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Lord Monkswell: The Minister is talking about the advice which a pensioner might have received from the department or from his local office. We can accept that if pensioners had sought that information and had obtained it, they would have been told that if they moved to certain countries their pension would not have been increased in line with inflation. But that is not the only information that they would have had. Will the Government not recognise that the other information that would form the background to their making the decision, more particularly since 1979, is the Conservative Government's thrust to reduce inflation and keep it low? On that basis, given that climate, the pensioner might have taken the decision to go abroad while thinking that it would not matter too much because the Conservative Government would keep inflation down. Do not the Government feel that they

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have a certain responsibility because in that respect they are rather different from any previous government we have had?

Lord Mackay of Ardbrecknish: I am not entirely sure where that intervention takes me. If someone went abroad in 1980, 1983 or 1984 and decided that inflation would not be very bad through the rest of his lifetime in the UK and that he could therefore afford it, that is a view which he himself had to take. Interestingly enough, over recent years, it would not be too bad a view. But inflation goes on. Although it is low, it is not as low as we would like. It is still there and over time it is one of the problems that we have with inflation. If the noble Lord is a recruit to our campaign against increases in inflation, he will certainly be a recruit at the end of the debate to me preventing another £250 million of public expenditure, because the two are related.

This year the Government will spend around £900 million on pension payments to people who live outside Great Britain. Noble Lords have said—and I shall say it for the first time and not for the last—that if we were to pay out pensions to all pensioners who live abroad at the same level as we pay to pensioners in this country, the cost would rise. That £900 million would rise by about £235 million a year, an increase of £250 million. That figure is the latest estimate based on an actual count of 90 per cent. of the pensioners overseas and what their entitlement would be.

Some noble Lords might consider that £250 million a year is a small sum in relation to social security spending as a whole. Indeed, the noble Baroness, Lady Seear, invited me to take money from less good causes. She did not actually give me a list of the less good causes from which I might take £250 million. By any reckoning that is a very considerable amount of money. It would have to be found either from the existing social security budget or from an increase in taxation.

If I were offered by the Treasury, which seems an unlikely scenario, an extra £250 million to spend on the social security budget, I regret to say to noble Lords who have supported the amendment that unfreezing these pensions would not be my first priority by quite a long way. There are many other cases in this country of people who live here that I would certainly prefer to attend to than spending £250 million in that regard. Although I hope that the problem does not arise, a point which arose in one of our debates earlier this afternoon about people with Alzheimer's disease certainly springs to my mind as one area which I would certainly have higher up my shopping list of things I might do. I am quite sure that most Members of the Committee are in exactly that category.

Pensioners in the European Economic Area or in countries with which we have reciprocal agreements have their pensions uprated. We have some 30 agreements. The great majority came into force when cost was a less important factor than it is now. Other more recent agreements fulfil long-standing commitments entered into when the modest costs involved were considered affordable. It is part and parcel of our commitment to the European Economic Area. But some 90 per cent. of pensioners who do not

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receive uprating live in Australia, Canada, New Zealand or South Africa. While we do have reciprocal arrangements with Australia, Canada and New Zealand, they do not provide for uprating. I know that Members of the Committee are particularly concerned about those countries. But one cannot unpick countries because those which I have mentioned would account for £210 million of the £250 million I have mentioned. That is the cost.

During the Second Reading of the Bill and today, the noble Lord made a point about the United States and Canada and the fact that pensioners in the United States receive indexation whereas pensioners in Canada do not. Annual pension increases have been payable in the United States since 1969 by virtue of a reciprocal agreement. I should explain that shortly after we concluded the agreement with the United States, the then UK Government offered to enter into negotiations with Canada to unfreeze UK pensions paid there. The Canadian Government were unable to discuss the issue at that time because of the federal nature of their social security system. By the time they were able to do so, inflation in this country had taken off and created a financial climate in which unfreezing for Canada was no longer affordable.

It has been argued that the cost of uprating these pensions would be offset by savings to public services here, like the health service and so on. Of course, they are not real savings; it simply means that we may have had to spend more. The argument that one gets a quarter of a billion pounds out of these savings is not very sensible in the real world, but I understand it.

