Orders of the Day — Armed Forces (Pensions and Compensation) Bill

House of Commons, 6 May 2004.

New Clause 1 — Reservists Personal Pension Plans

Julian Brazier (Conservative, Canterbury)

I beg to move, That the clause be read a Second time.

I declare an interest, Mr. Speaker, as I served for 13 years in the Territorial Army, as you yourself did. Indeed, as background to our debate on pensions, I might say that my grandfather served throughout both world wars as a reservist officer. His health was ruined as a result and, although he was decorated for gallantry, he never received a pension of any kind. The proposal in new clause 1 does not relate to the past, but aims to address an injustice that exists today.

In connection with the point of order raised by my hon. Friend the Member for Mid-Sussex (Mr. Soames), Operation Telic involved the largest deployment of reservists since the war, so this is a good time to focus on the issue. They constituted a huge proportion of the overall personnel, with 5,000 out of a nominal total of 45,000 reservists—only 35,000, however, were trained and available for service—being deployed. Even today, the Library tells me, we have 989 reservists in Iraq, 230 in Afghanistan and about 300 in the Balkans. Recently, the first military cross since 1945 was awarded to a territorial.

Nearly all those are people who have civilian jobs. They give of their time during peacetime and for many years serve at annual camps, weekends and evenings in the Territorial Army and its counterparts in the other two services. There is no pension provision for reservists, however many years they serve, except in one respect. Those who are called up for full-time service can have payments made into an employer's pension fund, if they have an employer. If they happen to be self-employed—a large and important category of reservists—there is no provision. The new clause seeks to address that, for two reasons.

First, the current arrangements are grossly discriminatory against self-employed people; why, I cannot imagine. I served in three different TA units and self-employed people played a vital role in all of them. As call-outs become more burdensome and onerous, and as employers become reluctant to allow employees to serve in the reserve forces, the proportion of self-employed people, if they can be found and are able and willing, may have to rise. It is very unfair that such discrimination exists.

The second point relates to all reservists. No matter how long they serve, there is an absolute lack of provision for their general service outside full-time deployments. I was one of those who argued strongly and many times in the House for more use to be made of reservists, preferably in formed units. I welcome the fact that just before the last Conservative Government fell, we passed the Reserve Forces Act 1996 and started the process of making more use of reservists. I did not envisage at that stage that there would be huge cuts in the number of reservists and an enormous increase in the scale of work required of them. That is what happened.

When we consider pensions for those who are not on full-time service, it is important to recognise the sacrifices that they make. Overtime opportunities are greatly reduced if one is spending weekends away and spending training evenings as a reservist. Even in the old days, career opportunities were somewhat jeopardised by reserve service. I well remember conversations in which people said, "We really wanted so-and-so to take such-and-such a job, but he finally felt unable to do so because it would have meant giving up a promotion, as the job is so busy." Today, with the prospect of being called out in peacetime for periods of as long as six or even nine months, perhaps as often as once in every three or four years, the reduction in people's earning prospects, and consequently in their eventual pension prospects, is considerable. That is not reflected at all, outside the periods of full-time service.

I shall not detain the House with a long argument because that would not strengthen the case. However, it might be for the convenience of the House if I explained in a few sentences how the national guard scheme works. It is a good scheme and a cheap one. Bearing it in mind that reservists provide defence on the cheap, much of it funded by their employers—or their own business where they are self-employed—it is a scheme that the Government would do well to consider. Such a scheme is envisaged by new clause 1.

The scheme is governed by three simple rules. First, leaving aside the full-time deployments, there is no contribution for anyone who serves fewer than 20 years, so the scheme applies only to a small proportion, but it applies to those people who are the very backbone of every unit—the company commander, the company sergeant-major and the long-serving non-commissioned officer. In America, when such people have done 12 or 13 years and feel that they have had enough, they realise that in another six or seven years they will be eligible for a pension. The scheme affects a fairly small class of people, but a critical one for maintaining unit quality. Secondly, one does not receive a pension at the age where one's regular counterpart would. The pension starts at state retirement age, which, from memory, is 67 in America, so the provision is relatively cheap. Thirdly, it is entirely related to the amount of time spent serving.

At a time when the defence budget is stretched, I know that there is no huge willingness to consider spending extra money on anything, but when the burden is being disproportionately borne by members of the reserve forces, the very small sums that the scheme would cost would be good value for money and would represent justice.

Ivor Caplin (Labour, Hove)

May I take the hon. Gentleman back to the US system that he was explaining to the House? For comparative purposes, will he tell us about other pension provision? For instance, is there a state pension provision across the United States that national guard members would receive as well?

Julian Brazier (Conservative, Canterbury)

The Minister knows that pension arrangements in America are extremely complicated, with variations between states. The crucial issue is the return that reservists get from giving up time to do reserve service, which other civilians who do not give up time to do reserve service do not get. What pension return are reservists getting? In the national guard, the US army reserve or its counterparts in the other services, the small proportion of people who are the backbone of the organisation get the benefit if they do more than 20 years, and those who choose not to sacrifice their time and make the other sacrifices involved do not get it.

Angus Robertson (Scottish National Party, Moray)

The hon. Gentleman is making a powerful case, which I am sure he has also found is popular among people in the Territorial Army and reserves more generally. They think it would be a fair way to go. Is he aware not only that such a scheme exists in the United States, but that Canada has been developing a similar scheme over recent years? Perhaps the Ministry of Defence could look at that for inspiration.

Julian Brazier (Conservative, Canterbury)

I am grateful to the hon. Gentleman, who is more up to date on the situation in Canada than I am. I know that the Canadians were evaluating a scheme, but I do not know how much progress has been made. I can say, however, that, as the House knows, the turnover figures, or the wastage rates, which are a significant measure of the state of a unit, in all our counterpart English-speaking countries—America, Canada, Australia and, I believe, New Zealand—are much lower than those for the British reserve forces. That should concern us.

There are two separate injustices that the clause seeks to address. The first is the lack of a pension to cover the full service of a long-serving reservist. The second is the immediate crying need to sort out the discrimination against the self-employed. I urge the House and the Government to support new clause 1.

Colin Breed (Liberal Democrat, South East Cornwall)

As there are currently reservists in theatre, it is right that we should think about their future welfare and the benefits that we provide for them. In Committee, the hon. Member for Canterbury (Mr. Brazier) explained in greater detail why we should do so. We should look after reservists for the right reasons, not because other countries may be introducing their own schemes. We should properly address the discrimination issue and find a means of reflecting in pension terms the service that they have given. The principle of paying a contribution to reservists who receive an occupational pension has already been established, so the Government cannot argue against it.

On that basis, why should we not pay those who have personal pension plans? In Committee, the Minister explained that a reservist averages about 30 days' service a year, so the pension would be very small. However, that is an argument in favour of new clause 1, because extending the scheme would have little effect on the overall cost—I understand the cost-neutrality problem. The change would cost a small amount and affect relatively few people, so finance should not be an issue.

We have agreed the principle and that extending the scheme will not cost very much, so why are the Government making such a great fuss? The hon. Member for Canterbury suggests an elegant solution to enable the Government to address discrimination and recognise the valuable service that reservists give, and it would hardly register as a blip in the budgetary process.

Mike Hancock (Liberal Democrat, Portsmouth South)

I am delighted by the new clause moved by the hon. Member for Canterbury (Mr. Brazier), but I was disappointed by the Minister, who sought to tarnish it by criticising the system in America and suggesting that people gain an advantage by having two pensions. The issue is about fairness to people in the reserve forces, who give their time and, in some instances, their lives or their well-being on behalf of their country, and new clause 1 allows this House and the nation as whole to recognise that commitment.

Ivor Caplin (Labour, Hove)

As the hon. Gentleman is a member of the Defence Committee, he did not participate in Standing Committee, where hon. Members were able, free and willing to ask questions about different points as we debated the issues. I intervened on the hon. Member for Canterbury (Mr. Brazier) to raise an interesting point about the US scheme, and I cannot see anything wrong with that.

Mike Hancock (Liberal Democrat, Portsmouth South)

The point would be relevant only if the Minister provided evidence that people in the reserve forces in the United States can claim other benefits. The US system is a good example, because it works and offers reserve forces a pension scheme, and it could easily be adapted and made available to reserve forces in this country. The point that many reserve service personnel in the United States probably do not have other pension facilities is valid, but it does not relate to this issue, which concerns fairness to our reservists.

Julian Brazier (Conservative, Canterbury)

The hon. Gentleman makes a powerful point. Pensions paid to members of the armed forces and, indeed, other state sector occupational funds are not welfare payments; they are a reward for service.

Mike Hancock (Liberal Democrat, Portsmouth South)

The hon. Gentleman is dead right. The issue concerns the recognition of those individuals' commitment to the nation. New clause 1 will not break the MOD bank, and it is a way to honour reservists and recognise their dedication.

During the past year, I have talked to many people who have returned from active service in the Territorial Army and other reserve forces in Iraq, many of whom have been on long deployments for the third time in three years. Reservists who have served on three separate deployments are not unusual, and many of them return to face difficult employment situations, which is a point that the Minister has recognised.

New clause 1 is a major step in the right direction—it is a small financial step, but it is a big step in honouring a debt that we should have considered long ago. I hope that the House is inclined to support it unanimously, and if the Government were to agree to it, it would mark their commitment to our reserve forces.

Ivor Caplin (Labour, Hove)

I can safely say that unanimity will not be achieved on new clause 1.

I pay tribute, as I have on a number of occasions, to the work of all our reserve forces, whether they are deployed in Iraq, the Balkans or Afghanistan. The hon. Member for Canterbury was good enough to acknowledge that we have made changes to reserve forces during the past few months to recognise their greater importance. I told the Standing Committee the news about the Duke of Westminster a couple of weeks before the London Gazette announced it, but not to worry—I suppose that was my privilege in that situation.

Since we debated the issue in Standing Committee, I have met a number of reservists in Basra. As I expected, they are a fully committed and very determined group of men and women, and they are dedicated to Britain's cause in south-east Iraq. They are particularly committed to the reconstruction of Iraq and to their work with the local Iraqi community, which is testament to their skills. Many members of the reserve forces, which are doing a superb job in Iraq, are becoming increasingly frustrated at the lack of attention shown by the newspapers and television to their work developing water stations and sewers and helping schools and hospitals. Owing to the work of all our British troops, including our reserve forces, the public infrastructure of south-east Iraq differs significantly from its condition 18 months ago.

The hon. Member for Canterbury began the debate by discussing the current size of our reserve forces, and he does not see the Reserve Forces Act 1996 as a reason to reduce numbers. If we go back 10 years to 1994, however, the Territorial Army contained about 100,000 people.

Julian Brazier (Conservative, Canterbury)

No it did not.

Ivor Caplin (Labour, Hove)

It was very large, but it was seldom deployed or deployable. Today, the TA contains some 40,000 people and is deployable, which is something that Government and Opposition Members welcomed in an excellent Adjournment debate on the issue in Westminster Hall. The capability of the TA and the reserve forces in general is more significant today because they are more likely to be deployed.

Julian Brazier (Conservative, Canterbury)

I am listening to the Minister carefully. After the TA was cut by about one third, the Government announced that it was more deployable, and it has been deployed more often. Apart from the introduction of the mobilisation centre, which was announced by the previous Conservative Government, can he mention one single change that has made the reserve forces more deployable? More reservists are being deployed, but the resources to train them for deployment have been reduced.

Ivor Caplin (Labour, Hove)

I do not accept the basis of the hon. Gentleman's question. I went to Chilwell to speak to reservists as they were mobilised and found that the system is effective. I have talked to reservists in both Chilwell and Iraq, and they welcome the training and development that is part of the mobilisation process.

I make those points about deployment because it determines the pension issue. The House will not take a unanimous view on new clause 1 because, as the hon. Gentleman knows, voluntary reserve service, such as weekend training and annual camp in the TA, is not pensionable under the armed forces pension scheme. Service is pensionable when people are deployed. I entirely accept the point that the hon. Member for Portsmouth, South (Mr. Hancock) made about fairness to those who are deployed in Iraq or Afghanistan. Under the Reserve Forces Act 1996, we do, can and will use the power to make pensionable payments for those people, because they are deployed, or mobilised, and therefore acting in theatre.

Mike Hancock (Liberal Democrat, Portsmouth South)

The Minister makes an interesting point, which he has obviously researched. Will he give details of how many people over the past three years have been compensated in the way that he describes?

Ivor Caplin (Labour, Hove)

I cannot do so today, but I look forward to the parliamentary question that will naturally follow.

When the reservist is mobilised, he or she can ask the Ministry to make pension contributions to his or her civilian pension plan. That is how the 1996 Act works. New clause 1 is unnecessary, because we already have that power to make payments to civilian pensions.

I cannot tell the House how much it would cost to extend the scheme as the new clause proposes. It was suggested that it would not cost a lot, although we were not given any figures—that would have been interesting. I have a feeling that such non-mobilised reserve service pension arrangements would end up costing millions of pounds, but we can certainly look into the potential costs.

I want to draw some differences between those who are employed and those who are self-employed. Those who are employed are protected under the safeguards in the Protection of Employment Act 1977, which were enhanced by the Reserve Forces Act 1996. I accept that the situation is slightly different for self-employed people. As hon. Members will know from the debate in Westminster Hall, this is one of the areas to be considered in the review that I am undertaking with regard to statutory instrument 309, which will take account of the differences between employed and self-employed status. I explained the timetable for the review process, and I hope in next week's debate to be able to say more about where it stands and to give hon. Members clearer time lines. [Interruption.] I can see the hon. Member for Canterbury edging towards the front of his seat.

Julian Brazier (Conservative, Canterbury)

I thought that the Minister was about to sit down.

Ivor Caplin (Labour, Hove)

I should like to make a couple more points first.

The new clause would add nothing to the powers under the Reserve Forces Act, which allows us to make such contributions. The Bill ensures that reservists' arrangements will continue to be properly governed by the 1996 Act when we move to the new armed forces pension scheme. Two schemes will run, and the 1996 Act will be relevant to both. The powers that we have in those schemes will ensure that people are not out of pocket in terms of their pensions. That is because, as the hon. Member for Portsmouth, South said, they are doing a crucial job for our country, whether in Iraq, the Balkans or Afghanistan. If the new clause is pressed, I shall ask my hon. Friends to resist it.

Julian Brazier (Conservative, Canterbury)

I hope that it is in order, Madam Deputy Speaker, for me to say that when I moved the new clause I did not explain that my hon. Friend the Member for New Forest, West (Mr. Swayne), who has just come back from the Gulf, was unable to move it because he is at his father-in-law's funeral. He asked me to pass on his apologies to the House.

Although I am not persuaded by the Minister's arguments, I acknowledge that he made two helpful commitments: that the Government will consider the whole issue of the way in which the self-employed are looked after; and that he is willing to look into how much it would cost to introduce a wider scheme. It would perhaps be uncharitable to remind him that he still owes me a letter, because he promised to write to me about the points that I raised on unit structures during the Westminster Hall debate.

On the basis that we have those two pledges, I am happy to withdraw the motion.

Colin Breed (Liberal Democrat, South East Cornwall)

In view of what the Minister said about next week's debate, it would be extremely helpful if we could have by then some very rough figures on costs. I am sure that the actuaries could produce something in time.

Ivor Caplin (Labour, Hove)

Perhaps I should clarify the commitment that I gave. I did not say that I would provide figures on the proposed pension arrangements; I said that I would update the House on our review of statutory instrument 309 and reserve forces generally, which I detailed in the Adjournment debate in Westminster Hall four or five weeks ago. Nice try, though.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

Order. I must now put the Question. I am afraid that we have had speeches after the withdrawal of the new clause. I must now put the Question but, of course, Members may decide not to vote on it.

Question put and negatived.

New Clause 2 — Armed Forces Pay Review Body

Gerald Howarth (Conservative, Aldershot)

I beg to move, That the clause be read a Second time.

We had a series of very successful discussions in Committee. Although we were hampered in certain respects, and there were several fundamental disagreements, I think that the Minister will agree that we were able to deal with the issues in a courteous and civilised fashion. Conservative Members' criticisms of the Government—I suspect that their Back Benchers may have some, too—should not be misinterpreted. We are saying not that the Government are not supportive of our armed forces or careless with their lives and conditions, but merely that they could be doing better.

I pay renewed tribute to the Select Committee on Defence for the extensive work that it—or, if I may say so, we—carried out in examining these complex matters of pensions and compensation. One of its chief complaints was that the Bill is an enabling Bill. It contains virtually nothing save an unfettered and unlimited power for the Secretary of State to draw up such schemes as he thinks appropriate. We have only the possibility of a one-and-a-half-hour debate to consider and scrutinise schemes that are very extensive in their effect on the armed forces and detailed in the way in which they will affect their lives.

