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Lord Mackie of Benshie: My Lords, I, too, congratulate the noble Baroness, Lady Greengross, on
 
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bringing this up. It has been a source of annoyance and grief to a whole lot of people. Many people in political life have been trying to make the Government see sense. It is extremely difficult to do that.

Fortunately, we have some hope on the legal side, in that a very distinguished lawyer, the noble and learned Lord, Lord Carswell, disagreed with the last verdict. The Government have won the last legal case, but it is not a legal case that we are talking about. The noble Baroness, Lady Fookes, put it in a nutshell: it a case of human rights. The human rights issue may well provide some solution. The Government should, however, think of doing something to put this evil right. They would do some good to themselves in so doing.

The figure quoted by my noble friend Lord Jones of Cheltenham—I think he said £500,000—would upgrade the pensions without paying the money they are due for back pensions, which must cost more. If the Minister would explain this, and agree or disagree, I would be grateful.

I am a pensioner. I took my pension when I was 70. That, I am afraid, was 16 years ago, but my pension then was £74. It is now over £140. The difference that that would make to someone who has gone abroad, simply to live with his family—which is a right and proper instinct—might be very big indeed.

The people who are profiting from being paid the rise are mostly people who are quite well off. One can go and live on the beaches of Spain or the French Riviera; one can mingle with the toffs in Tuscany; or one can go and live in Las Vegas, if anyone would desire to do that. Then you get the increase. It is totally illogical. If you live in the Caribbean, as I understand it—and I should like the Minister to confirm this—you get the winter fuel increase of £200. That seems a bit illogical in view of all the good people who get nothing out of it.

8 pm

To talk of money is right and proper, and we have to think of it. But to save money for the Treasury from one section, totally unjustly, is quite wrong. If the Treasury has to save that money it should come off all of us from taxation or elsewhere. To save it at the expense of people who go to live with their families in the Commonwealth—people who have supported us in two wars—is quite wrong. The Government must consider not paying a little more but paying the full rate to pensioners who have lived abroad for family reasons as well as giving it to all the people who are rich enough to live in the Caribbean.

Lord Goodhart: My Lords, I am very pleased indeed that the noble Baroness, Lady Greengross, has chosen to raise once again for debate in your Lordships' House the subject of this longstanding injustice to a substantial number of people who have contributed much to the United Kingdom. I am also very pleased that my noble friend Lord Jones of Cheltenham has chosen this debate in which, a little unusually, to make his maiden speech. But it shows that his 13 years of
 
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distinguished service to his former constituents in Cheltenham is continuing despite the fact that he is no longer their representative in the lower House of Parliament.

I believe that any reasonable person would agree that the treatment of pensioners who have gone to live abroad in countries where there is no mutual agreement on pensions is grossly unfair. I think that that belief will only have been reinforced by the specific examples that have been raised this evening by the noble Baroness and by my noble friend. This unfairness dates back to 1975 when the Wilson government were in a terrible mess, had to find spending cuts and had to restrict the outflow of sterling. The uprating of pensions of non-residents was selected as one target for these cuts and restrictions. It had the great attraction, and continues to have the great attraction, that those who suffered from these changes did not have the vote. So they were denied the uprating and they have never had it since despite the great improvements in this country's fiscal situation and the transformation of sterling into one of the strongest currencies in the world.

Back in 1975 there was no Human Rights Act which gave the victims of this decision an opportunity to challenge it on grounds of discrimination. Following the enactment of the Human Rights Act, a number of overseas pensioners claimed that their treatment was discrimination which was rendered unlawful by the Act. Mrs Carson, who took her case to your Lordships' House, was one of them. I believe profoundly that in rejecting her claim the Appellate Committee of your Lordships' House got it wrong—except, of course, for the noble and learned Lord, Lord Carswell. I do not know whether there is any possibility that this case might be taken from your Lordships' House to Strasbourg. If there is any possibility, I certainly believe that there would be a real chance of victory for Mrs Carson.

I was my party's spokesman on pensions for some years and became very concerned with this issue. Pensions are a contributory benefit; indeed, they are by far the largest contributory benefit. Not only that; they are by far the largest benefit of any kind in money terms, whether contributory or non-contributory. Contributions are paid into the national insurance fund. The national insurance funds is not a fund like a private pension fund; it is, as I say sometimes, a pipeline and not a reservoir because the year's contributions go to pay the current year's pensioners, not to provide capital for future pensions. But that does not alter the principle, which I believe is that there is an implicit contract between the contributors and the state—not a legal contract, but an understanding that the contributors will make payments, and in return for that the state will pay them a pension. Contributions are payable only if and while the contributor is employed in the United Kingdom, apart from the now fairly numerous occasions when people receive contribution credits without actually paying contributions.
 
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During the period when they are employed in the United Kingdom, those people will not have been making contributions to foreign state pensions and building up foreign pension rights. The contributors will have been contributing to the United Kingdom economy when they are working here. When they go abroad, they relieve this country of the burden on the National Health Service and the social services, which are very much more expensive for those who have retired than for those who have not yet reached retirement age. This relief far outweighs the fact that pensioners, when they go abroad, do not pay income tax on their pensions.

The Government have singled them out for the denial of uprating. That means that the value of their pensions goes down in real terms from year to year. There is no possible justification for that. It means that some elderly pensioners who got pensions 20 or 30 years ago in periods of high inflation are now receiving only a tiny fraction of the pension that they would receive if they were still resident in this country.

The lead speech in the Carson case was given by the noble and learned Lord, Lord Hoffmann. I disagree strongly with the noble and learned Lord's statement in his speech that:

"There is nothing unfair or irrational about according different treatment to people who live abroad".

