(12 years, 7 months ago)
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Baroness Dean of Thornton-le-Fylde
To ask Her Majesty’s Government what steps they are taking to resolve the issues of operational tempo, pay, pensions and housing affecting Armed Forces personnel reported in the latest Armed Forces Pay Review Body report; and how they ensure that such steps are compatible with the Armed Forces covenant.
Baroness Dean of Thornton-le-Fylde
My Lords, the opening words of the current military covenant say that,
“the whole nation has a moral obligation”,
to all those,
“who serve or have served in the Armed Forces…and their families”.
and that they deserve our
“respect and support, and fair treatment”.
That is the basis of my Question for Short Debate this evening. I ask myself whether the Government are fulfilling their obligation on the military covenant. It is an undertaking that goes back many centuries, indeed to the first great Queen Elizabeth—Elizabeth I—when an Act was passed which compelled parishes to contribute to the care of veterans. This nation has a very long history of seeking to give good support not just to our service men and women but to their families as well, both during and after their time in the services. The Armed Forces do not have the channels to speak out for themselves. They are not permitted to join a trades union, although if you look at the blogs and the chatter on the wires, you would see that many in the Armed Forces are now agitating that they should have a trades union. I make no comment on that.
They do not have the same right to speak freely in the public arena about their position as we do. However, in January this year, Catherine Spencer, speaking on behalf of the Army Families Federation, suggested that Ministers were close to breaching the military covenant. She said:
“I have to ask if the future has ever seemed more demoralising”.
I have always believed that you should look on the upside of things and not just the negatives. I have had a pretty awful weekend doing the research for this speech because I have become increasingly concerned about the state of our Armed Forces—I am talking about the personnel side, not the equipment, obviously. I recognise the need for austerity measures but my interpretation of the wording of the 2012 AFPRB report is that it expresses deep and serious concerns on the range of those austerity measures and how they are being applied to the Armed Forces.
I declare an interest as a former chairman of the Armed Forces Pay Review Body for six years. I am currently a vice-president of the War Widows’ Association and a trustee of the Armed Forces Pension Scheme. I have been in contact with none of them for this debate; I am not speaking to any external briefing. This is based on my experience.
It is a long time since I read a report from the Armed Forces Pay Review Body which has been so direct in talking about decreasing morale in the Armed Forces. The report states that the operational tempo remains “very high”. We know that, but that is almost a blanket for a number of problem areas: people not being with their families for as long as they should, going off on operations, coming back, going on training, not having the time that we have, in the military covenant, tried to ensure for them. Indeed, chapter 2.8 states:
“The 2011 Armed Forces Continuous Attitude Survey … indicated decreasing satisfaction … and declining morale”,
in the services.
Written and oral evidence from the services family federations highlighted uncertainty from those people about, for instance, the future of the pension scheme and the related transitional arrangements; changes to the Ministry of Defence allowances package; the impact on family life of the operational tempo; and the recurring theme of poor-quality accommodation and maintenance. These are ongoing issues that have been raised not just with the present Government but with the previous Government.
Those concerns are coupled with a pay freeze for 75 per cent of Armed Forces personnel for the past two years and a pay award for the remaining 25 per cent of just £250. In my view, the decision now to extend the pay restraint for a further two years, with no exclusions and a limit of 1 per cent, is having a cumulative and potentially damaging impact on the morale of our Armed Forces personnel and their families. We should be worried about that and we should try to address the issue.
A staunch pillar of the covenant going back generations has been the provision of housing, particularly in the Army. The Navy has a high proportion of its personnel who buy their own homes. To be in a community of forces families in similar situations—young families, often with Dad, or now sometimes Mum, absent for a lot of the time on operations—provides great mutual support. In the recent, successful television programme, “The Choir”, we saw how being there supported those young women. Just 45 per cent of Army personnel are buying or renting their own homes—two-thirds as many as the rest of us in the population. So the reasons for the drop in morale are obvious.
If this situation is to change, more help is needed. The home is at the heart of the family. It is somewhere we all retreat to when we have issues. The £8,500 from the current Long Service Advance of Pay Scheme to assist in buying a home is, in my view, insufficient; it was insufficient some years ago. I am not even sure whether it is still being applied, but the conditions for it are pretty onerous. It will not bring about the change that the Government—particularly the Minister—want. The Armed Forces Home Ownership Scheme is a good and very welcome initiative, but it hardly touches the problem. Just 93 personnel benefited from April 2010 to July 2011, so it needs a lot more resourcing. I accept that in a period of austerity that is very difficult; nevertheless, it needs more resource. With the number of personnel returning from Germany, what are their hopes for decent housing either within or without the services?