A second criticism was the lack of much of the detail of the schemes. No details about the early departure scheme were provided on Second Reading and were tabled only in Committee. I have outlined the two principal criticisms that the Select Committee on Defence made, and it is important to revisit some issues, not simply to rehearse earlier arguments but to give other hon. Members an opportunity to have their say.

The pension and compensation schemes have been subject to scant parliamentary scrutiny. I remind the Under-Secretary that, in the 2001–02 Session, 1,468 secondary legislation measures were tabled but only three were considered on the Floor of the House and we voted on only one. Last Session, there were no debates in the Chamber on secondary legislation. We must also bear it in mind that secondary legislation is not amendable. The Bill contains nothing about the schemes, which will have a huge impact on the lives of our servicemen and women. In Committee, we tabled amendments to include at least some of the main principles in the Bill.

Ivor Caplin (Labour, Hove)

I, too, do not want to repeat all the points made in Standing Committee, but perhaps we can make the ground rules clear. We are considering a new scheme for members of our armed services on or after 6 April 2005. It is not directly relevant to those who are currently serving unless they choose to transfer to the new scheme.

Gerald Howarth (Conservative, Aldershot)

That is a poor start by the Under-Secretary. We know that the new scheme that comes into effect next year will be mandatory for those who join on 6 April or thereafter, if the Bill reaches the statute book—perhaps that is a big assumption. However, the Under-Secretary glided over a fundamental issue, which I shall tackle shortly. Those who serve today and continue to serve beyond 6 April next year will face a choice. He accepted but brushed over that. They will have to choose whether to stay in the existing scheme or to join the new scheme. I leave aside compensation, about which there will be no such choice. However, it exists for pensions and it will affect servicemen and women and their families for the rest of their lives. The fact that there is nothing in the Bill about that makes it difficult for us to scrutinise the matter as we would have wished.

Another complaint that we made was that, unlike members of other public services such as the fire or police services, Her Majesty's armed forces had no representative body to speak up for them. We therefore called in Committee for independent oversight to be given to a body of, for example, representative trustees. The Under-Secretary rightly pointed out that an unfunded scheme cannot have trustees, and we accepted that. We welcome the fact that, last Friday, the Under-Secretary announced that he had considered the representations that we made in Committee. To be fair, there was concern in all parties in Committee about the lack of independent oversight of the armed forces pension scheme.

We are pleased that the Under-Secretary listened to our arguments but his announcement did not go far enough. We have tabled the new clause to include in the Bill an issue that the Government acknowledge to be important, and to add other matters on which the Under-Secretary's announcement did not go far enough. We welcome the fact that oversight will be given to the Armed Forces Pay Review Body. As I said in Committee, that organisation has worked well and is respected by everyone. Given that we all believe that our armed forces need to have confidence in the oversight of the pension scheme, they will be encouraged to know that the remit has been given to the Armed Forces Pay Review Body.

However, the review body's role in externally validating, as the Under-Secretary describes it, will be done

"in the context of their quinquennial valuation of the AFPS".—[Official Report, 30 April 2004; Vol. 420, c. 65WS.]

We are worried that we have no detailed statement of the exact powers that will be given to the Armed Forces Pay Review Body. Will it be limited to considering pension issues every five years, as the comment about the quinquennial review suggests? Can it maintain—as we believe that it should—a watching brief, and report as and when it considers that to be appropriate? We believe that that is a much better way of granting power to the review body.

If members of the armed forces knew that the matter would be considered not only every five years, but as and when those highly professional and splendid people who make up the Armed Forces Pay Review Body felt that the Government should take action or at least investigate a matter, that would have the added advantage of further consolidating confidence. I hope that the Under-Secretary will tell us how he envisages the pay review body's remit being effected.

Why will the Armed Forces Pay Review Body be constrained in making its views public until the following year's annual report is published? There may be a good reason for that, but if the body discovers something about pensions that should be drawn to the attention of the armed forces or to that of the House, it should be able to do so and not be constrained. If it looks into a matter and finds a cause for concern, it should not have to wait until the following year to publish its anxieties. That is an unacceptable limitation. I reiterate that there may be a good reason for that, but we need to know why the Under-Secretary has chosen that route.

Ivor Caplin (Labour, Hove)

Perhaps I can help. Last week, I announced a quinquennial review of the new armed forces pension scheme. That would not prevent the Armed Forces Pay Review Body from commenting on pensions in relation to recruitment and retention of current armed forces staff.

Gerald Howarth (Conservative, Aldershot)

That takes us a little further forward. If I understand the Under-Secretary correctly, he proposes to give the Armed Forces Pay Review Body a statutory remit whereby it must conduct a review every five years but will not be constrained from making a report to the Secretary of State or, as I would hope, to Parliament, if something arises in the meantime. Perhaps the Under-Secretary will confirm whether I am right.

Ivor Caplin (Labour, Hove)

The Armed Forces Pay Review Body reports to the Prime Minister. It is not in the Ministry of Defence in that respect. I am clear that it can consider all the issues that relate to recruitment, retention and pay. It makes the appropriate reports to the Prime Minister and we announce them to the House in a statement. Those terms of reference are unchanged. I propose that the body should undertake the additional work of examining every five years the workings of the new pension scheme. I shall say more about that shortly, but I hope that I have cleared the matter up.

Gerald Howarth (Conservative, Aldershot)

I take encouragement from the last part of the Minister's remarks, because one of the issues that will become apparent—it is not apparent now—is just how successful some of the new measures will be in retaining the servicemen and women whom we want and need to retain in our armed forces. None of us here today, not even the Minister, can say with any certainty that the measures will have the desired effect in that respect. I therefore welcome the fact that there will be a requirement to review every five years, but it seems, from what the Minister has said, that there will be an opportunity for the review body to make known concerns as and when they arise, rather than being limited to doing so every five years. I do not want to be churlish: I welcome that.

Given the importance of this issue, however, we feel that the new clause ought to be in the Bill. That would help the Government, because it would give them a clear framework within which to operate. We have included a number of other issues in the new clause that we felt ought to be addressed and to be given to the Armed Forces Pay Review Body as specific remits. Perhaps I can just go through some of them.

New clause 2(5) would require the pay review body to

"set out the arrangements to apply to servicemen and women who elect to transfer to a new Armed Forces Pension and Compensation Scheme."

As I have just pointed out to the Minister, this involves serious issues that must be addressed by every serviceman and woman who is serving in the armed forces next April—issues that are likely to affect them and their families until the end of their days. We raised this matter in Committee.

The Minister was present at our meeting yesterday with some of those who feel that the scheme has not moved on to help them sufficiently. Some of those people are in their 80s and 90s, and are living with a scheme that was established in the past. Whether they elect to stay in the existing scheme or move to the new one next year will be a matter of concern to them and to their families, and I envisage a great deal of debate on the issue in married quarters up and down the land, and certainly in my constituency of Aldershot.

In Committee, when we called on the Minister to make advice available to our servicemen and women, he said that the Ministry of Defence could not act as a financial adviser, and nor, by implication, could any member of the chain of command. Given the way in which the oversight of our financial services is administered today, I quite understand the elephant trap that might lie ahead if the Minister or those under his command were to give such financial advice.

The Minister helpfully provided us with a leaflet, however. I am not sure whether other hon. Members have seen it, but it is a little purple leaflet representing a tri-service view of these matters, entitled "The New Armed Forces Pension & Compensation Schemes". It sets out some of the key conditions and tells people:

"You can remain on the current scheme",

and

"You will get the opportunity to choose whether to stay where you are or transfer to the new pension scheme. You do not have to decide now."

Well, they are going to have to decide in due course, and these are momentous decisions. The leaflet says:

"Where can I find out more?"

and advises people, in the modern usage, to go to the MOD's website. I have managed to master the necessary technology to have a look at the website, and it does give some comparative examples of conditions under the existing scheme and what will apply under the new one. I have to say, however, that it is all pretty basic.

The leaflet goes on:

"If you have any general questions on the schemes, address them to your commanding officer or your local administration office in the first instance."

I suspect that the Minister has already advised those people not to offer anything that might constitute individual advice to individual soldiers, sailors or airmen, and to ensure that their remarks are of a very generalised nature. The leaflet continues:

"You can email general questions to the pensions team".

I have not done that yet, but I might give it a try. Here is the rub, however. The last sentence says:

"They will not be able to respond individually".

That is the issue. Our armed servicemen and women will not be able to look to their employer for individual advice.

Mike Hancock (Liberal Democrat, Portsmouth South)

The hon. Gentleman has been uncharacteristically generous to the Government in not repeating the condemnation of the Select Committee, on which he and I served, regarding this whole process. The Committee made it clear that the consultation on the process was "uninformative" and that the MOD had failed to grasp the importance of the issue to the service personnel involved. That leaflet is still vague in the extreme, and it still does not properly open the door for those issues to be discussed fairly with the individuals concerned. Does the hon. Gentleman agree that, once again, the Ministry of Defence has failed miserably to put its case properly to the people it serves?

Gerald Howarth (Conservative, Aldershot)

The hon. Gentleman and I both still serve on the Defence Committee, and we did indeed make those forceful criticisms. In fairness, however, this leaflet came out after the Committee's report was published.

Ivor Caplin (Labour, Hove)

indicated dissent.

Gerald Howarth (Conservative, Aldershot)

The Minister shakes his head, but I do not think that any of us knew that the leaflets were in circulation until we asked, in Committee, what advice was being given. At that point, the Minister stood up and told us that the Ministry had put out a little leaflet. The following day, he came armed with a supply of them so that we should know exactly what was being given to our servicemen and women to enable them to make up their minds. However, as the hon. Member for Portsmouth, South (Mr. Hancock) said, it is pretty generalised stuff, and I return to my point that the leaflet says that the pension team will not be able to respond individually.

In Committee, the Minister said that

"as part of our preparations for the transition, we are obviously considering how to provide and facilitate access to independent financial advice. That is the responsibility of a good employer, which is what the Ministry is."—[Official Report, Standing Committee B, 10 February 2004; c. 131.]

We concur with that, but so far, I see no evidence that any details of those preparations have been vouchsafed to us. Certainly, I have been given no new information that extends beyond this little leaflet. It is incumbent on the Minister to tell the House how the preparations for the transition are going, and whether he has come to any conclusion on how to provide and facilitate access to independent financial advice. That is the issue, and we and those whom we represent need an answer. The Minister is driving this measure through—I shall be contrary here and say that he has both gripped it and rushed it through, but I am in opposition and I am entitled to say that—and he is pressing ahead with the April 2005 deadline. We need to know what detailed provision he has made to facilitate access to independent financial advice.

The Minister also told us that plans were under way to provide comparative individual benefit statements to enable servicemen and women to make an informed decision. Fearful as we all are of the capacity of government to cope with any new IT system, he ought to tell us what progress has been made in establishing the system necessary for the provision of that information. He was very confident in Committee that this could be done, so we would like to know that the system will be up and running and that it will provide what is needed to supply the individual benefit statements.

Subsection (6) refers to the mortality and longevity assumptions, which underpin much of the complex debate on the affordability of the pension scheme. On Second Reading, my hon. Friend the Member for Mid-Sussex (Mr. Soames) said:

"During interminable debate on this issue, the Ministry of Defence has effectively moved the goalposts by changing the actuarial assumptions on which everything is based. As the Defence Committee reported, the expected cost of the existing scheme to the Ministry in 30 to 40 years' time has been recalculated from 22. per cent. to 24.5 per cent. of pensionable salary. The new scheme will reduce the estimated cost to 22 per cent. However, if the original actuarial assumptions were applied to the new scheme, it would cost 20.3 per cent. of pensionable salary, so the total value of the new scheme is 1.7 per cent. less than the value of the current scheme".

As my hon. Friend went on to say, that

"flatly contradicts the Government's claim that any savings in one area"

would go to

"enhance benefits elsewhere."—[Official Report, 22 January 2004; Vol. 416, c. 1500.]

However, he might regard the Chancellor of the Exchequer as a benefit.

Given the capacity of Government to manage—that is the word I use—the figures, it is essential that there is some independent scrutiny of how a scheme as important as this is arrived at. The mortality and longevity assumptions on which it is based should be in the Bill, hence proposed subsection (6).

Subsection (7) would provide for the Armed Forces Pay Review Body to keep under review the legacy issues, which are defined in subsection (12). The Minister and all of us are aware of the great concerns out there, particularly among those who retired some time ago or their widows, about the feeling that there are issues that have never been addressed, either by this Government or by previous Conservative Governments. Therefore, it would be helpful if we provided for the AFPRB to have a specific remit to keep those legacy issues under review.

That would help us and the Minister. Indeed, it would help me when we swap places after the next election, as we would be able to have some independent assessment. [Interruption.] My hon. Friends say that the Minister will not be here then. Well, Brighton and Hove Albion are doing pretty badly at the moment, so he may follow suit. It would help Ministers of whatever description if some well-regarded, well-respected and professional organisation could have a look at issues that have been of concern to a number of our constituents over a great many years.

Subsection (9) states:

"The Review Body may make to the Secretary of State recommendations for variations in the Schemes."

That would enable the AFPRB to keep the compensation scheme under review, as well as the pension scheme. It is important to recognise that we are dealing with two schemes—one relating to pensions, the other to compensation. Again, the proposal would assist the Minister, as the compensation scheme could be kept under review. I suspect that the way in which he proposes to change that scheme—I will come on to that when we discuss another new clause—is likely to cause problems for him and his successors. Therefore, giving the AFPRB a remit there would be valuable.

I hope that I have made a compelling case as to why we should include provisions on the review body. I acknowledge that the Minister has listened to some of the arguments and moved a long way to meeting our concerns. I hope that he goes the extra mile, as that would please us all.

Rachel Squire (Labour, Dunfermline West)

I welcome the fact that the new clause has been tabled and I welcome its contents, which raise a number of issues. I also welcome last week's written statement by the Minister on the Armed Forces Pay Review Body, which shows that he has indeed taken careful note of the concerns of the Select Committee, of which I am a member, and those expressed in Committee, as well as the views from a range of individuals and organisations. I am pleased that the AFPRB will now have a role in externally validating the provisions of the armed forces pension scheme.

The review body will enable all views to be expressed on the issues that involve all ranks of the armed forces. While debating and consulting on the Bill, I and others have been concerned about how much voice—or rather, as it often seems, how little—has been given to all ranks of our armed forces, instead of focusing on officers having their say. The most junior ratings and privates get little opportunity either to be informed of the proposals or to respond to them.

May I ask the Minister two questions about his response in last week's statement? First, I welcome the clarification he has given on the five-year proposal not constraining the AFPRB from considering recruitment, retention and pay more frequently. However, I still want to press him on whether he will consider the possibility of the AFPRB being able to consider matters related to the pension and compensation schemes more regularly than every five years. One of the interesting suggestions in the new clause is that a range of individuals serving in the armed forces and other organisations should be able to write to the AFPRB to express their views and concerns about the operation of the new scheme and how things are happening.

Secondly, and linking up with the question I have just asked, the Minister said in his statement that

"we plan that this will be done in the context of their quinquennial valuation of the AFPS, though more frequent examinations of the scheme provisions could be undertaken if wider developments justified this."—[Official Report, 30 April 2004; Vol. 420, c. 65WS.]

What does he mean by "more frequent examinations"? Could that mean every year? Will he give examples of the "wider developments" that would justify the AFPRB looking at things more regularly? The new clause suggests an annual review of the new scheme.

I welcome the fact that the new clause also considers consultation, the impact that the new scheme may have on retention and recruitment, the transfer arrangements and the AFPRB making a critical examination of the longevity and cost-neutrality issues, which have been addressed previously.

On consultation, I welcome the fact that the Minister and the Government have responded to some of the concerns that were raised about how little opportunity it seemed that Parliament would have to debate the detailed regulations, as they were introduced, to this enabling Bill. I welcome the assurance that statutory instruments will be available for discussion, and that the House will be able to give a negative response if it feels strongly about them. I am not content, however, with the way in which the consultation on the proposed new pensions and compensation scheme has been conducted over the past six or seven years by the Ministry of Defence. I always react strongly to the argument that says, "This is the way that things will be done, because that is the way that they have always been done", whatever the issue. Half of the population of this country—I and other women—would not have been allowed to vote or stand as Members of Parliament if that argument had been upheld and the established arrangement therefore maintained.

