§ The Secretary of State for Defence (Mr. Denis Healey)
With permission, Mr. Speaker, I wish to make a statement on the pay of the Armed Forces.
The Government have received the National Board for Prices and Incomes Third Report on Forces Pay and have accepted the board's recommendations.
Last year, the board recommended the creation of a comprehensive salary structure which would not differentiate between single and married Service men. This "military salary" would include compensation for the withdrawal of items which had previously been provided free in lieu of salary. It was also proposed that the Services should, because of the special conditions of their employment, receive an additional emolument. This was to be known as the X-factor. Payment of the military salary and the X-factor was deferred until new rates of pay could be determined in the light of a job evaluation exercise. This has now been completed.
Job evaluation and the evaluation of the X-factor will increase pay by £75 million in a full year. This represents an increase of 15 per cent. over the present value of the Services' total real emoluments, that is to say, the pay and allowances which they receive in cash and the value of food and accommodation which they receive in kind. It is important to recognize—as does the board—that these recommendations involve some substantial changes in the relative positions of the forces and civilian pay. Job evaluation has shown that, by comparison with the civilian sector, the Armed Forces have been underpaid. To bring up forces' pay to levels comparable with civilian employment cannot, as the board made plain, be a justification for pay increases elsewhere.
The Defence budget cost of ending differentiation between single and married men's rates of pay is £52 million in a full year, after allowing for the recovery of charges for food and accommodation from single men. Single men will not only have to pay charges, but also to pay for them out of income on which they will have paid £11 million in tax. So the real benefit to single men 1201 and cost to the Exchequer, in fact, amounts to £41 million rather than £52 million. The establishment of parity between single and married men will at last rectify an anomaly in the forces pay structure which has no parallel in other occupations.
A number of improvements in allowances will also be introduced. These cost about £5½ million in a full year; £75 million for job evaluation and the X-factor; £41 million to give single men parity with married men; and £51 million for allowances add up to a real increased in Service emoluments totalling £121½ million a year. The total cost to Defence Votes will be greater—£135½million because the increases will, in fact, be sufficient to compensate the Services for the £11 million in tax to which I have already referred, and also for a similar tax element in increases in rents recommended by the board for married quarters and hirings—another £3 million.
The board, in its report, has suggested that, in the light of the size of the total increases, the Government should consider paying some of the larger ones by instalments, particularly the once-for-all increase required to bring the emoluments of single men up to married rates. We have accordingly agreed that, while the increases recommended for married men on the basis of job evaluation and the board's assessment of the X-factor should be paid in full with effect from 1st April this year, the increases for single men and women will be paid in two instalments.
With effect from 1st April this year, single men and women, like married men, will get the full increases based on job evaluation and the X-factor. They will also get an increase sufficient to pay their food and accommodation charges after the payment of tax. Finally, they will get a first instalment, on average about a quarter, of the total increase of £41 million to end differentiation between themselves and married men. The balance of this £41 million—about £31 million—for single men and women will he paid from 1st April, 1971. The detailed pay scales which will apply both to single and married personnel are in the board's report. Tables of the adjustments for single men and women until 1st April, 1971, are also available in the Vote Office.
1202 I believe that the application of job evaluation and the radical revision of Service pay that the standing reference to the N.B.P.I. has made possible provide a basis for the military salary which can be supported with confidence on grounds both of efficiency and fairness.
§ Mr. Rippon
While thanking the Secretary of State for his Statement, for which we have been waiting too long, may I say that I am sure the House will want an opportunity of studying the detailed effect of the proposals before making any final comment. No doubt we shall have an opportunity, if necessary, of debating this matter before long.
The right hon. Gentleman says that the proposals represent an increase of 15 per cent. over the present value of the Services' total real emoluments. Will he say what would have been granted on the basis of the Grigg formula had that been applied in the same way?
Will the right hon. Gentleman also tell the House why this announcement about Service pay was not in time to be included in the Defence budget? Was it perhaps that he wanted to put that figure a little lower than it really is? Will he say what Supplementary Estimates he expects to have to introduce, and what effect they will have on the Defence budget for 1970–71, both in total and as a percentage of the gross national product?