I read the review body report over the weekend, and from personal experience I know how much care goes into writing this report. The authors do not want to be negative when they write the report or cause problems by overspinning it, but the report brought home to me just how serious the concerns must be. Normally the authors would put it across very calmly and without exaggeration—and I believe there is no exaggeration in this report. So I was alarmed at the overall message in sections of it. One reference on its own would not be too concerning, but reference after reference to morale must lead to concern.
The review body deals with serving personnel, not veterans; the military covenant covers those serving and those who have served, and rightly so. The plight of some veterans is concerning and has been raised in this House over a number of years. It is not getting much better. Last year the Veterans Aid charity provided 19,700 nights of accommodation for former Armed Forces personnel. A disproportionate number of people who live on the streets come from the Armed Forces; we know that from debates that we have had in the House. The link with the poverty that those people live in must be of concern to us all.
The House has a reputation for taking a keen interest in Armed Forces personnel issues. I think that we all recognise the work and dedication that the noble Lord, Lord Astor, has applied to this. Nevertheless, there are still areas of criticism. I will bring together the list of issues of concern that contribute to a lack of morale. There has been pay restraint for two years for 75 per cent of personnel, yet they see in the Budget that people with plenty of money will get tax cuts next year. Job security is disappearing and career prospects have been cut, against a background of high operational tempo and the negative impact on family life.
Sometimes when I raise issues, for example on pensions, I am told that things cannot be changed because the consequences will bounce back on the public sector. I do not accept that as a rational argument. People in the public sector do not go off and give their lives. More than 400 of our men and women have lost their lives in Afghanistan up to March this year. It cannot be said that this is the same kind of job as working in an office or in a local authority. We need to look at this.
I am not asking for special treatment. I hope that on this occasion the Minister will not trot out the usual mantra that it is all the previous Government’s fault. I am asking that we honour the military covenant. It is our moral obligation. We are in serious danger of not meeting that obligation. Perhaps in his reply the Minister will kindly consider committing to remedy what people in the Armed Forces have lost. They face four years of pay restraint—a pay cut in anyone’s language—and a lack of job security and career prospects. We need a renewal of our commitment to the Armed Forces, and we need to carry out that renewal.
Lord Palmer of Childs Hill
My Lords, I thank the noble Baroness, Lady Dean, for initiating this debate, which is very appropriate. In reaching its recommendations, the Armed Forces Pay Review Body, which the noble Baroness mentioned, must have regard to,
“the need to recruit, retain and motivate suitable, able and qualified people taking into account the particular circumstances of Service life”.
I make no excuse for raising in this debate a subject that I raised at each stage of the Armed Forces Bill: Armed Forces housing. Surely the state of availability of such housing must be a major factor in recruitment, retention and motivation. Adequate housing must be one factor to balance against the “high operational tempo” that the Armed Forces pay review report identifies. The report described the lack of choice in accommodation, the variable maintenance performance and also what constitutes family eligibility for accommodation.
In answers given by Ministers to my many previous comments on Armed Forces housing, the proposal was made that in future families will be enabled to own their homes. This was mentioned by the noble Baroness, Lady Dean. I said at the time that I agreed with this as an alternative and as an aspiration but that home ownership should not be a requirement for our forces. The report rightly says that the MoD will need to continue to make a significant provision of good-quality housing for a mobile workforce.
A significant part of the report deals with the levels of rents and the size of any subsidy. My criticism is that the financial and economic requirements laid down in the report are divorced from the state of maintenance and the modernisation of services accommodation. The report states that there are 49,000 service family units in the UK, and that the 39,600 units in England and Wales—80 per cent of the 49,000—are leased from the commercial concern to which the MoD sold the properties. Only 20 per cent are owned by the MoD or by others.
The good news is that in 2010-11, £62.5 million was spent on improvements, with 900 properties being upgraded. The bad news is that there will be a three-year pause in the improvements programme from April 2013. The report shows that the MoD’s procurement strategy was to sell off most of its English and Welsh SFA estate for £1.7 billion in 1986, whereas the rent it has paid for those often badly maintained properties has been a massive £2 billion compared to the money received by the MoD of £1.7 billion. I hope that when my noble friend replies, he will comment on that procurement policy of the Ministry of Defence. Putting my accountant’s rather than my defence hat on, given £1.7 billion with interest of, say, half a billion pounds over the six years, one could have borrowed the £1.7 billion, paid the interest of roughly half a billion, and the MoD would still own the properties having received £2 billion-worth of rent and, at that stage, the rent roughly equalling the cost of repaying the loan and the interest. The MoD, would still own the properties which it has to repair and maintain although they are owned by someone else. I ask my noble friend whether it is right to make a judgment on forces’ housing on purely financial grounds without a strong consideration of the debt we owe our service personnel as contained in the Armed Forces covenant.