As for other aspects of the new clause, subsection (6) raises the issue of mortality and longevity, which was certainly an issue for me and other members of the Select Committee. The Armed Forces Pay Review Body should have an opportunity to consider the straitjacket, as we see it, of cost neutrality. Many of us are still concerned that the new armed forces pension scheme is not based on what our armed forces deserve but on how much they get now. Improvements are being paid for by reductions in benefit to compensate for the fact that people are expected to live for longer. In its report, the Select Committee made the point that the Government's proposals do not deal with what we considered was the likelihood that due to the reduction in service personnel, the MOD's total bill would decrease over time in spite of the increased life expectancy of all pensioners. Will the Armed Forces Pension Review Body be able to consider the fact that personnel are being asked to bear some of the burden of increased cost, rather than the MOD? I will listen with great interest to the Minister's response to the issues that have been raised by new clause 2.

Colin Breed (Liberal Democrat, South East Cornwall)

I endorse all the comments of the hon. Member for Aldershot (Mr. Howarth) and the hon. Member for Dunfermline, West (Rachel Squire).

I welcome the Minister's announcement that the pay review body's remit will be wider than it has been hitherto. Many of us believe that it is a pity that that was not the case some time ago, as it would then have been able to comment on the very scheme that we are now discussing. If the MOD had allowed that improvement to the remit of that body, we would have had the benefit of its comments. Nevertheless, the improvement is welcome.

On cost neutrality, I mentioned on Second Reading the fact that it was restricted to the pension scheme rather than applied to the whole remuneration budget. Now that the review body is considering remuneration, pay and pension, it is even more sensible to consider cost neutrality within the wider context of the total remuneration budget. At present the application of cost neutrality is so restricted that those strictures bear heavily on existing pensioners who will pay for some of the benefits of others.

I also welcome the fact that the layout of subsections in new clause 2 indicates clearly what the remit of the review body would be. From what the Minister has said, however, it seems that the MOD will still decide what matters the pay review body will consider, how and when it will do so, and even whether it is allowed to do so. It therefore strikes me that it does not have much independence, and the MOD will still be very much in charge, which diminishes the role that the review body can play. For instance, if the Select Committee decides in a year or two to reconsider the matter, will that pay review body be able to give its views, or will the MOD say, "Sorry, you must wait five years to give an opinion". That seems to diminish the value of what the ministerial statement was encouraging us to think was happening last week. This opportunity to debate new clause 2 is therefore extremely valuable.

The leaflet is helpful, although some might say that aspects of its wording are premature. It still gives no indication, however, as to where a serviceman might go to get independent financial advice. It may be that a serviceman will have an independent financial adviser. Where will an IFA get the right answers to his questions to enable him to give proper advice to his client? Such decisions may be very significant, and must be made well in advance of the implications taking effect. If they are unable in any way to gain the information necessary to make the correct decision, there is at least the opportunity of a further round of mis-selling. It will not be mis-selling in the sense that people are—deliberately or not—sold something that is not appropriate to them, but in the sense that the adviser had been unable to secure all the relevant information to ensure that the client got the right advice and was not in any way restricted or ill advised in terms of the decision to change to the new pension scheme. That is an important issue, and I welcome the leaflet, but I am not certain of the implications if somebody says, "That's fine, but I want precise information about my individual circumstances." Where will they go for that information, and how will that be addressed?

Mike Hancock (Liberal Democrat, Portsmouth South)

If the House agrees with the Defence Committee that the armed forces deserve a pension scheme that recognises the unique contribution that armed forces personnel make to the life of this country, it must also accept the advice that the Committee attempted to give to Ministers—that they would have to do more work on their proposals if best practice rather than cost neutrality was going to be the starting point for a review. Those words were spoken in the Defence Committee, by me and others, as far back as two years ago. Our report was published on 9 May 2002. It is a great disappointment to me that the Bill fails to grasp the point that we were making.

I congratulate the hon. Member for Aldershot (Mr. Howarth) on pursuing the issue in his new clause. I hope that—unless the Minister proves extraordinarily generous—he does not withdraw the motion, thus depriving us of an opportunity to divide the House. New clause 2 is fundamental to the fulfilment of the principles spoken of in the Defence Committee's comprehensive review of the armed forces pension scheme. In its present form, the Bill does not address those principles. The new clause would allow the review body to take account of changed circumstances and reflect what happens in the real world, rather than waiting for five years.

The Minister said that the body reported to the Prime Minister, not the MOD. What goes to the Prime Minister, however, is not a public document. The Prime Minister can make a personal decision on whether to act on it. A report on something so fundamental should be presented to the House so that it can decide whether there should be structural changes in the way in which the armed forces are compensated for accidents, death or illness, or in their pension arrangements.

New clause 2 would enable us to help armed forces widows—who spoke to the Minister and others yesterday about their problems, and their dissatisfaction with what has been done by successive Governments. The hon. Member for Aldershot was right to acknowledge that this is not just a one-Government failure, but a traditional failure of all Governments to recognise the difficult position in which many widows find themselves. Most Members of Parliament would agree that it is unacceptable, yet we choose to do nothing about it. The new clause would allow it to be examined and ruled on not by the Prime Minister but, properly, by the House.

I was pleased to hear from the hon. Member for Dunfermline, West (Rachel Squire), who, as a member of the Defence Committee, listened to the evidence. It took a long time for the Committee to hear it all. We did not rush our review; the Committee is not renowned for its speed when it comes to matters as important as the pension and compensation rights of members of the armed forces. We heard a huge amount of evidence from all who could possibly be seen to have an interest. In her speech, the hon. Lady acknowledged that there were still improvements to be made. I sensed a more than willing acceptance that new clause 2 would help rather than hinder the Bill. I hope that the Minister will recognise that it is not a wrecking proposition, and is intended not to harm the Government's case but to cover matters that the Bill does not cover properly.

Many of the problems of service personnel and their families will not go away, and we need a speedier vehicle to deal with them than we have at present. New clause 2 could provide it, and the Minister should welcome the new clause with enthusiasm. I hope that he takes a slightly more open view of it than he took, regrettably, of new clause 1, which he refused to consider. I also hope that the whole House will accept that if we are to live up to the expectation that we all claim to have that our servicemen and women should have proper pension and compensation schemes, it should not take five years to change aspects that are wrong.

A flexible approach should be taken, and issues of cost neutrality should not be the driving force. The hon. Member for Aldershot explained very eloquently that there would be a reduction in the overall cost to the MOD. On what may have been the first occasion on which the Minister was allowed out of the MOD on his own, he addressed the Defence Committee on this issue. He dealt with a complex and difficult case remarkably well for someone who had been in his post for only a short time. He, I hope, recognises that all is not well in the armed forces, that we need to get it right, and that the Government's proposed scheme will give rise to widespread concern and dissatisfaction.

The way in which we are informing service personnel about the proposals is not adequate. I do not think that the leaflet goes anywhere near appreciating the complexity of the issues, and the MOD does not even provide personnel in the scheme with a detailed analysis of how they would benefit if they changed their arrangements. Does the Minister dispute that? I should welcome an intervention from him explaining how people in that position can obtain definitive details of the benefits that they would lose and those that they would gain, but I do not believe that the MOD can provide such details.

The Government's proposals lack clarity. New clause 2 gives us an opportunity to do things properly by allowing the House to examine recommendations submitted to it.

Hugh Robertson (Conservative, Faversham and Mid Kent)

I refer hon. Members to my entry in the Register of Members' Interests.

I support the new clause, although I shall probably speak in its favour much less eloquently than the hon. Member for Dunfermline, West (Rachel Squire)—who, as usual, spoke extremely well—and the two Liberal Democrats.

We should be in no doubt that one overriding factor ought to influence our deliberations. Our armed forces are wholly unlike any other part of society, for a simple reason: they are expected to fight and, occasionally and regrettably, to die for their country. It is perfectly reasonable for them, in return, to expect security in their retirement.

Sadly, we live in an age in which members of the public distrust Government, and I am sorry to say that members of the armed forces distrust the MOD. I do not particularly like that, but it is a fact of life. That is why we need the form of independent governance offered by new clause 2. Although I welcome the Government's proposals, they do not go far enough. I therefore hope that the Minister will accept the new clause.

Ivor Caplin (Labour, Hove)

I was going to begin by congratulating the hon. Member for Aldershot (Mr. Howarth) on his technological skill in being able to access a website. He can explain that to the hon. Member for Mid-Sussex (Mr. Soames) later. But then the hon. Gentleman made a rather poor joke about football, revealing his lack of understanding of the game. Because he is an Aldershot Town supporter, however, I will forgive him. I shall confine myself to congratulating his team on reaching the Nationwide Conference final play-off. My team is in the second division play-offs, which will take place in a couple of weeks. We greatly look forward to them. That was a digression, and may represent the only point of agreement in this exchange. We shall see.

There are a number of issues with which I want to deal in this important debate. I welcomed the comments of the hon. Members for Aldershot, for Faversham and Mid-Kent (Hugh Robertson) and for South-East Cornwall (Mr. Breed) and my hon. Friend the Member for Dunfermline, West (Rachel Squire), who themselves welcomed the announcement that I made to the House last week. What I shall say now constitutes a response to the views of both the Select Committee and the Standing Committee considering the Bill. In the Standing Committee we discussed at length the whole issue of independence, and shared views on the various legal niceties in which we would have to become involved.

I hope that the House will accept that, given that it is only seven days since I made the announcement, some details are still being worked out. My officials are in discussions with the chairman of the pay review body as we speak on the details of how we will conduct the reviews. I understand why the House is so interested in the discussions so, when they are complete, I undertake to make a further statement to the House in the usual way to keep Members advised of progress. I make that undertaking because we are talking about the new scheme and the first review might not take place until 2010, so that the scheme has time to settle down.

The hon. Member for Aldershot and my hon. Friend the Member for Dunfermline, West have asked why we chose the period of five years. A number of pension schemes choose a period of five years to look at the way in which things have changed, if at all, in that period. I was a trustee of a pension scheme before coming to the House and my experience is that there were sometimes very small changes over a long period in the nature of pensions in the wider economy. Considering the changes is one of the remits that the AFPRB will naturally have. Five years is about the right time. It will allow the scheme to come in and allow the body to take stock of it in order to prepare a report for 2010.

Hugh Robertson (Conservative, Faversham and Mid Kent)

I take what the Minister says at face value. However, like him, I worked in the pensions industry for a while, albeit on the other side, before coming to Parliament. We were reviewed every three years, and almost every commercial firm is engaged in rolling three-year reviews. That is standard in the commercial world. The time period could be appreciably shorter than five years.

Ivor Caplin (Labour, Hove)

I accept that entirely. Triennial valuations are not uncommon in pension funds. However, in this case, we are not valuing a fund, and that might be the difference. We are asking the AFPRB to review the scheme as a whole and its conduct as the main armed forces pension scheme.

I want to say a few words about the work of the Select Committee. As my hon. Friend the Member for Dunfermline, West knows, I very much value the work that she and her Committee undertook on this issue. As Members will recall, we made sure that the response to the Select Committee was published in time for Second Reading. It was published in record time as opposed to the normal period of eight working weeks that we could have taken if we had wanted to. We did that because I believe that the Select Committee plays an important part in maintaining a watching brief on many of the issues relating to the armed forces. I hope that it will continue with its brief, and one or two interesting inquiries are under way at present. We all wish the Committee an interesting time whenever it gets to interview those people whom they invited last night to appear before it.

I turn to the issue of choice. I have used the word "choice" constantly throughout our debates, because the armed forces will have a choice when we get to the period after 6 April 2005 provided, as the hon. Member for Aldershot reminded me, the Bill gets through both Houses. I should have added that proviso earlier.

It might help Members if I remind the House of what I said at 4.45 pm in a sitting of the Standing Committee. I pointed out:

"New clause 13"—

which was tabled by the hon. Member for Aldershot and his colleagues—

"would require the Ministry of Defence to provide each service person eligible to transfer with a comparative benefit statement. I have already indicated that we intend to do that, and I recognise the importance of ensuring that our current service personnel have the information they need to make an informed decision on which pension scheme will meet their personal needs."—[Official Report, Standing Committee B, 24 February 2004; c. 218.]

The view that I expressed then has not changed at all, except that we are progressing our work on how that advice should be offered.

We are in discussion with a consortium of independent financial advisers on the services that they might be able to provide and the terms under which the services might be provided. I make it clear from the Dispatch Box on behalf of the Government that the Ministry of Defence and the chain of command are not licensed to give such advice. Therefore, in the transfer period window—it will not be April 2005, but could be a period of more than two years—people will get an individual pension benefit statement and they will then choose whether they wish to move to the new scheme. They will have the opportunity to seek independent financial advice to help them to make their decision. That will help us to avoid the problems of pension mis-selling that the hon. Member for South-East Cornwall reminded us about. That took place in the 1980s, and I know quite a lot about it.

I fully expect the arrangements that I have described to be in place in good time to enable the transfer arrangements to take place. Hon. Members who served on the Standing Committee will know that I am reluctant to suggest dates for the introduction of computer system technology, and they have accepted that it might be wise of me not to do so.

I come now to the new clause. We have taken an important step forward in inviting the AFPRB to carry out work for us in a professional way and on a quinquennial basis. As I have said, if the body feels in any of its annual reviews that it wants to make recommendations about parts of the terms and conditions, it will be free to do so. However, completely separate from that—I emphasise that this is applicable only to the pension scheme—there will be a piece of work to deal with the pension scheme itself.

The new clause seeks to establish a much wider role for the AFPRB. In my statement last week, I tried to set out the basis of the discussions and agreements that I have reached with the body and its chairman to bring about the change. The role that I have announced deals directly with the concerns that were expressed in Standing Committee and on many other occasions about the need for external and independent validation of the armed forces pension scheme.

The AFPRB will compare pension scheme arrangements with practice elsewhere in the wider economy and consider the extent to which those arrangements meet the recruitment and retention needs of our armed forces. It will publish the observations in an annual report after the completion of the first five years of the scheme in 2010, and the Government are committed to responding publicly to that report.

The work that I have asked the AFPRB to undertake is clearly focused on the armed forces pension scheme and the current pension arrangements that we are discussing in the context of recruitment and retention. It would not be appropriate for the body to consider as part of its remit any of the legacy issues that the hon. Member for Aldershot and others have raised.

Gerald Howarth (Conservative, Aldershot)

Why not?

Ivor Caplin (Labour, Hove)

For the reasons that I have set out. The AFPRB is being asked to look at the new pension scheme and to report on that and its conduct in relation to a quinquennial review. It is not being asked to look back on the legacy issues that the hon. Gentleman has already accepted occurred primarily under the Conservative Government.

Mike Hancock (Liberal Democrat, Portsmouth South)

I am delighted that the Minister has given way—he is being extraordinarily generous. I understand his reply to a certain extent, but if the AFPRB is not the appropriate vehicle through which to decide legacy issues, who will decide on such issues? Who will take proper account of the plight of servicemen who have been denied pensions so far, or of those who have problems with their pensions? What about widows and other groups such as the Gurkhas?

Ivor Caplin (Labour, Hove)

The AFPRB is clearly not the right vehicle. Since I have been in this post, I have always been happy to debate issues such as reserves and cadets with Members, and if the hon. Gentleman wants to debate this issue further, he can do so. I do not believe that the AFPRB, which will deal with the recruitment and retention of our armed forces, is the right vehicle for examining the so-called legacy issues raised by the Forces Pension Society, among others.

I cannot see why the AFPRB should get involved in the transfer arrangements for existing personnel; that would certainly be the wrong way to go. I have described the way in which we anticipate that the transfer procedure will be conducted. A pension statement will be provided, and it will be possible to seek independent financial advice. We certainly have not discussed the idea that the AFPRB should get involved in decisions on transfer arrangements.

I cannot support new clause 2, and if it is pressed to a Division I shall urge my hon. Friends to resist it. My reasons for not supporting it are simple. We have made progress in the past three months in terms of external validation of the pension scheme. That is a big and important step for this House in the scrutiny of armed forces pensions, and it constitutes a new validation of the pension scheme itself. That is the right way to go about matters. The AFPRB has the right skills and ability for the task, and working on a quinquennial basis will benefit the new armed forces pension scheme in the long term. I shall therefore resist the new clause if it is pushed to a vote.

Gerald Howarth (Conservative, Aldershot)

I want to start on two notes of agreement: the prospects for Brighton and Hove Albion, and for Aldershot's return, hopefully, to the Football League. I thank the Minister for his good wishes, and I convey my fraternal greetings to Brighton and Hove Albion. On a serious note, I welcome the Minister's recognition that an improvement could be made, and his having made it. I am extremely grateful to my hon. Friend the Member for Faversham and Mid-Kent (Hugh Robertson), and to the hon. Members for Dunfermline, West (Rachel Squire) and for Portsmouth, South (Mr. Hancock), for their support for new clause 2.