Against that background it is not surprising that he decided against Mrs Carson. He went on to say:

"The primary function of social security benefits, including state retirement pensions, is to provide a basic standard of living for the inhabitants of the United Kingdom".

That is only partly true of retirement pensions because, by working in this country and by contributing to the economy, people deprive themselves of the chance of acquiring benefits in other countries. They have rights to UK pensions, which they should be able to take with them when they leave this country, whether they leave before or after reaching retirement age.

The Government could, of course, say that no pensions should be payable to anybody resident abroad. There are good reasons why the Government do not say that. They would not get overseas workers to come here if they did. It would be an intolerable restriction on the rights of older people to move abroad. Instead they give the full pension that has been earned by the contributors at pension age, and then slice a little bit off year by year. It is death by a thousand cuts. That is not just unfair; it is immoral.

8.10 pm

Lord Oakeshott of Seagrove Bay: My Lords, this is not the easiest debate to answer from this Front Bench. The noble Baroness, Lady Greengross, has done us all a great service by raising with all her customary persistence and passion the issue of uprating. We almost always sing from the same hymn sheet in this House, so I thought long and hard about how far I could follow her on this occasion.

My noble friend and predecessor as Front Bench spokesman, Lord Goodhart, and I also stand shoulder to shoulder on almost every issue. As usual he has put
 
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his case with the logic and precision that we always expect. My noble friend Lord Mackie has also spoken with great force.

My short answer is that I have considerable sympathy with the points that they made, and I shall probe the Government's position as hard as I can. The official position of our party, as set out in our policy paper last year is,

"to look at whether further reciprocal arrangements could be established with other countries to allow as many pensioners as possible to benefit whilst recognising that a country's first duty is to those who live within its borders".

It is a particular pleasure to pay tribute to my noble friend Lord Jones of Cheltenham in his maiden speech, especially for his tireless work for his former constituents. He was in the front line for democracy in Britain on that dreadful day when he was attacked in his advice centre. He has also done much valuable work for the cause of democracy overseas in election monitoring. I pay particular tribute to him for his moving and focused speech highlighting the problems of the small group of state pension recipients in the British overseas territories. As he pointed out, only Bermuda, Gibraltar and the sovereign base area of Cyprus receive quarterly uprating. In 11 other territories they do not. He quoted £500,000 a year as the estimated cost of unfreezing pensions. Will the Minister either confirm that that is a realistic estimate, or perhaps write to me and the noble Lord, Lord Jones, if he needs to check the figure?

My noble friend made a particularly strong case for this group. We urge the Government to try much harder to widen uprating by a series of reciprocal arrangements with individual countries. But how realistic is that when we are dealing with tiny islands for which Britain is still largely responsible, such as British Virgin Islands with 47 pensioners, the Falklands with 38 and Ascension Island with just five? With whom would the British Government negotiate a reciprocal agreement when there are only a handful of pensioners? In practice the British Government would be negotiating with themselves. The Minister must consider whether the doctrine of reciprocity would stretch that far, or whether in all the circumstances, UK pensioners in the British overseas territories should not be treated for uprating purposes as if they were still resident in the UK. The cost, as we have heard, would be negligible.

Cost is a relevant consideration if the Government's estimate of £400 million a year, increasing over time, is correct as the price to public funds of fully unfreezing the pensions paid to about 520,000 people overseas, of whom the great majority—about 470,000—live in Canada, Australia, New Zealand and South Africa.

I fully understand how badly let down many—or all—of those pensioners feel. We have to recognise that they are competing for a limited pension and social security budget with, for example, many women who are shamefully treated by Britain's present pension system, or the 85,000 people in this country
 
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who have been robbed of their pensions when their funds collapsed and still have not received a penny from the financial assistance scheme.

We have heard powerful cases on behalf of overseas pensioners tonight. When we on these Benches are arguing our spending priorities with our Treasury team colleagues nearer the next election they will certainly be in our mind. But from these Benches we cannot make firm promises of backdated uprating now.

The Government must also tell us why progress on entering new reciprocal arrangements with overseas countries is so slow. In the past 20 years only with Barbados and the Philippines have they signed new agreements that have not been overtaken by European-wide regulation. Are they really trying? What is the strategy for reaching agreement with the key four countries? Do the Government now accept that reciprocity is not a realistic option with the overseas territories?

In replying to the debate on the Pensions Bill last year, the then Minister Chris Pond struck an encouraging note in discussing new bilateral agreements. He stated that after around 1981 there were no new bilateral agreements. He said:

"One way forward may be to argue for a bilateral agreement between those countries and the United Kingdom that would allow us to work out how to meet the reciprocal costs of such an arrangement".—[Official Report, Commons Standing Committee B, 27/3/04; col. 259.]

In reply to our then pensions spokesman Steve Webb, he said:

"I hope that other hon. Members will reflect on whether further pressure should be exerted to examine whether other bilateral agreements would benefit the interests of the particular communities mentioned today".—[Official Report, Commons Standing Committee B, 27/3/04; col. 259.]

That struck an encouraging note. Is that still the Government's position or, if not, why has it changed.

I end on as positive a note as I can. I can, at least, go further than the suggestion made by the noble Baroness, Lady Fookes. We on these Benches and my colleagues in the Commons believe that, as a start, UK state pensions paid to people living in countries where they are not currently uprated should be increased from now on in line with UK inflation. That change would let people make an informed choice about where they lived in future. It would not be retrospective, but it would be affordable, costing an estimated £20 million this year, rising to some £100 million a year by 2008–09. It may be cold comfort to those who retired and emigrated many years ago, but we think that it would strike a fair balance between the financial pressures of the pensions crisis in this country and the injustice felt by people living abroad whose pensions are frozen. It would be a useful start and it would at least stop the problem getting worse.

How I wish we could say that about our collapsing pension system in this country.

8.15 pm

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