I do not want to be all negative, because I take account of the fact that I am part of a Government coalition party. There are many things which we have not highlighted. For instance, there has been a rise in council tax relief to 50 per cent for service personnel overseas, a pupil premium of £250 for every child with a parent in the services and a yearly fund of £3 million to support state schools with service children. I was delighted that the operational allowance was doubled for Armed Forces personnel serving in Afghanistan. The community covenant scheme was launched to strengthen support between civilian communities and the forces with a grant of £30 million and the establishment of a veterans’ information service—they often need it.
Members of the House will know that during various debates I have made a big thing about treatment of veterans and medals. I am pleased that the Armed Forces compensation payments have been ensured as not being required as payments for social care. Improvements to the Army's education programme have also been secured. I was also delighted that during the passage of the Armed Forces Act, thanks to input from many Members of this House, there was movement, with the Minister's help, on medals which had been awarded but were not allowed to be worn. That was a move of great sensibility in which I thank the Minister for taking such a great part. I hope that the commission set up to look into medals and veterans, which seems to be clouded in a measure of obscurity, looks at the whole question of medals, the treatment of veterans and the National Defence Medal itself.
The review is important and I hope that when the Minister replies to comments made by me and the noble Baroness, Lady Dean, we can feel more comfortable on behalf of our valuable Armed Forces personnel.
Lord Ramsbotham
My Lords, like the noble Lord, Lord Palmer, I congratulate the noble Baroness, Lady Dean, on obtaining this debate. It is very important and there is no doubt that word of it will get out to the Armed Forces that we have taken an interest in what, as I know from personal experience when serving, is regarded as the highlight of the year almost on the personnel side: the annual report of the Armed Forces Pay Review Body, of which the noble Baroness was herself a most notable chairman.
I must admit that what struck me when reading the report was its similarity with what I regarded as one of the low points of my career, which was in 1977, when we had to face what became known as the Irishman’s pay rise, when the pay rise we were given was less than the increase in the accommodation and food charges. The result was that a number of commanding officers resigned because they refused to read out to their men what they were told to read—that this was a good pay settlement and that there was also to be a considerable increase in what is now called voluntary outflow. The result of that, thank goodness, was that the incoming Conservative Government had taken note of what was happening. There was an almost immediate pay rise, following the new Government taking over in 1979, which rescued a very dangerous situation. I was struck by the similarities of that situation when I read that there will be rental increases varying from 2.9 per cent for grade 1 to nothing for grade 4, and a 4.9 per cent increase in the daily food charge, when so few people are getting any increase in their pay. That strikes me as being along exactly the same lines as the previous situation. People are not silly and will see it as such.
I was for a time the Adjutant-General, the personnel director, for the Army. I was fortunate with the Armed Forces Pay Review Body of the time. It was extremely well led and it listened. It was encouraging to me that the board always came back and discussed what it had heard from us. There was therefore a partnership between the board and the military. The board recognised that the military welcomed the board, rather than not liking having it around, and particularly welcomed this partnership.
I was therefore intrigued that this AFPRB, which, as the noble Baroness said, has produced a very direct report, is clearly listening. I noted that it pointed out, among other comments, that it had heard,
“significant concerns about the wide-ranging changes in train following the Strategic Defence and Security Review”.
In other words, it was looking widely and looking for causes to report about, not just for individual things. Why is that serious? It is very serious because here we are faced with another two-year pay freeze, and we are told that the achievement of what was set out in the strategic defence review depends on a financial upturn in 2015. Frankly, looking ahead, it does not seem that that financial upturn is likely to provide what people were talking about in the SDSR. Again, soldiers, sailors and airmen are not silly, and they can see this. Coming on top of a freeze, with jam tomorrow being promised to them, and with 2015 not looking like it will provide the jam that was suggested in the SDSR, they are understandably concerned—particularly when they see that against the natural requirement for an upturn in personnel costs, which have been so adequately and fully described by the noble Baroness, the equipment programme is so vast that it is likely to swamp or dominate the personnel side, if we are not careful.
However, two sentences in the report worried me more. They were:
“We were due to undertake a number of scheduled reviews this year. For some reviews, MoD did not submit the evidence we required at the start of the round and we made clear that further evidence was needed”.
Frankly, I find that utterly disgraceful. Despite all the evidence that is there every time you talk to a serviceman, the MoD could not establish the evidence on which the Armed Forces Pay Review Body was due to do its work. No one should know this more than the current Permanent Under-Secretary, with whom I once worked when she headed the Prime Minister’s Social Exclusion Unit. She knows all about the impact on people of the things we have been talking about.