In his closing remarks on new clause 2, the Minister seemed to acknowledge its merits and to accede to the extension of the AFPRB's remit to one or two other areas that were not envisaged. He said that in his view, the AFPRB is exactly the right body to conduct the review of the pension arrangements. I of course agree, but it is also the ideal body to examine legacy issues and transitional arrangements.

Ivor Caplin (Labour, Hove)

The hon. Gentleman is probably not surprised at my rising to reply. The term "pension arrangements"—if I did indeed use it—is one to which the industry is well accustomed. It uses that term to describe a new pension scheme, as many Members will testify. Which pension legacy issues does the hon. Gentleman think should be dealt with under the terms of new clause 2(12)?

Gerald Howarth (Conservative, Aldershot)

In fairness, most of them. The Minister is as familiar as I am with the arguments concerning post-retirement widows. There is also the "trough" issue, which has exercised us all. These are difficult issues, and I am not suggesting that the Minister is uniquely to blame in this regard. I have tried to facilitate a sensible debate in this place, which is what the public want, rather than the trench warfare that we sometimes engage in. That said, they seem to like a bit of that as well, particularly on a Wednesday and in the light of the new leader of the Conservative party.

We all have constituents who are very exercised about these issues, and who write to us about them. I genuinely felt that the new clause was a means by which I could offer not just the Minister but all of us a forum through which these issues could be resolved. Those who are concerned and feel hard done by would respect a decision taken by the AFPRB; however, I suspect that they are less respectful of the decisions of Ministers. The approach seemed a sensible one, and I would not want to put a limit on the legacy issues to which new clause 2(12) refers.

My hon. Friend the Member for Faversham and Mid-Kent raised the question of a three-year or a five-year review. Frankly, I am not fussed, so long as the AFPRB's remit enables it to address issues of concern as they arise. My hon. Friend made an extremely useful point by way of reference to the pensions industry, but as long as the AFPRB has the power to consider such issues at any time, my concerns will be met.

The Minister mentioned individual benefit tables, which are extremely important to all our constituents and to those who serve in the armed forces. He said in Committee that he was working on a plan to ensure that they are provided, but it would help if he were kind enough to tell us how matters are progressing. Given that the 6 April 2005 deadline is approaching, the fact that the plan is not yet in place is a cause for concern. The Minister suggested that for those who continue to serve and who straddle the 6 April 2005 date, there will be a two-year window of opportunity for them to make up their minds. If he cannot provide individual benefit tables, will he undertake to ensure that the two-year period is a rolling window of opportunity? We do not want to discover that, 12 months after the date of introduction of the new scheme, people have only a year in which to make up their minds.

Ivor Caplin (Labour, Hove)

I understand the hon. Gentleman's point, and it is important that we get the pension benefit entitlement statements out to serving members of the armed forces. I assure him and the House that I shall make a careful review of the progress that we are making towards achieving that. We will try to ensure that we meet the timetable. We have followed the good example of a civil service scheme, which we briefly discussed in Committee. That scheme also used, I think, a two-year window. If that were to change, I would come back to the House to explain why.

Gerald Howarth (Conservative, Aldershot)

That is excellent. What we all want to know is that the Minister will keep us informed of progress on a regular basis. The Minister also suggested that the transitional arrangements were not appropriate matters for the pay review body to consider. Again, I believe that they should be and that failure to include them is a lost opportunity.

I do not, however, intend to press the new clause to the vote, notwithstanding the splendid support that I have received across the Chamber, for which I am extremely grateful. I have two reasons. First, the Minister has already acceded to some of our requests, so it would be churlish to kick him in the teeth and tell him to go away and do better. We would like him to do that, but, secondly, he has explained that he is still working on the details. In fairness, I am bound to give him the opportunity to conclude those details.

Hawks in the other place will be watching our proceedings closely, among whose number are certain gentlemen of a greater rank than the Minister or myself, who stand by to protect the interests of those who were once under their command. The pressure will be on the Minister to work out the details in time for them to be considered in the other place. As I said, I shall not press new clause 2 to a Division, but I hope that it will have been noted in the other place that the remit of the pay review body could readily be extended to cover issues that are of concern to many people.

For reasons that I have explained, I believe that it would be sensible to withdraw the new clause and I sense the feeling of the House that that is right. I would not stand in the way of any other hon. Member who wanted to press the new clause, but I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 3 — Burden of Proof

Gerald Howarth (Conservative, Aldershot)

I beg to move, That the clause be read a Second time.

New clause 2 dealt with one of the key new issues in our proceedings and it was appropriate to debate it at some length. Other provisions were dealt with in Committee and the House should have an opportunity to debate them again, but I hope that we can make rather swifter progress than on new clause 2.

New clause 3 provides for the existing burden of proof in compensation claims to be retained. The Government are seeking to change the existing rules concerning the onus and burden of proof. As matters have stood for the last 60 years, there is a compelling presumption in favour of a claimant whose appeal is brought within seven years of leaving the service. That is for a very good reason. The factors to which claimants are exposed in service life are in many ways different from those in civilian life. It is another example of many where it has been demonstrated that our armed services are different from the rest of society.

We believe that it is wrong for the Government to say that the proposals use the modern "balance of probabilities" standard of proof. There is nothing modern about this. For 60 years, Parliament has recognised in respect of service personnel that it is appropriate to have different standards of proof, just as there is a difference between civil and criminal standards of proof. To suggest that it is not unfair discrimination against service personnel is mischievous. The truth is that, by changing the standard of proof, a valuable right that recognises the particular factors in service life is being withdrawn.

The Royal British Legion, which represents 93 per cent. of all claimants, has analysed a representative sample of cases and demonstrated that, if the standard of proof were altered, 57 per cent. of all cases would not be eligible for a war pension and that a further 62 per cent. would fail on appeal. All the Minister would say in Committee was that he did not agree with the methodology of the Royal British Legion, but I remind him that that organisation, at the expense of voluntarily raised funds, represents people who are taking on their former employer to try to get a better deal for disabilities that they believe are attributable to their work in the service of the Crown.

The Select Committee said:

"Because of the special risks that Armed Forces personnel are required to run, and because they are likely to be involved in situations of great uncertainty, with uncertain effects on their health, we continue to believe that the onus should remain on the Government to prove that service was not responsible for causing or worsening a condition for which a compensation claim is made."

The Select Committee even sought to help the Government by attempting to meet them halfway. It proposed a double test under which a claim would fail either if

"the claimant is unable to prove on the balance of probabilities that a condition was due to service"

or if

"the MoD is able to prove on the same standard of proof that the condition is not due to service."

Ministers did not even consider that. All the Minister did in Committee was to ask me whether I was backing the Royal British Legion or the Select Committee. I explained that we were backing the Royal British Legion's argument, but it was, of course, the same as the Select Committee's argument. As I said, the Minister failed to recognise that the Select Committee sought to meet him halfway by providing a compromise solution, and it was inconsiderately brushed aside.

Is it the Government's intention to remove a standard of proof that has stood the test of time and recognises the special factors of service life in order to deprive such a large body of former service personnel an entitlement to a war pension? We do not believe that the proposed new tariff system is an acceptable substitute for the current arrangements and unless the Minister can respond more positively than he did in Committee, I am afraid that we shall have to press the new clause to the vote.

Ivor Caplin (Labour, Hove)

Perhaps the hon. Gentleman can help me and the House, as we have had only 24 hours to examine the new clauses. Does new clause 3 apply both to the pension scheme and the compensation scheme or only to the pension scheme? From reading it, I am not clear about that.

Gerald Howarth (Conservative, Aldershot)

I suspect—I may need to take advice—that it deals principally with the burden of proof in compensation cases. Mutatis mutandis, as they say in Rome, what applies there might also apply to pensions. The Minister may wish to develop his point in his reply. I do not want to drag the debate out, as we had an extensive discussion in Committee. The issue was a matter of great concern to the Select Committee and it is a matter of concern to the Royal British Legion. There are wide-ranging concerns and the Government have not made a proper case for change. I take the view that, if it is unnecessary to change, it is necessary not to change.

Rachel Squire (Labour, Dunfermline West)

First, I declare an interest. I am the honorary vice-president of the Dunfermline branch of the Royal British Legion Scotland. My association with that organisation has clearly influenced my views, as have veterans throughout my life.

I welcome the opportunity to raise the concerns of the Royal British Legion Scotland and the Royal British Legion in respect of the proposed new compensation scheme. As has been said on several occasions, under the present system a claimant will receive a war pension if the Ministry of Defence cannot prove beyond reasonable doubt that an injury or illness was not caused by events occurring during that person's time in service. The proposals in the Bill will mean that service personnel will have to prove that, on the balance of probabilities, their injury resulted from their time in service.

The Royal British Legion has told me that it believes that the proposals will mean that 60 per cent. of all new claims from ex-service personnel will fail. Another factor is the introduction of a time limit, which will mean that claims must be made within five years of an incident taking place.

Angus Robertson (Scottish National Party, Moray)

Does the hon. Lady agree with the Royal British Legion that claimants will be deterred from making claims if the onus of proving responsibility is placed on them? In other words, they will not make a claim in the first place.

Rachel Squire (Labour, Dunfermline West)

I agree with the hon. Gentleman. In my constituency experience, I have found it difficult, in other circumstances, to persuade people to register claims when similar barriers and pressures are encountered.

That leads me to my next point, which is that many people are unaware of time limits placed in respect of claims, for example under employment legislation. They are often unaware of what they are entitled to claim.

I urge my hon. Friend the Minister to take into consideration as well the fact that, when a claim must be made within a five-year period, the condition to which the claim could legitimately apply may not have made itself felt. In other words, a person may not know that he or she is suffering from an illness or injury, as a complaint may take many years to develop.

Another problem arises in connection with handling claims when medical records are inadequate or incomplete. I hope that the Minister will be able to say whether he or his civil servants have consulted other Departments about the problems that can be encountered when a person tries to obtain medical records and other records from a long time ago. If there has not been wide consultation on that matter, I suggest that talks be held with ministerial and civil service colleagues in the Department of Trade and Industry. I have been involved with compensation claims lodged by miners and I know that some of the problems and delays arising out of those claims have been owing to the inadequacy or lack of medical records that go back several years.

Although I accept that the present compensation scheme is an unusual benefit, I believe that our armed forces have deserved it in the past and that they will continue to deserve it. I agree with the hon. Member for Aldershot (Mr. Howarth) and my colleagues on the Select Committee: our service personnel run special risks and are involved in situations of great and constant uncertainty. The impact that that can have on their future health is beyond easy regulation or surveillance.

I urge my hon. Friend the Minister to consider retaining the current burden of proof in the new compensation scheme. At the very least, I hope that he will say that consideration will be given to the double test proposed by the Select Committee, that he will take the new clause away for further examination and that the matter will be brought back to the House for further discussion.

Colin Breed (Liberal Democrat, South East Cornwall)

I agree entirely with the two previous speakers. I want to make two additional points.

First, the Government claim that the new compensation scheme is in line with modern practice, although, as has been said, it is not particularly modern. However, the MOD appears to have been selective when it comes to the aspects of modern pension and compensation schemes that it wants to introduce. It seems to me that the selection has revolved around whether the Government can save money. I suspect that the motivation behind the proposal is not so much a desire to modernise the scheme as to make further cost savings. Everyone accepts that it will be much harder for complainants to succeed with the cases that they bring. That being so, fewer claims will be paid and money will be saved.

Secondly, even the existing system is unfair. Claimants have to fight an unequal battle. The MOD has unlimited resources to fight a claim and can prevaricate for years. If even more inequality is to be introduced by changing the standard of the burden of proof, that would be grossly unfair to people who want to make a claim.

The Royal British Legion does a magnificent job in supporting claimants, although at terrific cost, as no legal aid is available for compensation claims. The Select Committee deliberated for a long time on this matter and came up with a wholly reasonable solution. If that solution were implemented, some practical problems might arise and there could be great scope for prevarication, but the Select Committee at least attempted to resolve the matter and recognised the need for fairness. It behoves the Minister to say exactly why the MOD wants to change what is a fundamental aspect of compensation claims.

The new scheme will shift the burden away from the MOD and on to claimants. It has been pointed out that that will make it harder for people to make claims. As a result, a significant number of people will be deterred from even beginning an attempt to take on the MOD.

I am glad that it appears that the matter will be put to a vote. I and my colleagues will certainly support the new clause.

Mike Hancock (Liberal Democrat, Portsmouth South)

I am slightly more optimistic than my hon. Friend the Member for South-East Cornwall (Mr. Breed). I hope that the Minister will see that the Government are making a shabby and shameless proposal in respect of compensation claims and that he will therefore accept the new clause. Anything else would fly in the face of what the Minister said that the Bill attempts to do.

People in our armed forces and their families must be treated fairly and equitably. That was the conclusion of the investigation by the Select Committee into the current legislation. In the much wider review that the Committee conducted in 2002, we looked specifically at the burden of proof. I defy any hon. Member to say that it is easy to get information about service personnel out of the MOD. Those seeking compensation find it extraordinarily difficult to obtain their medical records and a later amendment refers to that problem. The Defence Committee report also explains how difficult it is to obtain any proof from the Ministry of Defence. Some service personnel who have photographs and medals to prove their service in a certain location have been told that they were not in those places, because of the inaccuracy of the Ministry's records. How can the burden of proof be placed on those seeking compensation, not on the MOD? That is what happens under the current system, but the proposals in the Bill beggar any belief in fairness and justice. I thought that social justice and fairness under the law were high priorities for our party of government. It may aspire to provide those things to all citizens, but obviously not to members of the armed forces.

The hon. Member for Dunfermline, West (Rachel Squire) mentioned the coal industry. Together with my local newspaper in Portsmouth, I am pursuing, on a daily basis, claims on behalf of service personnel, ranging from admirals to able seamen, who have been affected by asbestos-related illnesses, many of which do not materialise for 20 or 30 years. Trying to satisfy the standard of proof for such claims is all but impossible.

The hon. Member for Aldershot (Mr. Howarth) said that in Committee the Minister asked him whether he supported the position of the Royal British Legion or the Defence Committee. That question is beyond belief, because they were saying the same thing. Every day, the Royal British Legion picks up the pieces of shattered and broken lives and fights to get people the compensation that they have been denied. Hon. Members are right to say that the Bill will mean that fewer people will make claims. We may say, cynically, that the MOD wants to make it so difficult that people will not make claims. It is already difficult to obtain the evidence needed to make a successful claim and the Minister failed to recognise that the Royal British Legion made that exact point and so did the Defence Committee.

The Defence Committee offered an olive branch in the form of a solution that would enable the MOD to meet just over 50 per cent. of the ambitions of the Royal British Legion. The MOD refused. It would not even agree to retain the status quo, because it wants to screw down on those making a claim. Claimants will have to meet a standard of proof that goes beyond what most of us would consider reasonable. Some of those hon. Members who will be persuaded to vote with the Government today may, in a year or two, contemplate fighting a constituent's case for compensation. With the proposed standard of proof, they will find it very difficult to obtain the compensation that their constituent deserves.

I ask hon. Members not to shame this nation by voting against new clause 3. That is what most reasonable people would expect—[Interruption.] The Minister may be cynical enough to believe that this is a laughing matter, but those of us who deal with such claims regularly will know that my comments are heartfelt. I often meet claimants who cannot satisfy the standard of proof required. The MOD frequently asks for more evidence before agreeing to consider a case when it knows very well that the information needed has been in its possession and has either been lost or shredded. That is not good enough. The new clause offers a little hope for people who should get much more support. The Government should be ashamed of their proposals.

Ivor Caplin (Labour, Hove)

For the record, I was not laughing and I take this matter very seriously. I draw the House's attention to the Government's response to the Defence Committee. It might be helpful if some hon. Members who have contributed to the debate were to refer to the report of the Committee that we have been considering, which is the one that was published in December, and our response, which was published in January. Paragraphs 69 and 70 of that report deal with the compensation proposals and detail why the Government have put them forward.

We have a technical problem with the new clause. The hon. Member for Aldershot (Mr. Howarth) graciously confirmed that he intended it to affect the compensation scheme, but I am advised that as drafted it would affect the pension scheme. In saying that, I am trying to be helpful and I recognise that he has raised an issue for debate in connection with the compensation scheme.

Gerald Howarth (Conservative, Aldershot)

We are always delighted when the Minister seeks to be helpful and we appreciate it. The technical issue may need to be addressed, but the Minister is a most capable man and it is not beyond his wit to provide the changes necessary to give expression to the will of the House.

