situation is revenue neutral, the scheme's current beneficiaries must be losing out. I would have thought that that was simple logic. The cost will have to be met out of existing benefits. However, because there is nothing of substance in clause 1, it is difficult to see how it will affect people. It certainly will not improve conditions—that much is obvious. Indeed, my hon. Friend the Member for Aldershot made that point well on Tuesday last. One must therefore ask what the ordinary members of the armed forces will feel.

I suspect that in NAAFIs and messes throughout the country, or in Iraq or wherever else members of the armed forces may be, they are not discussing the Bill at great length. However, they will be saying that their political masters are yet again chipping away at what they have and undermining what they are doing. They will feel as I and the hon. Member for Falkirk, West (Mr. Joyce) felt—I am trying to make a cross-party point. One often feels undervalued by one's political masters. [Interruption.] I hear from a Labour Back Bencher, ''So do we all.'' It is somewhat like the tag given to the 14th Army in Burma—it was the forgotten Army. People sweating away in Iraq, Bosnia and Northern Ireland feel undervalued and the Bill will contribute to that feeling.

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As has been said, the truth is that few young people will be needed until the age of 55. We do not want many old soldiers serving in the armed forces. Like me, they will be too old and they will not be fit. Only a small number will stay on. Nevertheless, all those who give service in their 20s and 30s—and even in their teens—should be well looked after by the House. As my hon. Friend the Member for Aldershot rightly pointed out, few of them will earn a full pension.

The Minister's answer—that those people can buy extra years—is not particularly good. Those who want a career through to the age of 55 should not have to buy extra years. That is a bit much. Hon. Members can earn a full pension in 25 or 26 years, and I believe that that should also be the case for members of the armed forces. Physically, they will have worked somewhat harder than we do, although perhaps with not such a great feeling of public service.

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Prepared 10 February 2004