I know that we are very fortunate in having in the Minister someone who listens, cares and will take note. This is not just criticism for criticism’s sake—it is serious alarm that the MoD should be reported on by the organisation to which service men and women look up to more than any other to look after their interests. It should not be accused of not providing the evidence needed.
This leads me to the one recommendation that I would like to put to the Minister, based on the Armed Forces covenant. As the noble Baroness said, the covenant is about the services and their families, and veterans and their families. I am not talking about veterans and their families. The key part, as we discussed during the Armed Forces Bill, is when the Secretary of State reports to Parliament on the covenant. At the moment there is no set date for that, but bearing in mind the importance of the Armed Forces Pay Review Body and its report, and the fact that we in this House—and, I hope, the other House—will take a keen interest in this, I suggest that the timing of the Secretary of State’s report on the Armed Forces covenant should be related to the annual report of the AFPRB so that the Government’s comments on the AFPRB can be included in that covenant report. I believe that that is what service men and women will be concerned about more than any other issue.
Baroness Warwick of Undercliffe
My Lords, I thank my noble friend for introducing this debate and providing us with an opportunity to consider issues of such importance to our Armed Forces personnel. As she has highlighted, our Armed Forces are currently under great pressure. As the report puts it, “operational tempo remains high”. Gruelling tours in Afghanistan, and the Libya campaign, have placed a heavy burden on our services personnel and their families. This summer, there are the added operational demands of providing security for the London 2012 Olympics and the Diamond Jubilee.
These demands are being met with commitment and good will, at a time when our forces are experiencing a two-year pay freeze, cuts to MoD allowances, continuing cost-of-living increases and uncertainties over changes to come from the strategic defence and security review. While the Armed Forces Pay Review Body’s 2012 report notes carefully that recruitment and retention are,
“currently acceptable overall against a reducing manning requirement”,
it also highlights a “difficult year” for services personnel and their families. We know that to be true. While the pay freeze affects the whole of the public sector, it is not the case that all those in the public sector risk their lives when doing their jobs on our behalf.
I support my noble friend in contrasting the discomfort of pressures on the cost of living with the unrelenting day-to-day pressures on those we expect to serve us in battle. Those pressures make it vital that we get right anything that influences the retention of experienced personnel in our Armed Forces.
We have been reminded that, since November last year, the principles of the Armed Forces covenant are now enshrined in law. The covenant promises that the Armed Forces community should not face disadvantage because of its military experience. It sets out what safeguards, rewards and compensation military personnel can expect in return for military service. Fairness on pay and pensions, therefore, lies at the heart of the covenant.
The Government’s decision to implement a pay deal for our Armed Forces amounting to a real-terms cut seems to be at odds with the spirit of the covenant. At the very least, the Government should have allowed the pay review body to make its recommendations before deciding to cap pay rises at 1 per cent from next year. This decision cannot but harm the morale of serving personnel, even while they accept their share of austerity, and the PRB rightly makes the point that this will have an impact on recruitment.
However, my key point today concerns pensions, an issue that was raised by personnel of all ranks during a visit I made to HMS “Dauntless” recently under the auspices of the splendid Armed Forces Parliamentary Scheme. There is real anxiety over the proposed reforms to the Armed Forces pension scheme. The scheme is a highly valued part of the total remuneration package for the services, and a key recruitment and retention tool. Indeed, Armed Forces pensions are hugely important to satisfaction with the forces’ way of life.
Pensions can be taken at 55. Generally, people stay on longer if they believe that they have a good chance of getting promoted. Many do not, and there are several early-departure payment schemes whereby an individual can get some pension on leaving. As Major-General John Moore-Bick, general secretary of the Forces Pension Society, said, the unique nature of military service and employment patterns means that service men and women generally need to draw their Armed Forces pension for longer than they draw their pay. The average length of service is nine years; only 2 per cent of personnel serve to the age of 55; 34 per cent will earn an early-departure payment; and 64 per cent will not serve to the age of 40.
Service men and women rely on these small payments to see them into civilian life. I know this from what they told me on “Dauntless”, and from the experience of a friend whose father came out of the Army and returned to the UK aged 40, with two small children, no job and no house. The EDP housed and fed them for many months until he found work. These payments matter enormously. Therefore it is essential that the new pension scheme being designed by the MoD should protect and preserve the interests of service personnel. Confidence in their pension is crucial to morale—but it was not what I saw on HMS “Dauntless”.