Ivor Caplin (Labour, Hove)

I do not know about that, but I shall do my best.

I recognise the role that the British Legion plays in many cases. My hon. Friend the Member for Dunfermline, West (Rachel Squire) is the president of the Dunfermline branch—

Rachel Squire (Labour, Dunfermline West)

Vice-president.

Ivor Caplin (Labour, Hove)

I suppose that we all know someone else who could be the president of the Dunfermline branch of the Royal British Legion. I met the British Legion this morning, together with the parliamentary Gulf veterans group. We had an interesting 45 minutes of discussion and I certainly value the work that the organisation does. We are in further discussions.

In Committee, I said that we doubted the validity of the issue that the British Legion had raised about 60 per cent. of cases. We have now joined with the British Legion to consider the methodology that it used and we suspect that it will come to accept that its conclusions were not quite accurate. We shall also discuss the compensation scheme.

The balance of probabilities is the key and we consider it right to adopt that standard of proof, as outlined in the Bill. My right hon. Friend the Secretary of State made that clear on Second Reading, in answer to an intervention by the hon. Member for Faversham and Mid-Kent (Hugh Robertson). When we decided to adopt that standard of proof, we asked an independent firm of consultants to consider that aspect of the compensation scheme. The consultants confirmed that

"the proposed standard of proof is reasonable."

I accept that the onus has moved from the MOD to the individual, and I shall outline my reasons for believing that to be a reasonable change.

The Department has clear responsibilities. I understand and accept that. We have to ensure that service records and medical records are up to date. I do not know how many more times I can say this, but I have made it clear—starting at the Select Committee on 5 November—that if there is a failure, especially in medical record keeping, in relation to compensation cases, the Department will accept responsibility. I said that in the Standing Committee, I said it in the Select Committee and I have just said it again on the Floor of the House. The point is also reflected in our response to the Select Committee.

At the Ministry of Defence, we understand, I hope, our responsibility for record keeping. If there is a failure, especially in medical record keeping, we shall accept responsibility. We are not trying to get out of paying compensation; far from it. We want to ensure that we pay compensation to the right people at the right time.

One of the things that the new scheme will allow us to do, which we are not allowed to do under the current one, is to pay compensation to those who are still employed in our armed forces. The existing scheme requires people to leave the armed forces.

I believe that the "balance of probabilities" standard of proof that we have adopted for the compensation scheme is in line with practice in most occupational pension schemes and in the civil courts. The "beyond reasonable doubt" standard of proof is not appropriate to a no-fault occupational scheme and would be out of line with current good practice, where evidence-based decisions are the norm, taking account of modern medical understanding and record keeping. As I said, we are clear about the responsibilities for record keeping that lie with the Ministry.

Robert Smith (Liberal Democrat, West Aberdeenshire and Kincardine)

Will the Minister give way?

Ivor Caplin (Labour, Hove)

I was just about to end my remarks, but I welcome the hon. Gentleman to the debate.

Robert Smith (Liberal Democrat, West Aberdeenshire and Kincardine)

Can the Minister clarify how wide-ranging his commitment is? Would the assumption that the claim was valid apply in all cases where records were missing, especially those of Gulf war veterans?

Ivor Caplin (Labour, Hove)

No, that is not what I said. I said there would still be a need to lodge a proper compensation claim, but that there are clearly responsibilities on the Ministry of Defence to ensure that proper records apply. For the benefit of the hon. Gentleman, we are discussing a new compensation scheme, which will be effective from 6 April 2005 and will apply to all members of the armed forces. Obviously, any events that occur up to 6 April 2005 will come under the current compensation arrangements; we are discussing only the new compensation arrangements this afternoon.

In the light of my comments, I hope that the hon. Member for Aldershot will understand why I have to resist the new clause.

Gerald Howarth (Conservative, Aldershot)

Once again, I extend my gratitude to the hon. Members for Dunfermline, West (Rachel Squire), for South-East Cornwall (Mr. Breed) and for Portsmouth, South (Mr. Hancock) for their support for the new clause. I know that, like us, the Minister regards the issue as important and does not take it lightly.

I welcome some of the undertakings that the Minister has given, especially on medical records. All Members know that that issue has been very badly handled by the Ministry of Defence for a long time and that, from time to time, our constituents suffer accordingly. I am also pleased that the Minister is making up to the Royal British Legion and talking about methodology. That is welcome.

I hear what the Minister says about modern medical understanding, which is to be applied to the claims under consideration, although I have to say that there is no reason that modern medical understanding should not be applied to the existing standard of proof. There is no reason why it would not be equally helpful to the MOD in resisting a claim from someone "modern medical understanding" felt was not injured as a result of service to the Crown.

The argument has been well rehearsed and the issue is clear. The question is simple: are we to give the balance of advantage to those of our fellow citizens who put their lives on the line? This is not just another occupational pension scheme and nor is it just another occupational compensation scheme; it is a scheme for some very special people in our land—Her Majesty's armed forces. The Opposition and other Members feel that we owe it to our armed forces to give them the benefit of the doubt, and that means the Ministry of Defence having to prove beyond reasonable doubt that their injuries were not sustained by service to the Crown. Given the Minister's statement, I intend to press the new clause to a Division.

New Clause 4 — Full Career Pensions

Gerald Howarth (Conservative, Aldershot)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss new clause 5—Early departure—

'(1) Those serving 18 years and having reached age 40 (whichever is later) shall be entitled to a system of Early Departure Payments.

(2) Individuals meeting the requirements of subsection (1) shall receive payments until the preserved pension comes into payment at age 65.

(3) The Secretary of State shall by order set out details of these payments.

(4) The payments will be monitored by the Armed Forces Pay Review Body which will submit to Parliament a report on any changes.'.

Gerald Howarth (Conservative, Aldershot)

The last vote was close, and I am sure that the Minister will take the message back to his Department.

The objective of new clause 4 is to allow people to earn a full career pension in the armed forces. Under both the current arrangements and the new arrangements, the armed forces pension scheme is the only scheme in the public sector that does not offer genuine full career benefits up to the public sector benchmark or the limits allowed by the law, even for those who serve a full career. Only a very few—those who join when they are very young or those who reach a senior rank and are therefore allowed to serve beyond the age of 55—can accrue maximum benefits.

It has been calculated that it is virtually impossible to earn more than 62.5 per cent. of one's final salary unless one joins extremely early or one is promoted to a high rank and invited to stay on. It is perhaps a paradox that the Labour Government—should I call them the new Labour Government or the tarnished Labour Government?—are proposing a scheme in which those on the highest salaries command the best final salary pension arrangements, and I am sure that others have also noticed that.

The unusually low normal retirement age of 55 is required not by the armed forces but by the employer for reasons, many of which are entirely legitimate, relating to the age profile of personnel. It is physically demanding and arduous to be a member of the armed forces, and it is therefore right and proper that those services predominantly employ the young and fit, so the unusually low retirement age of 55 is legitimate. The low retirement age is not a perk of the job, and it is not a dispensation to soldiers, sailors and airman to retire at 55 because they have done such a good job. It principally benefits the employer, the Ministry of Defence.

The new arrangements will seriously inhibit the opportunity to earn a full career pension through service. Few servicemen and women join young enough or serve long enough to earn full career benefits, and extending service length while the retirement age is low will exacerbate the problem. It is disingenuous at best to structure a scheme in which more than 90 per cent. of its members are debarred from earning a full career pension without buying additional voluntary contributions. The normal retirement age is a misnomer; it is actually the age at which the full career pension is payable. Allowing personnel to remain in service for 37.5 years would allow them to earn a full career pension at the public sector benchmark and the current limit of the law, but the majority, who are constrained by the normal retirement age of 55, cannot obtain a full career pension.

We believe that the scheme should be altered to allow those who serve a full career to earn full benefits of 66.67 per cent. Options to achieve that include increasing the normal retirement age, increasing the terminal grant, improving the accrual rate—as Members of Parliament have in order to assist ourselves, the fact of which has not been lost on the services—or introducing shared-cost additional voluntary contributions. Such measures are widely available in other schemes for occupations where short careers are common—not only Members of Parliament, but, for example, the police. It really is an issue out there that we have changed our scheme to suit the particular requirements of service to this House. I personally think that those changes are entirely reasonable and appropriate and reflect the fact that most of us provide a service to the House of Commons, but what is good enough for us we should regard as good enough for our armed forces.

The fact is that at 55 the armed forces employee has very limited prospects of earning a second career pension of any comparable value and is therefore uniquely disadvantaged among those employed in the public sector. That experience is shared in this House. Members who leave, voluntarily or involuntarily, at the age of 55 and having served in particularly important Departments such as the Ministry of Defence might well find themselves with handsomely rewarded consultancies or directorships; but for every one of those, I venture to suggest that many others will have been in the foot soldier category and not find such lucrative employment possible. A reflection of that fact of life informs the current scheme and should inform the new scheme.

The new clause would place on the Secretary of State a requirement to provide a mechanism to deal with that. We did not spell out what that mechanism should be, but left Ministers with the flexibility to devise a scheme that uses some of my suggestions to enable the intent of the new clause to be met.

I mentioned the parliamentary scheme, but let me for the record remind the House that the police service scheme's accelerated accrual rate in the last 10 years of service could be replicated for the armed forces. The Government are fond of saying that considering comparable public sector schemes is part of their benchmarking exercise in trying to come up with the right solutions for the armed forces pension scheme. The police are an example of a public service that is similar to the armed forces, as police officers also—all too often, sadly—put their lives on the line for the security of our nation. The police service's scheme recognises the particular difficulties that its employees face. That gives the Minister something to go on, and I hope that he will accept the new clause.

New clause 5 would add to the Bill the provisions of the early departure scheme, details of which were given to Members only during our considerations in Standing Committee—they were not available on Second Reading. The new clause sets down the bare bones to give the scheme specific parliamentary protection and to leave it less vulnerable to ministerial manipulation—although, in fairness, the Defence Committee thought that the scheme had enough flexibility to enable Ministers to manage the business of manning control in the armed forces.

The immediate pension scheme is a not inexpensive benefit that accounts for about a third of the pensions budget. That substantial amount of expenditure has meant that benefits for full career servers and their dependants were depressed well below the benchmark and modern good practice.

The Ministry of Defence proposes to change from the immediate pension scheme to the early departure scheme for three principal reasons. First, it will improve the benefits for full career servers and their dependants in the overall cost-neutral constraint that applies to the Bill. Secondly, it will comply with Green Paper proposals on the wider subject of pensions, which will make it illegal to pay a pension to someone who has not reached the age of 55. Thirdly, it will remove the inequities between officers and other ranks that are inherent in the immediate pension scheme and are caused by different accrual rates for qualifying periods.

Both the immediate pension and the early departure schemes were and are designed as manpower control tools to improve retention. That is a matter for principal personnel officers and is not pensions business, but the efficacy of the proposed early departure scheme as a manpower control tool is speculative. We simply cannot judge its effectiveness today. We know the current effect of the immediate pension scheme on retention and, to a lesser extent, recruitment. However, the proposal contains an element of leaping in the dark. The early departure scheme will be used for manning control and we shall not know for probably 20 years whether it will prove efficacious in Ministry terms in retaining the skills that we need to keep.

Angus Robertson (Scottish National Party, Moray)

The Government are not taking a leap in the dark when we consider the examples that the Ministry of Defence has worked through to compare the early departure scheme payments with the immediate pension scheme payments. Under the new scheme, the amounts are halved per annum. That is the effective difference for all ranks. Does the hon. Gentleman believe that that will make the new scheme more attractive to those who are currently serving? Will they wish to change to a scheme that will mean the effective halving of their annual income?

Gerald Howarth (Conservative, Aldershot)

The hon. Gentleman makes a good point. He is right that the new scheme puts especially those who leave early at a disadvantage. As the Under-Secretary said earlier, those who are currently serving and remain in service on 6 April next year will have to decide for which scheme to opt. They must determine whether to choose the new scheme and substantially reduced benefits. They will have to trade that against, for example, the welcome salary multiplied by four for death in service under the new scheme. Again, that is equivalent only to the provision that the House makes for its Members and therefore, although it is welcome, it is not exceptional.

As I said in Committee, I envisage some difficult conversations in military households throughout the land, especially when Her Majesty's armed forces are called on to undertake war-fighting operations or dangerous peacekeeping operations. There will be pressure on soldiers from wives who say, "If you are killed and you stay in this scheme, I get one and a half times your salary, but if you opt for the new scheme and you are killed, at least the children and I will get four times your salary." Against the current background, that will be a compelling argument because it is relevant today, but not perhaps in 15 years, when the person becomes entitled to an early departure scheme payment.

The hon. Member for Moray (Angus Robertson) is right. A staff sergeant who leaves the service at the age of 40 on a pensionable salary of £30,820 will get a lump sum of nearly £30,000 under either scheme, but his annual pension will effectively be halved. His early departure payment at the age of 55, uprated for inflation, would be about a quarter or a third less than he would receive under the immediate pension arrangements. The overall saving to the Government that has been calculated in that case would be about £57,000. Equally, it has to be said that if that same staff sergeant retired at the age of 54—which is much less likely, as they tend not to stay on that long—there would be a cost to the Government of £56,000. Given the present profile of service, however, it is much more likely that the Government will save money.

I do not wish to labour these issues, because they were extensively debated in Committee, but concerns have been raised in the Defence Committee about the early departure scheme. We can see the purpose of it. It is true that it will deliver £100 million a year in savings to the Ministry of Defence, which could be redeployed elsewhere, but it will disadvantage some of those who are currently serving and will be serving. The issue will cause considerable grief in households up and down the land, and the least that the Minister can do is to ensure that the scheme is put in the Bill. I look forward to hearing his comments when he winds up this debate.

Rachel Squire (Labour, Dunfermline West)

I welcome the details that the Government have provided on the early departure scheme since the Select Committee produced its report and since our Second Reading debate. I was not on the Standing Committee, so I would like to take this opportunity to ask the Minister a couple of brief questions. First, given that the early departure scheme will not attract index linking to inflation, how does the Ministry plan to deal with the fact that the real value of the scheme will apparently decrease over time? Secondly, what consideration has been given to the possibility of payments to personnel differing substantially over time in the early departure scheme, possibly leading to grievances and disputes between personnel who find themselves receiving very different payments?

Colin Breed (Liberal Democrat, South East Cornwall)

I should like to make a couple of points in support of the two previous speakers. I just do not believe that it is beyond the wit of the MOD to address the full career pension issue. The current concerns seem totally disproportionate to the likely cost involved. If the Government could address some of the issues that are engendering criticism and objections without it costing them a significant amount within their total budgetary constraints, I hope that even at this late stage they will consider doing so, and give us an indication accordingly. The percentage difference is relatively small, and the measures seem likely to apply to so few people that the issue ought not to be such a running sore for some.

Secondly, in relation to the early departure scheme, I want to mention the issue of erosion over a period of time. Thankfully, we live in low-inflationary times. I pay tribute to the Government for that—it is very welcome indeed, notwithstanding the slight interest rate rise earlier today—but many of us are beginning to grow used to it. However, we are discussing schemes that will have effect long into the future—who knows what will happen then?

We do not want to make the mistake, which was made in the past, of producing a so-called pension trough. It appears to me that we held back during a period of high inflation and wage restraint, so we have had the trough going forward. That subject has been debated. Without any index linking and without a clear indication of how the Government would address that particular potential problem, the early departure scheme runs the risk of experiencing exactly the same difficulty in a few years. If we are to learn from the past, perhaps we should envisage that the pension trough issue will arise again if we go into a period of high inflation, and undergo some pay policy restraint. We must face up to the issue, even if it is not totally apparent in today's inflationary climate.

Angus Robertson (Scottish National Party, Moray)

I want to make a brief contribution on a subject that I raised in an intervention, which involves the early departure scheme and, in particular, how it might impact on communities that are perhaps viewed as more peripheral and which have a low-wage economy. Some of those communities also have a significant military footprint, which is certainly the case in my constituency, where a third of all service personnel north of the border are stationed.

The early departure scheme is not an academic exercise. It is a real, important issue affecting the income of many people, particularly in lower ranks, when they make decisions on their future and where they see themselves and their families living. The hon. Member for Aldershot (Mr. Howarth) is right that many people will have to make a difficult decision on whether to remain in the current scheme or to transfer to the new one.

Politicians are often accused of not having a particularly long-term view. I want to try to break that mould in a small way in addressing this scheme and how it may impact in 10, 20 or even 30 years' time. That is what we must do in considering the issue. I want to paint a theoretical picture, although I would be grateful if the Minister confounded me and reassured me that my fears are misplaced.

