The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
As part of the strategic defence and security review, the Government announced that the amount spent by the Ministry of Defence (MOD) each year on personnel allowances would be reduced by over £300 million. Reductions to civil service allowances will necessarily be dealt with separately to those affecting the armed forces. I am now able to detail the changes to armed forces allowances, which will achieve a reduction in spend of some £250 million by financial year 2014-15.
A strong economy is a national security imperative, and the Government conducted the strategic defence and security review (SDSR) against the background of a dire fiscal situation, which requires difficult decisions on reducing public spending. Proper support to our service personnel is equally essential. An appropriate set of allowances is an important element of that support, and will remain so in the future. However, it cannot be immune from careful scrutiny to ensure that it remains appropriate. While reductions in this area will never be welcome, the package of changes which we are introducing has been developed in full consultation with the service chiefs of staff and represents the best balance between affordability and fairness.
Service personnel are entitled to appropriate notice of changes to allowances, and there will be a minimum of three months notice before any alterations which affect those currently serving take effect. In specific cases the notice will be longer (up to 12 months).
The changes affect the following allowances:
Incidental Expenses Allowance—This a contribution to minor expenditure incurred during temporary duty involving overnight absence; it is paid at a flat rate of £5 per day. In future this allowance will only be paid to personnel in hospital. All personnel will continue, as now, to be reimbursed for the actual costs of travel, food and accommodation.
Local Overseas Allowance—This allowance contributes towards the cost of living, when service personnel are required to serve overseas. We will be modernising the way in which the allowance operates by re-evaluating the items used to construct it, and by reducing the number of rank-based bands from 13 to three. In view of the significant impact of these changes on some service personnel and their families, they will be staged over two years.
Food and Incidentals Allowance—This is a contribution to the additional costs which are incurred by unmarried service personnel and those serving unaccompanied, if they do not have access to service accommodation or messes. In future the allowance will be based on more realistic assumptions and a reassessment of the extra costs incurred. As a result the allowance will reduce from £12.41 to £8.50 per day.
Living out Supplemented Rates of Local Overseas Allowance—This allowance achieves the same aims as food and incidentals allowance but for personnel based abroad. The allowance has been removed and replaced with food and incidentals allowance paid in local currency.
Home to Duty Travel—This assists service personnel with the cost of daily travel between their home and place of duty. At present, individuals are responsible for the first three miles of their journey. In future, this will increase to nine miles, even when they have no choice in the location of either home or duty premises. This change will be introduced over a period of three years to mitigate the affect on individuals.
Recruitment and Retention Allowance (London)—This allowance is designed to encourage personnel to serve in London. Since changes to this allowance would have the greatest impact on those on the lowest salaries, the allowance will be maintained for all those of the rank of corporal and below. For all others it will be removed. To allow adequate preparation for this change, it will not be introduced until 2012.
Disturbance Allowance—This flat-rate allowance was intended to compensate for the necessary additional expenses that arise when service personnel are required to move to take up new assignments. In practice, many significant costs associated with moving (removals, storage etc) are covered through other allowances. It is therefore appropriate to reduce the value of this allowance by 10%. For those with children, the additional elements previously paid will be reduced by 53%.
Daily Subsistence—This allowance reimburses actual allowable subsistence expenditure. We have reduced the maximum rate payable to £25 per day, in line with the rates paid by other Government Departments, and made similar percentage reductions in overseas rates.
Get You Home (Early Years)—This allowance is designed to enable junior members of the services to maintain links with close family as they adjust to service life by funding four journeys to the family home per year. In future it will be available only to those undergoing initial training and for all personnel under the age of 18.
Get You Home (Seagoers)—This allowance is designed to support retention of seagoing personnel by reducing the impact of routine separation. The current provision of 12 journeys to the individual’s place of residence will be reduced to 10.
Motor Mileage Allowance—There are three rates of motor mileage allowance currently in use. These will be unified to a single rate of 25p per mile, in line with the HMRC basic rate.
Commitment Bonus—Commitment bonuses are paid at specified career points, and reward completed service. Due to current service manning levels and the redundancy programme we announced in the SDSR we have decided to reduce the value of these bonuses by 50% for all new entrants, implemented with immediate effect.
Specialist Pay (Reserve Banding)—Specialist pay is paid to service personnel with specialist skills in order to help recruit and retain them. Reserve banding is used to facilitate a gradual reduction in specialist pay when individuals are in positions not requiring specialist skills. The period of gradual reduction has been changed from six years to three, and will cease after the recipient has spent three years out of specialist assignments. Additionally, we will remove specialist pay from those who give notice of resignation. We will not implement this change until 2012. Outwith these changes, we have asked the armed forces pay review body to review all specialist pay as part of its 2011 programme of work.
In addition to the changes described above, we have made alterations to a number of other smaller allowances, to simplify the allowance system and contribute to the reductions in our allowance expenditure.