If the Armed Forces fear that they are being stitched up, there is a desperate need to stem the tide of doubt. The commission on public sector pensions, chaired by the noble and learned Lord, Lord Hutton, recommended a switch to options based on average earnings over a career. The noble Lord acknowledged that in the Armed Forces the switch would take longer than the expected target date of 2015, and stressed that Armed Forces schemes should be tailored to the unique requirements and hazards of military careers. He also recommended that accrued rights for those in existing pension schemes should be protected. This was accepted by the Government, yet widespread uncertainty remains. As the review body report noted, this is not least because the Government made clear commitments to other public sector groups but so far have not offered similar clarity on how the commitments will apply to services personnel. Will the Minister tell the Committee whether the MoD and HM Treasury will undertake to resolve any outstanding issues on accrued rights as soon as possible, and end the uncertainty over the protection of earned pension provision?
Rumours spread like wildfire in the services. Good communications are essential. The PRB stresses the importance of clear, jargon-free messages. I would like reassurance from the Minister that the MoD has a communication strategy to ensure that whatever it proposes in this complex area is explained and thus understood at all levels. The PRB asks, too, that in the absence of trade union representation, the MoD will ensure that service men and women are enabled to express concerns about pension changes, and to articulate priorities for future provision.
My final point concerns the importance of the role played by the AFPRB. The review body's independence is vital. It is right that it should question plans for further pay increases and should challenge the MoD to show more flexibility on military wages. Service men and women trust the AFPRB as an independent, honest broker, and rely on it to make their case on pay and remuneration and to keep in mind its remit to take account of the particular circumstances of service life. Those circumstances, and the risks that service men and women take on our behalf, should be kept in mind by us all.
Lord Craig of Radley
My Lords, the House should be most grateful to the noble Baroness, Lady Dean, for bringing this topic to attention. Her experience of the Armed Forces’ Pay Review Body was extensive, both as a member in 1993-94 and as the chair from 1999 to 2005. The Minister and Government should pay most careful attention to her remarks and criticisms, and those of other noble Lords who spoke. I will add my slant to the thrust of their remarks.
Noble Lords will recall that the early 1970s were a time of acute national economic difficulty. A series of government steps such as the pay and prices code and the Counter-Inflation Act 1973 were applied nationwide. Looking at the Government’s strictures on public sector pay, have we not all been here before? However, for the Armed Forces of today, things are not as they were then. Experiences of dealing with the Cold War and the threat from the Soviet Union are far removed from the expensive and extended expeditionary warfare of today, in which large numbers of an ever dwindling cohort of service men and women are now involved, at greater risk of being killed or severely wounded or of being long separated from their families.
This significant change was recognised by the previous Government in their Command Paper, The Nation’s Commitment: Cross-Government Support to our Armed Forces, their Families and Veterans, and by this Government with the passage into law of the Armed Forces Covenant last autumn. That special recognition of the distinctive nature and value to the nation of the Armed Forces receives scant attention in this year’s AFPRB report. The Government’s across-the-board imposition of pay freezes in the public sector treats service personnel once more—as was the practice in the 1970s and 1980s—on a par with the rest of the public sector. However, it was the prime thrust of the Armed Forces Covenant and the previous Government’s White Paper that the services and their families were distinct from the rest of society and merited preferential treatment.
As this year’s AFPRB report makes clear, far from being independent and able to make its recommendations to the Prime Minister, the board has been directed by Ministers to observe the public sector pay restraints. This seems somewhat at odds with the response that I got to a recent Written Question about the Government’s attitude to the AFPRB. I asked the Government whether it was part of their commitment to the military covenant to implement the recommendations of the Armed Forces’ Pay Review Body in full. Their reply stated:
“The Government believe that the recommendations of an independent body such as the Armed Forces Pay Review Body (AFPRB) should constitute an integral part of the process used to determine the pay of the Armed Forces.”—[Official Report, 10/2/12; col. WA 113.]
That hardly describes the process followed this year and is some way, at least, from the assurances given by successive Governments in the past that the independent review body’s recommendations would be accepted unless there were clear and compelling reasons for not doing so. It would have been a more independent review if the body, after taking account of how comparators were faring, had been freer to reflect the increasing pressures of service life. The board stated:
“The Chancellor’s announcement in November 2011 of two further years of public sector pay restraint, with average increases (excluding increments) capped at one per cent, disappointed Service personnel who had made clear their expectation that we”—
the board—
“would return to making recommendations in the normal way following the pay freeze. We emphasised to the Secretary of State during oral evidence that this would be of great concern to our remit group and pressed him on whether there should be special consideration for the Armed Forces”.
I hope that the Minister will say something about that. The Board has perforce danced to the Government’s economic tune.
What gets overlooked in these immediate restrictions on pay and increases in charges is the longer-term impact on an individual’s financial circumstances. The baseline for calculating remuneration increases in future years has been debased and lowered while that for charges has been raised. As we heard from a number of noble Lords, at this sensitive time for morale and motivation in the services, the importance of treating service men and women—as both this Government and the previous one set out in statue and White Paper—is critical. Positive action, not vapid assurances that “we are all in this together”, is required to sustain the calibre of the forces that the nation must have to defend its interests.