According to some trade union estimates, the area that I represent—Moray—has the lowest average wages in Scotland, although central Scotland has areas of significant poverty and low wages. It is also a fact that many hundreds, if not thousands, of service personnel take early retirement at an age when they can still enjoy a second career. They do so with great happiness. Moray is a tremendously beautiful part of the country with a high quality of life and there are job opportunities, but, because of the nature of the market, those jobs are not particularly well paid.

One reason for many of those service personnel being able to remain in the community to which, often, they have moved from elsewhere in Scotland or down south is that they have a cushion that is provided through the immediate pension scheme. I am concerned that, if those who enter the service or choose to go into the early departure scheme see that annual payment effectively halved, a significant number might choose not to remain.

The House should remember that I am painting a picture of what things may be like in 10, 20 or 30 years' time. The population projection for my constituency is a decline of up to 38 per cent. by 2018, so the potential double-whammy of significant population decline and economic disincentive caused by the new scheme will not help the area.

I have raised the issue with the Minister, and he has signalled an interest in and understanding of the question. I am keen for him to signal that he understands that there may be a significant impact on communities in Scotland, and I imagine that that is the case not only in Moray but in Fife and around the Clyde. Is he confident that the new early departure scheme arrangements will not have a negative impact on the number of retiring personnel who wish to stay on and contribute in an important way to local economies, such as those in Moray, Fife, the Clyde or elsewhere in the UK?

Mark Francois (Conservative, Rayleigh)

I want to make two brief points in this debate. I should declare an interest, as I am the president of the Rayleigh branch of the Royal British Legion—and proud to be so—and I am in the process of applying to become an associate member of the Rayleigh branch of the Royal Naval Association, which is based in part on the fact that my father, Reginald Francois, served in the Royal Navy in the second world war.

I wish to address my remarks mainly to new clause 4. First, I want to follow up the point made by my hon. Friend the Member for Aldershot (Mr. Howarth) about the comparison with the pension scheme that Members of the House enjoy. I am pleased that the Ministry of Defence has decided to match the four times death-in-service benefit, which I am sure will be popular among service personnel and their families, and it is appropriate that there is now equanimity between the benefit that we enjoy and the benefit that those who are prepared to fight on behalf of our country will enjoy.

It is important to remember that, relative to the MOD's scheme, our pension scheme is contributory, which is not always brought out when it is reported in the press. Members who chose the option of fortieths will now be paying 9 per cent. of their gross salary, so it is a fair comment that we are chipping in from our salaries under our scheme. I entirely understand why those in the services, who are very sensitive to changes in their pension arrangements, for reasons to which I will refer in a moment, would look with understandable scrutiny at our scheme, and perhaps would not be slow in making comparisons with any changes that relate to them. If I were a serviceman, I would be doing exactly the same, and it is right that we in the House should acknowledge that understandable desire to match in some respects what we have.

That leads on to my second point, which I have raised previously in the House in other contexts: the importance of retention in the armed forces. Arguably, people in this day and age are much more sensitive to pensions and changes in pensions than perhaps they were 10 or 20 years ago. The pensions market and the structure of pensions have changed a great deal in that time. There has been the business of Equitable Life and other problems in the pensions industry, which I will not rehearse again this afternoon. Suffice it to say that, because of a number of those changes and events, people now pay much closer scrutiny to their future pension than they might have done two decades ago, and that affects their career planning. In the context of this debate, that also firmly affects the decisions that they and their families make about whether, as they approach middle age, they retain their post in the armed forces or move on to seek an alternative career. Ministers must therefore be careful before they change any of the arrangements, as they may start to see a knock-on effect on retention if they get some of the issues wrong.

My hon. Friend the Member for Aldershot dealt very well with the technicality of that, and the hon. Member for Moray (Angus Robertson) made a thoughtful contribution about how such things play out over the long term. I remind the Minister that although recruitment figures for the armed forces remain healthy, almost as many people are leaving at the moment as are joining. The key is the net figure and the overall ability to retain skilled and experienced personnel. That is even more important, because no matter how enthusiastic the recruits, they cannot, at least in the first few years, make up for the experience that the armed forces lose when an experienced non-commissioned officer, such as a colour sergeant in the infantry or a staff sergeant, decides to leave the Army. We face the danger of a gradual hollowing out of our armed forces as more and more experienced personnel leave and are replaced by recruits without experience. That is a worrying trend over the long term, and Ministers must deal with it if they are to be consistent. As I have said, I have raised the point before.

The future pensions of servicemen and women are becoming increasingly important to their calculations and their decisions on whether to stay or go. I issue a plea to the Minister, as others have done: the Government must think very carefully before making any long-term changes. They must be very mindful of the likely effect of such changes on the retention of experienced key personnel. After all, it takes a great deal of time and money to train them. The Government must be extremely careful in everything they do that affects service pensions, because it will begin a knock-on process that may prove very difficult to reverse if Ministers get it wrong.

Ivor Caplin (Labour, Hove)

I welcomed the speeches of the hon. Members for Moray (Angus Robertson) and for Rayleigh (Mr. Francois). Perhaps the hon. Member for Moray and I could discuss his points in more detail outside the Chamber. I found them especially pertinent, given my ministerial responsibility for veterans. As for the hon. Member for Rayleigh, I was particularly interested in what he said about recruitment and retention. As he and his hon. Friends know, I pay close attention to those issues. The 20,000 people who leave each year become veterans, and it is important for us to look after their interests as well.

Angus Robertson (Scottish National Party, Moray)

I appreciate the Minister's invitation to discuss with him the issues that I raised. May I now ask him to put something on record? Does he believe that the new early departure scheme will not have a negative impact on the number of retiring personnel who wish to stay on and contribute, in an important way, to low-wage economies, often in peripheral areas?

Ivor Caplin (Labour, Hove)

I understand the point that the hon. Gentleman is making—we have touched on it briefly before—but I have done no detailed work on it. That is why I suggested that we discuss it at some point in the future.

My hon. Friend the Member for Dunfermline, West (Rachel Squire) mentioned index-linking. We have adopted the same approach to the early departure plan as we currently apply to the immediate pension. It is not index-linked, but it will be once a person reaches the age of 55, which seems to us appropriate. My hon. Friend will recall that at one stage there was a slight error on the MOD website; we corrected it in response to the Select Committee's report.

As for my hon. Friend's second point, I do not expect any major changes in early departure plans. As currently happens with the immediate pension, people will sign on for the terms offered to them at the time. I do not envisage any small changes in those terms.

The 66.67 per cent. of final salary mentioned in new clause 4 will obviously have a cost implication, of which I am sure the hon. Member for Aldershot (Mr. Howarth) is aware. Under the Bill, personnel who serve until the normal retirement age of 55 and have served for 35 years under the new pension scheme will receive pension benefits comparable with those available under the current scheme, which will be paid much earlier than those in most other schemes. As the hon. Member for Rayleigh pointed out, dependants' benefits will be significantly improved. Personnel who wish to improve their pension benefits further will have the opportunity, as they do now, to purchase additional voluntary contributions. The extended accrual period of 40 years will provide sufficient headroom for them to receive benefits up to the current Inland Revenue limits should they wish to do so.

The new scheme has been designed to be equitable, treating officers and other ranks in the same way with a common, even accrual rate. The Select Committee's report applauded us for that. The new clause would benefit only a limited number of personnel who serve a full career, as the majority will have left before the new early departure point—18 years' service, at a minimum age of 40. I feel that it is therefore counter to equality of treatment.

I shall also deal briefly with new clause 5, and I do not think that the hon. Member for Aldershot will be at all surprised by my response. I do not know how many times he has heard this argument, but I do not propose to accept the new clause for the reasons that I outlined on Second Reading and in Standing Committee. Such details should not, in my and the Government's view, be included in primary legislation.

As the hon. Gentleman rightly acknowledged, I gave the Standing Committee two detailed notes on the early departure plan and put copies in the Library. He was kind enough to say in Committee that they were "clearly written" and "relatively easy to understand". I take that as a compliment for a Ministry of Defence document of that type. The documents will form the basis of the separate statutory instrument setting out the scheme rules. However, it is important that I point out that the early departure plan is not part of the new pension scheme, as the benefits paid under it are not pension benefits.

I have no particular difficulty with some of the separate points made in new clause 5. Indeed, the first three subsections simply repeat details that were set out in the notes that I published previously. The only new point is in subsection 4, which seeks to embrace the early departure plan within the scope of the independent, external validation review of the new pension scheme that we debated earlier.

As I have just said, EDP benefits are not pension benefits, and that is a large part of their attraction to our armed forces. They have allowed us to develop more flexible arrangements that, I hope, will better meet the needs of our service personnel while providing the savings to fund significant improvements to widows' benefits and to help offset the rising cost of longevity. However, I want to make it clear that we plan for the AFPRB to look at the level and broad design of the EDP within its quinquennial review and as part of its broad remit with respect to remuneration.

I do not intend to accept the new clauses, but I hope that what I have said reassures the House. Perhaps we can move on.

Gerald Howarth (Conservative, Aldershot)

I am delighted to hear that the Minister has found another purpose for the AFPRB, which serves further to undermine his earlier argument against my proposals. I certainly welcome the fact that he has suggested that the early departure payments scheme should be extended to the AFPRB for its consideration. I am sure that the House will welcome that.

I appreciate the support of all the Members who have said kind words about the new clauses. In particular, I recognise the point that my hon. Friend the Member for Rayleigh (Mr. Francois) made and that the Minister rightly picked up. The litmus test is what the scheme will do for retention. We cannot be sure what it will do, because the jury is still out. The backing of the Scottish nationalists has extended the range of support for the new clauses, so the Government should listen carefully because support for them is coming from across the House.

I take the point that the Minister makes about not including the provision in the Bill, but I am sorry that he feels unable to do that. I also think that he is being unfair on the issue of the full career pension. There is simply a difference of view between us. He rightly said in Standing Committee that there was a cost implication, and I fully accept that there may well be. Cost implications surround the issue and one of the tricks is to find a way of giving the best possible service to our armed forces that is consistent with exercising a proper constraint on public expenditure. The Minister and his Department know the arguments just as much as I and my party know them. However, we all feel that our deliberations should be determined by what is best for our armed forces. Clearly, nobody has a blank cheque—I have no more of a blank cheque than the Minister has—but the issue that we must bear in mind is what is in the best interests of our armed forces.

My hon. Friend the Member for Rayleigh described the pensions that we receive as Members of this House as contributory, the implication being—I know that he did not mean it—that the armed forces do not contribute to theirs. There is widespread resentment throughout the armed forces at the idea that their pension is a perk—a free gift from the Ministry of Defence and the Government. It is not. As the hon. Member for Dunfermline, West (Rachel Squire) knows better than anybody else, members of the armed forces pay for it. When considering salaries, the Armed Forces Pay Review Body discounts the amount that, in its view, service personnel are getting as value for their pension. The value of that abatement is currently 7 per cent.—it was 11 per cent.—so the idea that the armed forces do not contribute must be scotched once and for all. They receive a lesser salary than they would get if the appropriate contribution to meet the worth of their pension were deducted from their salary.

Mark Francois (Conservative, Rayleigh)

The point that I was trying to make is that although the media often acknowledge that members of the armed forces contribute to their pensions, they do not always acknowledge that Members of Parliament contribute to theirs. I was simply trying to make that point in the interests of balance. Service personnel rightly chip into their own pensions, and we thank them for it.

Gerald Howarth (Conservative, Aldershot)

My hon. Friend has put that point firmly on the record.

Unfortunately, time is running out and we have other important business to attend to. I hope that the Minister has noted our concerns, particularly in respect of full service career pensions; I suspect that these matters will be taken up in another place. We will simply have to wait to see how the early departure scheme works out, but in the interests of moving on, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 7 — Widow's Pensions for Life

Gerald Howarth (Conservative, Aldershot)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss the following:

New clause 8—Date of marriage—

'From 6th April 2005 widows and surviving registered unmarried partners of all service personnel shall receive a full widow's Forces Family Pension based on their spouse's or partner's length of service and final salary regardless of that date of marriage or registration.'.

Gerald Howarth (Conservative, Aldershot)

I regard these matters as extremely important, and in the absence of a satisfactory answer from the Minister, I might well have to invite my hon. Friends and others to press the new clause to a vote. I do not suggest that as a threat; rather, the business arrangements of the House are such that it will probably assist you, Mr. Deputy Speaker, if I explain my position at the outset.

New clause 7 deals with widows who have unattributable pensions—in other words, widows whose husbands died from natural causes rather than as a result of service. Under the current scheme, certain widows—here, I include widowers—retain their pensions for life should they care to remarry or cohabit, and others do not. A distinction is made according to whether the spouse's death was attributable to service or not. The new scheme will remove that distinction, and will allow all widows and unmarried partners, of whatever sexual orientation, to keep their pensions for life.

Nevertheless, the changes laid before Parliament in this Bill will create a group of disadvantaged widows: existing non-attributable widows. Those whose husbands died from natural causes will still lose their pension should they elect to remarry or to cohabit. That small discrete group will still be forced to choose between financial well-being and happiness in a future relationship. We regard that as indefensible. The group at risk is tightly defined and small—in other words, the existing non-attributable widows and those tragically created between now and the introduction of the new pension scheme in about 2007. Only about half may be expected to remarry.

The Government have already conceded the principle that widow's pensions for life are appropriate. They introduced them in 2000 for one type of service widow—the attributable widow whose husband died as a result of service. At that time, existing widows were included retrospectively and the Government also planned to introduce such pensions for the other type—the non-attributable widows, but not including such existing widows.

If the Government do not take the one further small step of including existing non-attributable widows, they will wilfully create a new group of disadvantaged and aggrieved people and a serious and unnecessary fault line within the scheme. Indeed, I venture to suggest to the Minister that they will create a new legacy issue. It would be a small, magnanimous and entirely appropriate step—wholly in line with the Government's own agenda—to include existing non-attributable widows. The Government have rightly tried to create fairness in some respects, but long-standing inequity has been exposed, so they should use the opportunity provided by the new Bill with its new scheme to start afresh and correct that inequity.

The Minister's predecessor suggested that if we established a precedent under this scheme, there would be a read-across to all other public sector schemes, but I do not believe that that would happen. It has always been the Conservatives' submission—and, I believe, that of the Select Committee—that our armed forces not only are different, but need to be different. There should therefore be no automatic read-across. We must be allowed to make particular provision for a particular category of people whom the entire nation recognises as different from the rest of us. The commitment of the serviceman is unique, so I see no reason why we cannot make a unique case in this respect.

I do not accept that it will cost us billions of pounds to provide the scheme because other groups of public sector workers will then expect the same treatment. I hate using the expression "public sector workers" in respect of Her Majesty's armed forces. Servicemen are not public sector workers; that is not to decry such workers, but to deny comparability between the two. We know that members of the armed forces are unique.

A service widow is also unique in that the requirements of the service caused her to be disadvantaged while her husband was serving—she was often unable to earn an occupational pension because of the frequent requirement to follow the flag. It was often impossible to develop a long-term career. A splendid lady, Mrs. Jenny Green, whose husband died in a Tornado accident, persuasively put that case yesterday. As she said, it was Ministry of Defence policy to involve wives in welfare duties at any RAF station.

A friend of my parents used to be the commander at a RAF station in Germany. He married late in life and his wife rather resented the fact that she had not realised that she had joined the RAF by default. It was her job in a wholly unpaid capacity to act as the welfare officer, getting all the wives on the station together. That was the position that prevailed. Wives had to travel with their husbands and were unable to pursue a career. The husband's career often depended on his wife's involvement in the wider service. Today, the Government pay for welfare officers to do the job, but in the old days, they had the wives to do the job on the cheap, as it were, and many a wife and widow across the country will recognise what I am describing.

As Jenny Green also pointed out, stakeholder pensions are not a viable option for service wives and widows because they are often unable to build up a personal pension in their own right, as other civilian widows and wives have the opportunity to do, neither can they afford the full national insurance contribution for a full DSS widow's pension.

All in all, I hope that the Minister will accept that the people involved belong to a very specific category. They have been uniquely disadvantaged, and it would be sensible for us to make provision for them. The nation would be grateful as well.

In addition, those women who receive pensions at the moment lose them only if they remarry. There is therefore no question that the Government or the MOD will have more costs to bear if the new clause is accepted, as current payments will merely have to be maintained.

Ivor Caplin (Labour, Hove)

Will the hon. Gentleman confirm that what he proposes from the Dispatch Box is now official Conservative party policy? In the likely event—I should say the unlikely event that the Tories ever return to power, will the policy be implemented in their first manifesto?