It has to be said that pensioners who go abroad either when they are in work or are retired, no longer pay tax in this country, but are paying it in the country in which they are resident. They may be paying tax on more than just the United Kingdom retirement pension. They may pay tax on the portion of the Australian retirement pension on which they become eligible to pay tax or on their occupational pension, which was either earned in this country before leaving or in the country in which they now reside. Therefore, the balance of advantage is a much more complex problem than my noble friend Lord Pearson tried to pray in aid, and whether one can set out a credit and debit sheet as regards this group of people.

My noble friend Lord Dean of Harptree, in being "half friendly" with me, as he put it, asked whether we were looking at any further negotiations on social security conventions. There are no new negotiations leading to unfreezing which have been initiated in recent years. Due to the financial position I have laid out and the need to keep control of public spending, I do not foresee any prospect of re-opening negotiations in the next few years.

This is an emotive issue and Members of the Committee who have spoken in its favour have certainly done so in an emotive way. But the blunt fact of the matter is that in this country our social security spending is running at over £80 billion a year. Despite the measures which we are taking to contain costs—not universally approved of by the Benches opposite—they are expected to grow to something like £90 billion by

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1996-97. We are committed to an efficient, effective and affordable social security system which protects the needs of the most vulnerable in our community. But we have to ensure that social security spending does not outstrip the ability of people in our country or the economy to pay for it. I believe that to look for an extra quarter of a billion pounds for this particular case is a bridge too far. As I mentioned earlier, if I had a quarter of a billion pounds (and it is billions) to spend—and I suspect most Members of the Committee would agree with me—I can think of other cases which might have a higher priority than this one.

Despite the sympathy which many have shown for those who have decided to live in climes other than our own, the Government's case is unanswerable on the ground that the amendment of the noble Lord, Lord Stallard, would impose a very considerable increase in expenditure on us. For that reason, if the noble Lord divides the Committee, I hope that noble Lords, having heard my argument, will support me in the Division Lobby.

Lord Pearson of Rannoch: Has my noble friend read leaflet NI 38 which he prayed in aid in support of the fact that people who have gone abroad will have been sent that document and will know exactly what is in store for them? If my noble friend has not read it, can he do so and do something about the drafting at .19 on page 10? As I mentioned in my few remarks, the pensions which are not to be index linked relate entirely to widows, the mother's allowance, the child special allowance and the guardian's allowance. That might make matters easier for people in future.

7.15 p.m.

Lord Mackay of Ardbrecknish: Of course I shall read the leaflet in some detail, including the small print. I do not think that that takes away from the point I made. If a pensioner had made inquiries about his position, either through leaflets or through officials of the department over nearly 50 years, he would have been told the situation.

Lord Stallard: I have listened very carefully to the debate and I would like to thank all those on both sides of the Committee who have participated. I have heard nothing new from the Front Bench opposite. In fact, that speech must have come from the files because there was nothing in it which has not been said by umpteen Secretaries of State in the noble Lord's position over many years. He said that Labour Governments have never done anything about this matter. It must have been a Labour Government in 1969 which negotiated the reciprocal agreement which the Minister mentioned.

Nonetheless, the whole tenor of the Minister's speech and others seemed to be that it was the pensioners' fault and that they should not have gone to Canada; that if they had listened to the Government they would have gone to some other place: one of the other 33 countries. The Government are not prepared to discuss reciprocal agreements with those countries. It is only the United Kingdom Government who are stopping the pensioners having the benefit.

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The Government have been saying ever since I was a Member of the other place that the offer is there and those countries should come to talk to us. The Minister said that in 1972 an offer was made, but there were difficulties in Canada at that time. He covered that up by saying that when the Canadians had solved their problem, and when renegotiation was considered, the Government said that inflation had taken over and was sky high, so they could no longer discuss the matter. But when inflation was virtually nothing the Government still did not want to talk about it.

From all that, one can only assume that the Government are hell bent on continuing this discrimination. They have done nothing to solve the rift which exists. In fact, they have worsened it and spread it. On that basis I have no alternative but to take the opinion of the Committee.

7.18 p.m.

On Question, Whether the said amendment (No. 183) shall be agreed to?

Their Lordships divided: Contents, 45; Not-Contents, 98.

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