Lord Lyell
My Lords, I apologise to the noble Lord, Lord Tunnicliffe, and to other noble Lords, for speaking now. I did not expect to arrive in time to ask the Minister my very brief question. The noble Baroness, Lady Dean, will know of the excellent work that our committee tried to do, I think four years ago, when we went to Colchester. I was detailed to take account of services family accommodation, and what was said to me then was quite chilling, although things seem to have improved considerably.
The Minister does not have to answer this point tonight; he can write to me. In paragraph 4.13, which begins,
“In its evidence, the Ministry told us that”
something was going on, the penultimate line on the page is:
“However, we received a rather more mixed impression on our visits”.
I will not say that that is necessarily what happened when your Lordships’ committee went down to Colchester. The report found that 42 per cent of respondents were satisfied with the quality of maintenance and repairs. I ask the Minister and indeed the rest of the Committee to glance at table A6.4 on page 76, labelled “2011 Armed Forces Continuous Attitude Survey results”. It is encouraging that 57 per cent of respondents declared that they were satisfied with the overall standard of service accommodation, and the figure for satisfaction with value for money was 65 per cent. So, in spite of the fact that a majority was not entirely happy with one aspect of value for money and service, the results were encouraging I hope that my noble friend will be able to give us further encouragement on the issue. I apologise and thank the noble Lord, Lord Tunnicliffe, for his forbearance.
Lord Rosser
I am actually Lord Rosser, not the noble Lord, Lord Tunnicliffe. Anyway, I, too, add my thanks to my noble friend Lady Dean of Thornton-le-Fylde for securing this important debate.
In a Written Ministerial Statement on 13 March this year, the Secretary of State for Defence said that he was pleased to confirm that the Armed Forces Pay Review Body recommendations would be accepted in full. But what he did not remind us of was the fact that his predecessor had previously told the PRB to confine its recommendations to a small overall pay increase to just those earning £21,000 or less, because of the two-year pay freeze imposed across the public sector.
The PRB has made it clear that, following its previous report it had heard a strong message from service personnel about the cumulative impact of the pay freeze, the Ministry of Defence allowance cuts and cost-of-living increases on their everyday lives, which implied a noticeable reduction in real income for many personnel. However, any suggestion that the PRB will soon be able to address the concerns also expressed by service personnel about perceptions of its independence appear to have been dashed.
In his Autumn Statement at the end of November last year, the Chancellor of the Exchequer made clear that the Government intended to continue to hold back pay in the public sector, including the Armed Forces, with awards at an average of 1 per cent for each of the two years following the freeze. The pay review body has told the Secretary of State for Defence that it believes that the Armed Forces would be disappointed by this, which seems a bit like the understatement of the year. It asked the Secretary of State to give it a degree of flexibility. This he has declined to do. Will the Minister confirm that this continues to be the Secretary of State’s position in relation to the next two years, despite service personnel regarding the two-year pay freeze as exceptional and making it clear to the PRB that they wanted it to resume its normal role in 2013?
The Government’s argument is that the Armed Forces’ pay has to be frozen and, after that, held back, because the United Kingdom is, to use their words,
“recovering from the deepest recession in living memory”;
that the overall value of the reward package to Armed Forces personnel remains “generous”, with pension provision being significantly better than in the private sector; and that, because of continued pressure on public finances, public sector pay awards must continue to be severely restricted following the end of the pay freeze.
However, a key reason for the continuing freeze and future heavy restraint on Armed Forces pay is the result of the Government’s economic and financial policy, which has led to the growth rate of the economy, which had been restored when the Government took office in 2010—some 1 per cent growth in GDP in the April-June quarter of that year—vanishing by the end of the year and not reappearing since. Growth provides increased tax revenues for government as well as more jobs and lower unemployment. This Government, in their enthusiasm to cut public expenditure too fast and not pay sufficient regard to the issue of growth, have killed the growth rate in the economy and thus the increased revenues that they inherited. That has made the financial situation more difficult than it could and should have been, and with it has given us at least the intended level of heavy restraint on Armed Forces’ pay over the next two years.
It is also worth mentioning that a continuation of severe pay restraint for our Armed Forces lies ahead at a time when well over 50 per cent of pay increases in the private sector are of at least 3 per cent, and the economic climate that the Government say necessitates their approach to severely restricting the pay of the Armed Forces does not also apparently prevent them from implementing next year a tax cut of 5p in the pound on incomes in excess of £150,000.