Gerald Howarth (Conservative, Aldershot)

I am afraid that the Minister got it right first time. It is likely that we will assume office next year, but I do not want to be too partisan as there is genuine consensus across the House on some of these matters. Of course I speak on behalf of the Opposition, and my argument is that the people involved deserve to be shown some consideration.

For the benefit of people outside the House, I want to make it clear that the Minister has not addressed the serious issue that is at stake. He has chosen to cut the cake in a certain way, with the result that the people about whom I am speaking have been carved out. They are deeply resentful, and do not feel that they should have been treated in that way.

The Conservative party is not in government at the moment, and I do not know the state of the books, but I can tell the Minister that I will not be browbeaten or intimidated into saying that we would not help those people. On behalf of the official Opposition, I say that we will do our level best, when we return to government, to find ways of helping these people. That is not a spending commitment, as I do not know how much money is involved. Frankly, the truth is that the Minister does not know either. He cannot tell the House how much money is involved in dealing with these people, and neither can I. Therefore, the basis of his question to me is entirely specious. However, the Opposition believe that these splendid people should be helped and supported.

New clause 8 deals with post-retirement marriages. When people die who married after retirement from the services, their widows, in certain circumstances, are not eligible for a pension. Pensions for widows of post-retirement marriages were introduced on 6 April 1978—I think that that was the last time that the Labour party was in government—to comply with the Social Security Pensions Act 1975. However, the change benefited only those serving at that date, and only service from that date qualified. The review of the armed forces pensions announced last September introduced full dependants' benefits for unmarried partners, with effect from 6 April 2005.

Special factors undoubtedly apply to service personnel who are not applicable to any other group of public or private sector workers. The pattern of service life militated against early marriage. Service people were stationed abroad for long periods, with limited opportunities to meet suitable potential future spouses. They therefore tended to marry later, often after having completed distinguished military careers.

For officers, early marriage was formally discouraged up to 1973, through the denial of allowances and quarters. The strains on marriages of enforced separation and exposure to danger also probably led to the incidence of divorce being higher in the armed forces than elsewhere. The services' normal retirement age of 55 is well below the norm of 60 or 65 elsewhere, and the vast majority of service people are forced to retire at or below 40 because of service manpower policy. In consequence, the probability of service people marrying for the first time, or for a subsequent time, after leaving the armed forces was, and remains, higher than elsewhere.

At yesterday's meeting, it was interesting to hear one lady say that she had received letters from a number of people who had decided not to get married during their service careers. The reason was that they knew that part of their contract with the nation was that they had to put their lives on the line. They did not want to have the responsibility of getting married and then leaving their families with less than adequate provision in the event of their death. It is not an academic argument: it is supported by fact.

The post-retirement marriage pension rules bear heavily and unfairly on the armed forces whose unique conditions of service, as we all know, make them a special case. Serving personnel continue to be uniquely disadvantaged by the pattern of their employment, which is not the case in other public sector schemes and marks them apart as a special case. I hope that the Minister will look favourably on the matter. He heard some of the forceful arguments that were advanced yesterday. I thought that they were persuasive and I hope that the Government will accept the new clauses.

Joyce Quin (Labour, Gateshead East and Washington West)

I first became interested in the issue covered by new clause 8 through the situation of a constituent who had married a serviceman who had retired from the service before 1976 and therefore fell foul of the subsequent changes, which were welcome in other respects but did not benefit her. Some cost would be involved in making the changes retrospective and I wondered whether my hon. Friend the Minister had any recent estimates of the likely cost. His predecessor wrote to me a couple of years ago and suggested a figure of £50 million. The number of people in such circumstances is likely to have fallen, and it would be useful to know whether any estimate has been made more recently.

I do not wish to pre-empt my hon. Friend's response, but if he does not envisage a change in the law to allow retrospective claims, I wonder whether individual cases could be considered on grounds of hardship. The constituent I mentioned lives in straitened circumstances and I know that her late husband would have wanted her to have benefited from his pension. There are probably other hardship cases that should also be considered sympathetically.

Mike Hancock (Liberal Democrat, Portsmouth South)

I wish to associate myself and my colleagues with new clauses 7 and 8. There can be few hon. Members who have not dealt with this issue at some stage in their parliamentary careers. The right hon. Member for Gateshead, East and Washington, West (Joyce Quin) mentioned the possibility of considering individual cases on hardship grounds. I have tried to make that happen in the past 20 years, but there is no flexibility in the system. Under the present regulations, the MOD cannot make payments to help widows of service personnel who do not fit the criteria for the receipt of pensions. Unfortunately, those widows have had to fall back on the good offices of the British Legion or other service-related charities for hardship grants.

We are trying to give justice to those few people who were denied justice when the legislation was changed in the 1970s. New clause 8 would go some way towards doing so and the cost would be nowhere near the £50 million that was envisaged two years ago. The number of people who might be affected has diminished considerably in that time.

New clause 7 would rectify the injustice faced by widows of those who have paid the ultimate sacrifice on behalf of this nation. The costs involved are already accounted for, because if the widow receiving a pension did not remarry, the MOD would have to continue to pay it. It is only when she marries that the MOD benefits. New clause 7 would merely put right a wrong that most of us have come across in our constituencies. Whether we are in government or opposition we have told our constituents that we sympathise with their case and will take it up. It is a question of natural justice and this is our opportunity to put it right. I am delighted to be associated with the new clauses and I hope that the Minister will welcome and support them.

Ivor Caplin (Labour, Hove)

I begin by telling my right hon. Friend the Member for Gateshead, East and Washington, West (Joyce Quin) that the costs that she was given by my predecessor remain, broadly, the same. I shall be more than happy to receive written details from her about the individual case that she mentioned, to see whether the Department can offer her constituent any assistance. That offer is open to other Members, and the number of letters that I sign shows that they take it up regularly—many such Members are in the House this afternoon.

The proposed new armed forces pension scheme includes provision for non-attributable widows' and widowers' pensions to be paid for life. Existing members can transfer to the new scheme if they want to benefit from that provision. The proposed new clause would cover existing widows and widowers who are not provided for—I accept that—in the new scheme.

In the majority of public service schemes, non-attributable widows' and widowers' pensions cease on re-marriage but, as in the armed forces current scheme, can be reinstated on second widowhood or divorce if the individual is otherwise worse off financially than when first in receipt of their armed forces pension. Although we are able to make changes for the future under the new armed forces scheme, which, as I think the House now understands, will be paid for by adjusting benefits elsewhere, the change under the new clause would carry with it no offsetting saving. I have been working hard to ensure that I could give the hon. Member for Aldershot (Mr. Howarth) some figures on the policy that he has just been announcing—he said that he was speaking for the official Opposition and that it was their policy. The cost of his retrospectivity proposal in year 1 would be £500 million, but I hear what he said about the Conservative policy and I shall return to it shortly.

I shall speak briefly on new clause 8. It relates to rules for the current armed forces pension scheme, which are set out in prerogative instruments rather than in primary legislation. The new clause relates to widows who did not receive a widow's pension if their husbands served before 1978 and the marriage took place after their husbands left service. I accept what Jenny Green said yesterday at the event attended by the hon. Member for Aldershot and me, but that is how the armed forces often operated in those days. If I were to accept the new clause, such people would be provided with a pension from the date of introduction of the new scheme, but that would not include the widowers of post-retirement marriages.

The new clause proposes that the pension should be based on the length of service and final salary, as under the new scheme. However, the current scheme provides benefits, as the hon. Gentleman is well aware, based on representative pay and reckonable service.

Gerald Howarth (Conservative, Aldershot)

Is that not changing? Under the new scheme the pension will be based on final salary; it is based on representative pay at present.

Ivor Caplin (Labour, Hove)

That is what I said. The current armed forces scheme is based on representative pay and reckonable service. The new scheme will be based on length of service and final salary. I was comparing the two schemes.

Post-retirement widows' pensions were introduced in 1978 for service after 1978, following the introduction of the Social Security Pensions Act 1975. If my memory serves me right, the late Baroness Castle was responsible for that splendid piece of legislation, and we all know who her special adviser was at the time—our current Foreign Secretary.

The change was introduced non-retrospectively in schemes across the public sector, so there is no distinction between servicemen and public sector employees in this instance. The cost of extending post-retirement widow and widowers' entitlement to all current and deferred pensioners would be more than £50 million, according to our current calculations, as I indicated to my right hon. Friend the Member for Gateshead, East and Washington, West. Such an extension would be contrary to the policy of successive Governments.

In conclusion, the Conservative party had 18 years in power to deal with such issues, but it never once introduced a proposal in the House to do so. It now finds it convenient to do so—the convenience of opposition, the convenience of opportunism and the convenience of increasing public spending when it well knows that its shadow Chancellor is looking for major and significant cuts in the defence budget.

Gerald Howarth (Conservative, Aldershot)

The Minister is completely wrong: there are no planned Tory cuts in defence expenditure, so he is just trying to mislead the public again. I am genuinely disappointed.It is very pleasant to see that the Secretary of State is now present.

The Minister referred to the right hon. Member for Gateshead, East and Washington, West (Joyce Quin), who made a very useful contribution to these proceedings. He said that she should write to him, and he would try to do something about the case that she raised. He said that everyone is writing to him, saying, "Let's do something about this." Well, let us do something about it.

The hon. Gentleman cannot stick £500 million on us because that figure is simply not true. The people who currently receive pensions are being paid by his Department. They cease to be paid if they remarry. I put it to him that he cannot quantify how many will elect to remarry, thereby forgoing the pension that they now receive. The Minister is adducing a disingenuous argument. My commitment to the House and to those in the country who are concerned about such matters is that the next Conservative Government will review the issue with a determination to do something about it.

To accommodate some of those people, the Secretary of State introduced a new scheme to enable attributable widows to benefit if they remarry, but he did not do so by telling the House that there was a compensating cut elsewhere in his pension provision for our armed forces. He was not reslicing the cake; he was just providing a welcome addition. We welcome the fact that he has done that. We believe that the funds should be made available to meet the requirements, certainly given the 1.7 per cent. saving that the Government will make from rejigging the mortality and longevity issues.

There is another, final point that I want to nail in what the Minister said. He keeps on saying it, and it is unfortunate that the Government keep on doing so because they believe in supporting our armed forces. As I said before the Secretary of State arrived, I believe that the Government have the interests of our armed forces at heart. I do not claim a monopoly of that for the Opposition. There are differences of view. Certain things could be done better than the Government are doing them, but I am not suggesting that they are cavalier about our armed forces. However, constantly to equate them with other public sector services and say that if we did something for the armed forces we would have to do it for everybody else is not acceptable. The public believe that our armed forces are different, and we do too. Most Members of Parliament, whatever their party, believe that the armed forces are different, and it is because of that, because their commitment to our country is unique, and because they put their lives on the line for our country—they are doing so as we speak—that we ought to give them the best that we can offer them. They certainly deserve that, and it is the very least that they are entitled to expect. It is the very least that we can do for our armed forces, and it is irrelevant to suggest that we must compare them with other public sector workers. If the current rules mean that we have to do so we should make special provision in law—

It being Five o'clock, Mr. Deputy Speaker proceeded to put the Questions necessary to bring proceedings on consideration to a conclusion, pursuant to Order [22 January].

Schedule 1 — Amendments to Pensions Appeal Tribunals Act 1943

Schedule 3 — Repeals

Ivor Caplin (Labour, Hove)

I beg to move, That the Bill be now read the Third time.

I begin by thanking my hon. Friends the Member for Bridgend (Mr. Griffiths) and for Normanton (Mr. O'Brien), who conducted affairs from the Chair during proceedings in Standing Committee. I thank the Under-Secretary of State for Constitutional Affairs, my hon. Friend the Member for Tottenham (Mr. Lammy), who dealt with the clauses relating to appeals tribunals on behalf of the Department for Constitutional Affairs. I thank the Clerks and officials in the Ministry of Defence who have been dealing with the Bill, in some cases for a long time.

It has been a feature of our debates on Second Reading, in Standing Committee and again today that the armed forces, both regular and reserve, are held in the very highest regard throughout the House. Members on both sides of the House have rightly paid tribute to their professionalism, courage and skill. The Ministry of Defence is a good employer and as such we must make available high-quality conditions of service for service personnel. The new pension scheme does just that.

Gerald Howarth (Conservative, Aldershot)

I take the slightly unconventional step of intervening on the Minister at this stage to associate myself entirely with what he just said to ensure that there is no doubt beyond these walls, especially among those serving in Iraq, that we hold our armed forces in the very high esteem that he described.

Ivor Caplin (Labour, Hove)

I am grateful for those comments.

We had an interesting debate that centred on the new part of the arrangements following the announcement that I made last week in relation to the Armed Forces Pay Review Body, which will provide a regular external validation of the new pension scheme that will compare it with other schemes in the market. I am delighted that the chairman and members of the review body have agreed to take on such a task.

Everyone who has been involved in our discussions will recall that concern was expressed that the Government should provide independent oversight of the arrangements provided for our armed forces in this respect. In Committee, I made it clear that I recognised the intent behind those concerns and that I would consider how best to respond on Report. Last week's announcement was made in response to those concerns, and I hope that today's debate has been helpful in highlighting the way in which the review body will deal with the matter. Its reviews will take place broadly every five years, but that does not preclude it from considering pensions issues if it feels that it should do so in the course of its normal work.

We are in active communication with the review body to determine the details of how the system will work. We agreed it only in the past couple of weeks and I shall return to the House with a further statement when we have more details. I am confident, however, that the change will provide for more independence in reviewing the terms of the new pension scheme while helping us to ensure coherence across the broader remuneration package of pay and pensions. It should also provide additional reassurance for service personnel, and for Members of both Houses, by ensuring effective independent validation of the appropriateness of the pension provisions for our armed forces, including those who choose to transfer to the new scheme and those who will be members from 6 April 2005, subject to the completion of the legislative process. I feel sure that hon. Members will acknowledge that that represents a major step forward in tackling the concerns that have been expressed in the past few months. It also addresses the desire for stronger controls in legislation over the scheme's benefit structure.

Before I conclude, I want to be slightly partisan and present two challenges to the hon. Member for Aldershot (Mr. Howarth). I hope that he does not have a scripted speech because he might wish to respond. My first challenge is about benefits being payable on an equal basis, irrespective of sexuality. In Committee, he said:

"My party's view was set out admirably by my hon. Friend the Member for Mid-Sussex in the debate."

He means Second Reading. He continued:

"We shall have to see how the land lies when we come into government, and review the position at that point."—[Official Report, Standing Committee B, 10 February 2004; c. 143.]

The hon. Gentleman has had three months to consider the matter. Does he stand by that comment or will he support the Bill and the equal benefits that it provides for all members of our armed forces?

I shall outline my second challenge. The hon. Gentleman clearly supports the legacy issues, as he showed yesterday and a few moments ago. In Committee, I said that I would calculate the amount of public spending required and I have done that. The total for the first year is £661 million. Every subsequent year, he will need £127 million for the legacy proposals that he presented this afternoon. Does he intend to pursue that as Conservative policy? The equivalent of £661 million is, for example, the single living accommodation project and the service family accommodation upgrade project. They would both have to be abolished to cover the sort of funding that his proposal would require. He can either play the politics of opportunism in opposition or make a serious point at the Dispatch Box about the legacy issues that the Conservative party never tackled. I am sure that he will respond to those challenges.

I am confident that the new schemes constitute a good deal for our service personnel: a pension scheme that is based on final salary, against the trend in the wider economy; a significant improvement to the benefits to widows and dependants; the introduction of common terms for officers and other ranks that also deal with equality issues; and a compensation scheme that focuses on the more severely injured and, for the first time, makes lump sum payments for pain and suffering. The chiefs of staff strongly welcome those aspects of the new arrangements. They perceive them to be an important part of a package that offers a high level of assurance to service personnel and their families, now and in future. The Bill is essential to providing the new schemes and I commend it to the House.

Gerald Howarth (Conservative, Aldershot)

I note that the Under-Secretary is getting frightfully excited. He raised several issues—two in particular—with me. The Government have introduced changes that extend the benefits to unmarried partners and the Opposition have accepted that. I hope that that will allay his concerns on the matter.

The Under-Secretary tried to stick on me a figure of £500 million a few moments ago, but it has now increased to £661 million. I knew that the Labour party was the master of inflation but that is excessive. He is the Under-Secretary and suggests that some of my proposals would cost £661 million. I do not recognise those figures and I do not believe that he will be able to justify them. He might be able to, however, and the House will look forward to his placing copies of his calculations in the Library.

