My Lords, the amendment is an attempt to find an alternative approach to the solution of the anomaly of what is known in common parlance as the frozen pensions issue. At Second Reading I asked my noble friend if I could see the correspondence
between other Governments where there were UK pensioners receiving only the frozen pension, in order to try to identify whether the idea of moving forward on the basis of reciprocal arrangements was actually going to be productive and would produce some way forward. It is clearly an anomaly; there are currently approximately 600,000 UK pensioners living outside the UK who get their pensions uprated in the same way as if they were living in the UK. At the same time, we do not uprate the pensions of about 550,000 UK pensioners, most of whom live in Commonwealth countries. All, of course, have made the appropriate financial contribution for their pension and many of them have relocated to be near family members. Many of them are former members of the British Armed Forces.
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My purpose is to try to probe and examine whether there is any benefit now in looking at reciprocal arrangements between this country and the countries where we do not have reciprocal arrangements, to see if there is any mutual benefit in such an approach. There may well be a quid pro quo for other countries to seek a way of ensuring that this is of mutual benefit to the United Kingdom and to the country concerned. If that were the case, we might be able to challenge the approach taken currently, which has been taken for a number of years.
When I asked my noble friend to release the correspondence, he said—I paraphrase—that he would rummage around the basement of the DWP to find the appropriate correspondence. Unfortunately, in the letter which he sent me on 9 December, he says,
“the relevant correspondence is not available as disclosure requires the permission of the foreign Governments involved”.
That started a bit of a paper chase, in which I sought to find some details of that correspondence. Fortunately, I have had access to correspondence between the UK Government and the Canadian Government, who have a principal interest in this matter. On 18 June 2012, the honourable Diane Finley, the Minister of Human Resources and Skills Development, whose department, I believe, has responsibility for pensions issues in Canada, said that the Canadian Government will,
“vigorously pursue all diplomatic efforts to conclude an agreement with the United Kingdom”.
Subsequently, in May this year, the same Minister, in her words,
“wrote a letter to the UK Minister for Works and Pensions to once again propose that, in light of the generational review of the British pension system”—
the Bill which noble Lords are now considering—
“our respective officials meet to negotiate a mutually beneficial agreement that would provide for the indexation of UK benefits”.
The crucial words there, of course, are “mutually beneficial”. That was precisely what I was going to be looking for in the correspondence, because the clear problem exemplified in the document which my noble friend’s department has provided for us is that there is a cost to uprating.
That cost falls into two categories: the cost of uprating from the time at which the pension starts to be uprated and the secondary cost there might be if
there were challenges, perhaps through legal procedures, to previous payments which had not been uprated. Attempts to determine what precisely those might be have led to a large range of figures being provided in this area. However, in the document that we have before us, which my noble friend’s department released, the estimate of the cost of the first of those categories is, by 2014-15, £590 million a year. That is the cost of uprating in that year if you start the process for those people whose pensions have been frozen. That is significantly less, by the way, than the earlier quote of around £700 million, which we heard from the House of Commons procedures on this Bill. However, what should interest noble Lords in this matter is how we have dealt with approaches from other Governments.
I understand that there have been no reciprocal agreements between the United Kingdom and another country covering the uprating of pensions since 1981. My noble friend helpfully tells us that this is because of the costs involved—I have just outlined the costs that we are talking about—and because it would lead to calls from other countries to negotiate similar agreements. However, if the reciprocal arrangement is to the mutual benefit of the other country and the United Kingdom, it is clearly in our interest to pursue and discuss these matters. The message that that would send to the Governments of other countries would be, “Don’t bother to negotiate with us unless the package that you can produce is to the mutual benefit of the United Kingdom and your country”.
When the Minister in Canada wrote to the United Kingdom Government asking for officials to meet to talk about—the word “negotiate” would be a bit strong—a mutually beneficial agreement, that raised my interest, which I hope noble Lords will share. I was therefore a bit dismayed to read in the letter dated 9 December from my noble friend that, because of the costs and the possibility of other countries negotiating similar agreements, the Government,
“has therefore informed the Australian and Canadian governments”—
I believe that a similar approach had been made by the Australian Government—
“that it will not be opening formal discussions on this policy”.
Either the UK Government do not know what they would be receiving, in a mutually beneficial way, from the Canadian Government or there have been discussions that are not, in the word of the letter, “formal”. I would be most grateful if my noble friend could tell us what discussions, if any, have taken place. Without those discussions, my noble friend cannot answer the question, “What would be mutually beneficial for the United Kingdom in the Canadian Government’s offer?”. My plea to him is that if, as I suspect, we do not know the sorts of offer that the Canadian Government might provide to the United Kingdom and whether that would lead to something of benefit to each side, perhaps we ought to have these discussions so that we can resolve the anomaly at least for some of these people. If there were such an agreement, that would encourage the Governments of other countries, notably New Zealand and Australia, to come up with a deal that
was mutually beneficial to them and the United Kingdom. I do not know what was in the mind of the Canadian Government, but they clearly understand the problem for the United Kingdom.
I conclude with a remark made by a former Canadian high commissioner to the United Kingdom, who said that frozen British pensions were the only thorn in the side of an excellent bilateral relationship. It seems to me that an excellent bilateral relationship is one in which, when an offer is on the table of a mutually beneficial agreement, it is worth at least sitting down and talking about it.