It is of course not only pay that is an issue, as my noble friend Lady Dean and others have so powerfully reminded us. The PRB itself referred to the significance of pensions as a top issue for many service personnel. As has already been said, personnel were already concerned about how pension changes might affect them, and particularly about how far a commitment to protect accrued rights would apply and how changes will affect the early-departure provisions in the current pension schemes. Pensions are important to service personnel, not least because they will be dependent on them for rather more years than people in other walks of life, and adverse changes—for example, in the basis of determining pensions and determining increases in pensions in payment—will have a much greater cumulative financial impact on service veterans and widows than on others.
On top of that, there are the uncertainties for personnel because of the redundancy programme at a time when unemployment is high in the external labour market, the continuing pressures arising from the sustained high operational tempo, issues over housing, the long hours worked by many service personnel, and the impact of separation from families. This is all having an effect on morale and motivation, as the Armed Forces Continuous Attitude Survey shows. The PRB said that, in general, levels of satisfaction fell in 2011 compared to the 2010 survey results, with significant falls observed around basic pay, allowances and pension benefits. Morale was less positive, it said, as was satisfaction with service life in general.
The question is: what does the Secretary of State for Defence—and I mean the Secretary of State, not the Minister—intend to do about this? Is he able to say anything about what will happen when the financial position improves? The holding back of pay and adverse changes in allowances and pensions will be permanent, unlike the present financial situation, unless the Minister can give an undertaking that the position will be looked at again as the financial situation improves, with a view to reversing the impact of the adverse effect of current policy on Armed Forces’ pay, allowances and pensions. Since the Government acknowledge the unique nature of military life, including the threat of loss of life or life-changing injuries, and we now have the military covenant enshrined in statute, will the Minister back up the Government’s view of service life and conditions by giving such an undertaking as I am asking about?
The Ministry of Defence is obviously determined to save money. One hopes that the Minister will now be equally enthusiastic over saving morale and motivation in our Armed Forces, to which the pay review body has drawn attention.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)
My Lords, I should like to start by congratulating the noble Baroness, Lady Dean, on securing this important debate. This is a subject about which she is well informed, having chaired the Armed Forces’ Pay Review Body until 2004, as other noble Lords and noble and gallant Lords said. As a result of her important work, service men and women trust the AFPRB. As the noble Baroness, Lady Warwick, said, that is very much down to the important work of the noble Baroness, Lady Dean. She has influenced Governments—not just this Government but the previous Government—and they have listened to her.
She is well aware of the independence of the pay review body. It retains a fundamental independent role in ensuring that the remuneration package of our service personnel is sufficient to recruit and retain the right people. We value its work, as do the Armed Forces, and the House can be assured that there are no plans to change this important principle.
The 41st report that noble Lords mentioned was published in March this year, and I am pleased to say that the recommendations have been agreed in full, with many of the changes taking effect from 1 April this year. However, we cannot ignore the financial crisis and the need to exercise restraint, and that is why it is necessary to freeze pay. None the less, pay for those earning less that £21,000 has increased, and it is important that we ensure that those who are experiencing the greatest challenges receive additional money. For those deployed for an average of six months, individuals will receive the tax-free operational allowance to the value of £5,280, and, as my right honourable friend the Chancellor announced in his Budget, council tax relief has doubled to some £600.
With Afghanistan in mind, the deployed welfare package has been increased. However, our forces are deployed not just to Afghanistan, and the noble Baroness mentioned in the title of this debate the operational tempo. It is true that some service personnel are now on a third or even a fourth tour, and it is testament to the work of the strategic defence and security review that we had the required capabilities to achieve what we did in support of the Libyan uprising. The increased separation from loved ones has been recognised and, as recommended by the pay review body, the qualifying period between increases in levels of the longer separation allowance has been reduced from 240 to 180 days. This means that progression through the 14 levels, ranging from £6.69 to £28.24 for each day separated, is attained more quickly.
We do understand that prolonged periods away from home impact on morale—an important point made by the noble Baroness. We do all we can to minimise this and use harmony guidelines to allow for operational rest. However, there will always be occasions where specialist skills are needed, often at short notice. This may mean that for some, harmony guidelines cannot be prescriptively followed, but we will make every effort to return the individual to their unit as soon as possible. The noble Baroness, Lady Dean, discussed morale at length. We recognise that this is a very difficult time for Armed Forces personnel and their families. Some tough policy decisions that may have had an effect on morale have had to be made as a necessary part of the department’s contribution to the overall government programme to reduce the United Kingdom’s deficit.
As my right honourable friend the Prime Minister has repeatedly set out, our combat troops will withdraw from Afghanistan by the end of 2014. Between now and then we will be able to reduce our numbers. This process has already begun. However, there cannot be some sort of cliff edge in 2014 when all remaining troops come out at once. The rate at which troops can be reduced will depend on transition to Afghan control in the different parts of Afghanistan. Although we will maintain a presence for some time after 2014, we would expect the frequency of deployment to reduce.
