Armed Forces: Personnel

Lord Rosser Excerpts

Monday 23rd April 2012 Grand Committee

[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.