I made a specific point to the Minister—I am not going to let him get away with this—about extending the benefits to unattributable widows who remarry. He has no way of knowing how much that would cost, because it is impossible to quantify. He extended the benefits to attributable widows in 2000, but he never made any corresponding cuts to accommodate that. He knows very well that only a very small number of people are involved, and they are being paid at the moment. They cease to be paid when they remarry. He has no way of knowing how many would remarry, in the event of his acceding to our suggestion, so his objections are just ministerial bluster. He even suggested that the proposal would have to be funded by cancelling the single living accommodation improvements. He flagged up the fact that he was going to make a partisan point and he did not disappoint. The public outside will have noted it and I think that they expect our debate to be conducted on a slightly more elevated scale than that.

My hon. Friend the Member for Mid-Sussex (Mr. Soames) said on Second Reading that we would not divide the House at that point, but that

"we reserve our position and will judge the Government on any progress made in Committee."—[Official Report, 22 January 2004; Vol. 416, c. 1499.]

We have now considered the Bill in Committee and only one change has been made. We welcome that change, and, along with the Minister, we wish the members of the Armed Forces Pay Review Body well in undertaking their enhanced remit. However, that change is modest and fails to deal as comprehensively with the needs of Her Majesty's armed forces, and those who have served, as the measures that we proposed in new clause 2—which the Minister would not accept—would have done.

Furthermore, some of the criticisms levelled at the Bill by the Defence Committee, at the outset and subsequently, remain outstanding. Save for the one change that the Minister has made, there is nothing in the Bill that presents the House with any greater opportunity to scrutinise what is being proposed. It is an enabling Bill that gives unfettered power to the Secretary of State to draw up whatever pensions and compensation schemes he likes. The only scrutiny available to the House will be through a one-and-a-half-hour debate on the relevant statutory instrument, the detail of which will be unamendable. Our original criticisms, and those of others, therefore remain. The final details of the early departure payment scheme were not available on Second Reading. They were produced in Committee, which we welcome, but some of the original criticisms on that issue still stand.

We judge the Bill by its ability to do justice to the men and women of Her Majesty's armed forces, who have given—and, as we speak, continue to give—outstanding service to our country. It is our view that their contract with the nation sets them apart from every other group in the country. Their commitment to lay down their lives in the defence of the people of these islands and of the wider interests of the United Kingdom places them in a wholly special category, deserving of the very best that the nation can give them. That means that they are, quite literally, a special case.

We are therefore disappointed that the Government have not reflected that special status in the schemes that lie behind the Bill. Comparing their benefits with those available to "other public sector workers" betrays the Government's reluctance to distinguish sufficiently between the needs of the armed forces and of those operating elsewhere in essential public services. The burden of proof in compensation is one example of the Government's thinking that it is perfectly in order to apply tests

"in line with the practice of other occupational pension schemes and the civil courts."

This is not another occupational pension scheme. We believe that the scheme applied to Her Majesty's armed forces should start by being at least as good as those available elsewhere. That is why, for example, we welcome the improvement of the death-in-service benefit from one and a half to four times' salary.

I hesitate to do so, but I hope that the hon. Member for Dunfermline, West (Rachel Squire) will forgive me if I quote from her speech on Second Reading.

John Bercow (Conservative, Buckingham)

Read it out.

Gerald Howarth (Conservative, Aldershot)

I genuinely do not wish to embarrass the hon. Lady, but I do wish to echo her words, and I think the House ought to reflect on them. She said:

"On pensions, the proposals essentially amount to 'making ends meet'. We do not consider that that is what our highly valued and professional armed forces deserve . . . The proposals are based not on what the forces deserve, but how much money they get at present."—[Official Report, 22 January 2004; Vol. 416, c. 1507.]

I therefore invite the House to decline to give the Bill a Third Reading. I invite the Government to address the serious concerns that have been expressed across the Floor of the House and to bring back a Bill that reflects the desire of our country to have the very best for those who are placing their lives on the line for our security. I can tell the Minister that, if he does not do so, there will be trouble in another place. I suspect that even if he gets his Bill tonight, this will not be the last he sees of it.

Rachel Squire (Labour, Dunfermline West)

I shall be brief because many hon. Members wish to speak.

The Bill has been the focus of much attention from hon. Members and constituents, who have a commitment to and high regard for the standards and professionalism of our armed forces. They are also committed to providing one of the best possible schemes for pensions and compensation for former and current personnel.

From the Bill's publication, my response has been mixed. I want to touch on the areas that I have always welcomed, the areas of continuing concern and the areas in which welcome progress has been made. First, I have always welcomed aspects of the Bill such as the effort to modernise pension and compensation arrangements in the armed forces, rather than never considering them at all, and the decision to put officers and other ranks on an equal footing so that all will be able to start accruing a pension as soon as they enlist and claim early departure benefits at the same age and after the same period of service.

I also welcomed the improved provision for widows and other dependants, especially when the serviceperson has been killed in action; the introduction of benefits for unmarried partners; the focus of compensation payments on the most severely injured and disabled; and the establishment of an independent appeals system for contribution claims.

That leads me on to mentioning some areas of continuing concern. The first is the cost-neutrality issue. I and others have deep reservations about a scheme that makes some improvements but seems to do so at the cost of others—improvements that appear to be paid for by armed services personnel. Many of us do not think that cost-neutrality should have set the framework for the scheme, leading to no more than a reshuffling of the pack. The scheme should not have been formulated on that basis. Rather, it should have been formulated on the basis of what our armed forces deserve.

The second issue of concern is consultation and how it has been carried out with Parliament and with serving and retired personnel, their widows and families. The review of the scheme was announced in 1997. It started in 1998, yet here we are, six or seven years later, being asked to approve an enabling Bill.

The time scale for implementation of the new schemes is very short: we are less than a year from new members and serving personnel having to make a complex choice between the existing scheme and the new scheme that the Bill will introduce by April 2007 at the latest.

The Government have said that they will produce individual benefit statements for service personnel—I welcome the Minister's comments on that today—to enable them to make a choice. But we are still waiting for the computer system that will produce such statements. We do not know when that will happen and how we can ensure that all personnel are fully informed and able to get the best possible independent information on the new proposals before they are forced to make a choice. The third area of continuing concern regards the compensation payment scheme, changes to the burden of proof and the introduction of the time limit.

In terms of progress made, I welcome the way in which the Government have listened to the concerns raised on both sides of the House, the information that we have had so far on the early departure scheme and the review by the Armed Forces Pay Review Body. I hope that the Minister's and the Ministry of Defence's continuing discussions with the chairman of the Armed Forces Pay Review Body will lead to improvements in those areas. I hope that the Minister and all involved will continue to listen and make further improvements. I and many others intend to continue to examine closely what is happening. I owe that commitment to former and current service personnel, their widows and their families.

The pressures on our service personnel increase, as they continue to provide a core part of this country's and this Government's global influence. We all hope that they will live to have a long, healthy and happy retirement, but some die in the service of their country and others develop illness and injury. The Bill should recognise and reward their service, their sacrifice and that of their families, but it still only does so in part.

Colin Breed (Liberal Democrat, South East Cornwall)

May I put on record on behalf of Liberal Democrat Members our admiration and gratitude for all the services that the armed forces provide, especially at this time? As we discuss these issues there is recognition across the House that they are very much a special case. Their commitment to us and to the country deserves an appropriate commitment to them.

Although some welcome benefits have been included in the Bill, such as the increase in death-in-service benefits and the extension of dependants' benefits more widely and on more equal grounds, inevitably, there are a number of concerns, which the hon. Member for Dunfermline, West (Rachel Squire) has just mentioned, which we had hoped would have been grappled with in Committee. Although we welcome the slight improvement in respect of the wider remit of the pay review body, it is a great disappointment that some of the real substance of our concerns has not been met.

What lies at the heart of that is the decision about cost neutrality, which has cast a shadow over almost all our concerns. I said on Second Reading, and it was reiterated in Committee, that it was an unnecessary straitjacket to apply cost neutrality to the costs and budgets of the pension scheme rather than to extend it to the whole remuneration budget. The provisions for pay and pensions are inextricably linked, and it is unnecessary to impose such a tight constraint, which has a considerable effect in not being able to deal with some relatively small financial issues.

I was interested when the Minister added up quickly the cost of the legacy issue. I had asked him for some figures previously, which could not be made available, but fairly instantaneously it became possible to work out precisely what next year and subsequent years were going to cost. I do not think that bandying such figures about is particularly helpful.

The Minister then went further, saying that he was going to knock out single-person accommodation. That extends the whole issue of cost neutrality. Either cost neutrality means precisely that, or it affects the whole budget. What the Minister said did not exactly align itself with what he has said before. If the total budget were involved, we could presumably take money from that to deal with some of the legacy issues that a number of Members have mentioned. I hope that those issues will be re-examined in another place. Perhaps by that time actuarial figures will be available, so that a more comprehensive discussion can take place about the real costs in the cost-neutral straitjacket that the Government have imposed on themselves.

I am also concerned about the burden of proof and medical records. I think that the two issues are linked. Although the Standing Committee did not discuss medical records in detail, I mentioned then that one of my other responsibilities was lay membership of the General Medical Council. The GMC is often confronted with a lack of medical records, illegible medical records or incomplete medical records, but such records are a vital part of any case for compensation, whether or not the MOD is involved.

I welcome the Minister's assurance that if the MOD cannot find the medical records and the claim seems reasonable it will accept the claim, but that does not exempt the MOD from ensuring that the best possible systems are there to ensure that all medical records are readily available and up to date. Given the proposed changes in the burden of proof, about which many of us are worried, the ability to put a proper case will depend much more on the medical records. Notwithstanding what the Minister has said, if the MOD is to help claimants to make a proper case—and we should bear in mind all the other problems with which it will have to deal—this matter will need proper attention.

Nevertheless, Liberal Democrats welcome many of the benefits conferred by the Bill, particularly the compensation for unmarried partners. We have called for that and other measures for some time. We are prepared to support the Bill overall, but in the hope that further debate in the other place and further reflection by the MOD will deal with some of the long-standing legacy issues. I do not believe that that would cost anything near what the Minister has suggested, and I think that it would right wrongs that have existed for far too long.

Hugh Robertson (Conservative, Faversham and Mid Kent)

One of the remarkable aspects of our debates on the Bill has been the degree of cross-party consensus. Let me record, in particular, my appreciation of the work of the Select Committee, which has enabled us to have a much more informed debate than we could have had otherwise.

Much of the Bill is welcome. I am especially pleased about the commitment in the explanatory notes to the continuation of the final salary defined benefits scheme, which I think particularly appropriate to service in the armed forces. I also welcome the equal treatment afforded to officers and other ranks, while adding the caveat that it can only go so far, as the two groups have different levels of responsibility and exposure. I also greatly welcome the increase in death-in-service benefits, the increase in widows' benefits and the Minister's movement on the AFPRB. However, as I said earlier, I wish that he had gone further.

As several hon. Members have said, it is fair to make the point that a number of issues remain of serious concern. The first is the fact that the Bill is only an enabling measure, but there is also the fact that the payment of pensions will be deferred from the age of 60 to 65. That is unfair when the retirement age remains at 55 and given that the increase in longevity is not yet five years.

There is a lack of opportunity for anyone to earn a full career pension. If one serves until the age of 55, one will accrue 35/70ths and, if one adds on the lump sum, one can get only 62.5 per cent. of one's salary. That, of course, is in the best-case scenario.

As other hon. Members have remarked, the impression runs through the Bill that it has been drawn up on a cost-neutral basis and not on the basis of what the armed forces deserve. As we heard earlier, there are also changes to the proof of entitlement to compensation. That is particularly damaging, because it is bound to encourage a compensation culture when the guiding principle should be that the United Kingdom owes a strict duty of care to those injured in the service of their country.

I am afraid the impression remains that the one certain winner from all this will be the Treasury. It will benefit from cost neutrality, the deferment of the payment of pensions and, on top of that, the overall decrease in service numbers, which means that fewer pensions overall will have to be paid. Elements of the Bill have attracted adverse comment from bodies as diverse as the Defence Committee, the Forces Pension Society, to which we all owe a particular debt of gratitude, the Royal British Legion and a number of other veterans' organisations, including the widows who presented a petition in Committee Room 14 yesterday.

The House has a special duty of care to the armed forces. Cost neutrality should not have been the basis of the review, because improvements in some areas are inevitably matched by savings elsewhere. At a time when our armed forces are so widely deployed and in so much danger, I believe that that is an entirely inappropriate message to send. On that basis, we shall vote against the Bill on Third Reading.

Angus Robertson (Scottish National Party, Moray)

I express the appreciation of the Scottish National party and Plaid Cymru for the work done by our servicemen and women. I also wish to put on record our commendation of the Government for certain changes in the Bill, not least the death-in-service lump sum, the widows' or widowers' pensions and what are known more generally as equality issues. Those are major improvements.

It is disappointing, however, that improvements to the Armed Forces Pay Review Body, the burden of proof, full career pensions and widows' and partners' pensions that have been discussed in the context of the new clauses have not been taken on board. Any one of those reasons, or all of them collectively, would be enough for me to vote against Third Reading. However, I shall vote against Third Reading because of an issue that I raised on Second Reading and in discussion with Ministers. It relates to the impact of the early departure scheme.

Ministers and other Members are aware that certain parts of the country, which have low-wage economies and which are dependent on the contribution that retired service personnel make, are underpinned by the current pension arrangements. Not long ago, I caught first sight of the figures. They were shared with the spokespeople for the Conservative party and the Liberal Democrats, but not with the major opposition parties in Scotland or Wales or any of the political parties from Northern Ireland. I hope that the MOD will take that point on board when other important information is made available.

In the letter to the Chairman of the Defence Committee, it was pointed out that, under the new scheme, annual payments to retired personnel under the early departure scheme would be halved. That will have a detrimental impact in my constituency and in many others. The Minister said earlier that no detailed work had been done on the question, and that fact alone is enough for me to vote against the Bill on Third Reading.

Mike Hancock (Liberal Democrat, Portsmouth South)

Every Member who has spoken has paid tribute to the men and women of our armed forces, and rightly so. We recognise the debt that the nation currently and historically owes to them. Today's debate has touched on many of the issues that this House has neglected to deal with in the past. We had an opportunity today to put right a number of wrongs, but we have chosen not to do so.

Like others, I welcome the improvements made in respect of equality—long and hard have they been fought for—but we missed the opportunity to take the initiative, and to offer pension benefits to members of the Territorial Army who, in some cases, have been deployed on active service as frequently as three times in two years. That issue could and should have been recognised, and the Minister could have responded positively this afternoon. I regret the fact that we were unable to vote on it. It was worthy of voting on, so that the Government could measure the depth of feeling.

This legislation is supposed to be complimentary to the men and women of our armed forces, and it is on compensation and the burden of proof that I draw a line in the sand. It is already extraordinarily difficult to fight the Ministry of Defence successfully in compensation cases: the burden of proof is already stacked against the individual concerned. The Minister suggested that the situation will improve, because medical records will be better kept and readily available, but in response to an intervention from my hon. Friend the Member for South-East Cornwall (Mr. Breed), he said that he was talking about the future, and that the many servicemen and women affected by Gulf War syndrome will not be covered. Their medical records do not exist, and they have no clear way forward in proving that the burden of proof lies with the MOD. We are going to make it incredibly difficult for people to fight cases in future. Even the Minister suggested that fewer claims for compensation will be made because of the way in which the burden of proof is being shifted. That must be reason enough not to vote for this legislation.

I hope that there will be a significant vote against the Bill on Third Reading, and I shall join those Members who do so. I cannot possibly vote for the Bill, given that many of my constituents and others are already proving unsuccessful in making their compensation cases. Such claims should not be made even more difficult to make.

We also missed an opportunity to put right the obvious mistake that was made with the widow's pension; indeed, we missed such opportunities in the 1970s, the 1980s and the early 1990s. Sad to say, despite the fact that every Member probably recognises the justice of the widows' and widowers' case, this Government have again failed to recognise the mood of the country, which is that the House should support such people, and that they should get what most reasonable people believe that they deserve.

In common with other hon. Members, I welcome the movement that has been made, but sadly, there has been far too little of it for us to accept that the legislation is worthy of the men and women whom we have praised so highly here today. The measure of our support for them is not how often we pat them on the back when they are fighting on our behalf, but the way that we treat them throughout their careers and afterwards. It is also the way that we respect and treat their families when, tragically, our servicemen and women do not return from the actions that we have sent them on. I ask hon. Members to reject the Government's position and to put down a big marker by saying that the Bill is simply not good enough.