§ Mr. Healey
I regret that the right hon. and learned Gentleman is following the sour-puss tradition of some of his hon. Friends in seeking to denigrate the most revolutionary improvement in this century in forces' pay and conditions.
Let me answer each of his questions in turn. First, as to the delay, I think that this was worth waiting for, because the total increase in forces' pay is four times the increase which the forces could have expected this year under the Grigg formula; and three-quarters of that increase is to be paid on 1st April this year, the other quarter next year.
The value of the total increase of Service pay and emoluments this year will be about 18 per cent. A further 7 per cent. will follow next year, making a total increase of 25 per cent. staged over two years. The reason why these details were not given in the Defence 1203 budget, as I explained last June, is that the amount of work necessary to do the job evaluation exercise and then convert the scales into detailed rates and computer-programme them made it impossible to complete the total exercise earlier. This is why they were not put in the Defence Estimates, but the Defence Estimates White Paper—[HON. MEMBERS: "Oh."] If hon. Gentlemen will listen for a moment, they will see that their chagrin is even less justified than it appears.
In the Defence White Paper, last week, I explained that, although we had already put in £30 million for increased pay, there was a shortfall of £68 million on the Defence budget target which was published in the December Green Paper on public expenditure, and we hoped to take up this increase in Service pay. The net result of all this is that we shall be able to remain within the Defence budget target when we present our Supplementary Estimate, and that the total expenditure necessary on defence will be as stated in the White Paper, about 5½ per cent. of the gross national product, l½ per cent. less, or a cut of one-quarter, in the Estimates of 1964 presented by the Conservative Administration at that time.
§ Mr. Shinwell
How does the additional expenditure compare with the savings effected by the withdrawal of forces east of Suez?
§ Mr. Healey
I hope to deal in some detail with the question of quantities in the defence debate very shortly. However, the total saving in 1972–73, on the Conservative costings which I inherited, will be £1,200 million.
§ Mr. James Davidson
Unlike the Official Opposition, we should like to give this statement on increased Services pay a very warm welcome. We must hope that it will give a real stimulus to recruiting. Since these increased rates are apparently based on a true job valuation and there is, in addition, the mysterious X-factor, why is it necessary to compensate the Services for the extra tax which they will have to pay?
§ Mr. Healey
I made it clear a year ago that to be able to offer to a potential recruit at the recruiting office pay which 1204 he could compare directly with the pay which he might be offered at the factory gate next door, we would in future require Servicemen to pay the charges for food and accommodation presently provided free, and we have added to the increases for parity and for job evaluation and the X-factor a sum sufficient, after the payment of tax, to cover all the charges for food and accommodation previously provided free of charge.
May I thank the hon. Gentleman for demonstrating that there is one party on the benches opposite which puts the welfare of the Services before party prejudice.
§ Mr. Roebuck
Is my right hon. Friend aware that his announcement will have a most welcome effect in stimulating recruitment? However, is he further aware that we shall get in sufficient numbers the sort of recruits we need only if he takes steps to dismantle the antiquated class structure of the Services? Will he bear in mind the great necessity of many more men in the ranks being commissioned?
§ Mr. Healey
As my hon. Friends have often pointed out, the number of promotions to officer rank from the ranks in the Services is considerably higher than it is in British business in analogous situations. But I know that my hon. Friend will be glad to see from the N.B.P.I. Report that the archaic anomaly of batman service is being withdrawn.
§ Sir Ian Orr-Ewing
Does the right hon. Gentleman feel that the short-fall of 13,000 recruits shown in his White Paper, published last Thursday, will be made up as a result of these increased incentives? He has a large backlog to make up and recruiting is falling further and further behind. Surely the contentment of existing Servicemen is the best recruiting factor. Does he really think that we on this side of the House will accept this excuse that he was not able to include this £100 million of extra expenditure in the White Paper which he published five days ago? We must suspect that these figures have been "fiddled", as every other figure had been "fiddled".