Armed Forces pay is frozen, as is the case for all public sector workers, with the exception of those earning £21,000 or less, to whom we have given £250 in each of the last two years of the pay freeze. Pay has also increased incrementally each year for those who are not at the top of their pay scale—some 75 per cent of personnel—a protection introduced for the Armed Forces to ensure that they were not disadvantaged by their lack of contractual entitlement. This is in accordance with the principles of the Armed Forces covenant and has meant that most service personnel will have received an increase in pay during the freeze period.
Increase in pay for the next two years will be limited to an average of 1 per cent each year. The pay review body has already begun its programme of visits to service personnel in the United Kingdom and overseas to gauge their views on pay and related issues. We always welcome the advice of the pay review body and, as we did this year, we will give due consideration to its recommendations.
The noble Baroness, Lady Warwick, mentioned pensions—in particular, the publication of the final report of the Independent Public Service Pensions Commission of the noble Lord, Lord Hutton, on 10 March last year, which resulted in a number of recommendations that were accepted as a basis for discussion on the design of new public service pension schemes to be introduced from April 2015. My department has now commenced its consultation process with service personnel and is conducting briefings throughout the service community. The consultation period ends on 20 June. However—I address the question raised by the noble Baroness, Lady Warwick—personnel have now been assured that any changes to the scheme will not affect the value of pension benefits that they earn up to 1 April 2015, and that those aged 45 or over on 1 April this year will see no change to the amount of pension that they will receive or the time at which it can be drawn.
My noble friend Lord Palmer mentioned accommodation, a subject in which I know my noble friend and all other noble Lords who have spoken take a close interest and which we discussed in the House on 1 March. We continue to examine accommodation provision but, in terms of making improvements, the Chancellor has made an additional £100 million available for service accommodation from the financial year 2013-14. It will be used by the MoD for repairing and refurbishing 650 family homes and buying a further 25.
While it is necessary to increase the daily charge in respect of accommodation, these increases range from a modest 2p per day through to 76p for accommodation in the highest standard. Increases are in line with the rental component of the retail prices index and are broadly comparable with the costs faced by civilians, but with a discount that reflects the disadvantages of living in service accommodation. This means that, for a typical three-bedroom property in the highest standard for occupation, occupants of other ranks pay some £306 per month.
The very basis of the covenant is to tackle disadvantage incurred as a result of service and to consider special treatment where appropriate. The covenant and the pay review body are not related. However, we ensure that the pay review body is kept informed of our commitments and changes.
In the two minutes left, I will very briefly address questions. The noble Baroness, Lady Dean, asked about troops coming back from Germany. The Defence Infrastructure Organisation is currently considering the likely housing requirements of those returning from overseas, including Germany.
My noble friend Lord Palmer asked about the three-year pause in the accommodation improvement programme from April 2013. As part of the MoD’s work to reduce the funding gap and balance defence priorities, from April 2013 there will be a three-year pause in the programme to upgrade lower-quality SFA homes. While this is regrettable, 96 per cent of service family accommodation properties and 42 per cent of single living accommodation bed spaces are now in the top two condition standards.
My noble friend also asked about medals. We worked constructively with the noble and gallant Lord, Lord Craig, on the issue of the PJM, and I congratulate the noble and gallant Lord on the resolute line that he took on that issue. The coalition Government have agreed to a fresh review of medals, and I hope that further details will be announced soon.
The noble Lord, Lord Ramsbotham, mentioned that my department was late in providing evidence to the pay review body. I was not aware of this, and I give him an undertaking that I shall look into it. I will write to him and copy in all other noble Lords who have spoken today.
The noble Lord also mentioned the timing of the Secretary of State’s report to Parliament. The covenant report will be produced each year and will consider the comments made by the PRB. I will pass on the noble Lord’s recommendation about the timing.
My noble friend Lord Lyell asked me to write on the issue of service families’ accommodation, particularly in Colchester. I will look into the issue and write to him and send copies to other noble Lords.
The noble Lord, Lord Rosser, asked me to give an assurance that the financial situation of Armed Forces personnel would be looked at when the financial position improves. That is, of course, the case; it will be looked at.
I hope that I have answered most questions but, if I have not, I undertake to write to all noble Lords with answers to questions that I have not answered. This has been an interesting debate and I am grateful for noble Lords’ contributions. The Committee can be assured that we will continue to listen very carefully to the pay review body, and we greatly value its work in support of service personnel and their families.
The Deputy Chairman of Committees (Baroness Fookes)
My Lords, that completes the business before the Grand Committee today. The Committee stands adjourned.