§ Mr. Healey
I am not responsible for the hon. Gentleman's suspicious mind. If he had read the White Paper, he would have seen that I specifically said in the 1205 fourth and fifth paragraphs of Chapter 1 that the shortfall of £68 million on the public expenditure target which was fixed and announced to the House last December would be taken up by improvements in forces' pay which were yet to be announced.
There was a 20 per cent. increase in recruitment last year compared with 1968–69. Re-engagement has been steady. It increased last year in two of the three Services very substantially, proving that the satisfaction of the men in the Services with their life is substantial. But there is no doubt that the satisfaction of those now serving will be substantially increased by an 18 per cent. increase in pay this year. An increase three times as great as any given under the outmoded Conservative system will be regarded by those in the forces as a good thing, no matter how much right hon. and hon. Members opposite try to pretend that it is not.
§ Mr. Dalyell
Is my right hon. Friend aware that some of us who have sat through Service debates for several years would like to offer him our unqualified congratulations on his facing up to a number of thorny problems which have dogged us for many years, such as single and married parity?
§ Mr. Healey
I should like to make, I hope in an unpartisan sense, two comments. First, there is no doubt that in the modern age, to determine the rate for the job and then deny it to single men, which has been the practice under many Administrations for many years, is absurd and an anomaly which has long needed correcting.
Secondly, it is clear from the job evaluation exercises that the Services have been seriously underpaid in recent years. I would not blame the Conservative Administration for this, because I believe that the reason is that in the last 20 years the degree of skill, responsibility and versatility required of Servicemen has increased a good deal faster than it has increased in civilian occupations.
However, the House should be in no doubt, having read the N.B.P.I. Report, that these increases are fully justified, particularly as they arise as a result not of bargaining against the threat of strikes between employers and trade unions, but 1206 of an objective process of job evaluation by impartial persons.
§ Mr. Ridsdale
How does the White Paper affect the pay of British forces serving with the United Nations in Cyprus? Is the right hon. Gentleman aware that a British Army captain is paid £5 while his Swedish driver is paid £10? The situation is equally bad among other ranks of the British forces serving with the United Nations. As comparative rates with other countries have deteriorated very badly since devaluation and because of our poor economic condition, would the right hon. Gentleman look into the scandalous pay of British forces serving with the United Nations?
§ Mr. Healey
I remember raising this anomaly with the Conservative Administration of six years ago. Having had to deal with the problem as Secretary of State, I do not think that we would be justified in paying British Servicemen completely different rates of pay according to where, in particular, they were serving. But there is no doubt that the very substantial pay increases arising from the new military salary will do a good deal to reduce the anomaly.
§ Mr. Frank Allaun
Is my right hon. Friend aware that many of us on this side of the House think it absolutely right that Servicemen should receive a decent rate of pay, even if the cost is £125 million a year but that this greatly strengthens the argument for drastic cuts in other aspects of arms expenditure?
§ Mr. Healey
For what it is worth, I can assure my hon. Friend that one reason why we are able to pay three-quarters of the increase this year is that I have managed to make further savings in other aspects of defence to accommodate these very massive pay increases.
§ Mr. Ramsden
Is the Secretary of State aware that it is desirable that the real value of this increase should be appreciated in the interests of recruiting? Would he clear up some doubts about the figures? In December, the Minister of Defence for Administration said that the increase comparable with Grigg would be 25 per cent. The right hon. Gentleman has today announced a 15 per cent. increase. The Services had 10½ per cent. over the last two years in the form of 1207 interim increases. This looks like level pegging. If I am wrong, it is desirable that the right hon. Gentleman should correct me.
§ Mr. Healey
May I say, in no partisan spirit, that I hope that the Government will have the support of the Opposition in seeking to present these increases in their proper light.
The increase which the forces could have expected this year under the Grigg system is about £30 million. The increase which they will get is £90 million, and single men next year will get a further increase of £31 million which they would not have expected to get at all under the Grigg system. So the total increase which the Services are getting is four times as great as they could have expected under Grigg, and three-quarters of it is being paid this year.
§ Several Hon. Members rose—