The Rt. Hon. Sir John Major KG CH

Prime Minister of Great Britain and Northern Ireland 1990-1997

1983-1987 Parliament

Mr Major’s Commons Response to British Pensioners (Canada) – 23 April 1986

Below is the text of Mr Major’s Commons response to British Pensioners (Canada), held on 23rd April 1986.

Sir John Farr (Harborough) I want to raise the plight of British old-age pensioners who are living in Canada. At the moment there are about 41,000 – [Interruption].

Mr. Deputy Speaker (Sir Paul Dean) Order. Perhaps the hon. Gentleman will wait just for a moment. He will not lose time. Sir John Farr.

Sir John Farr I wish to raise the plight of British old-age pensioners who are living in Canada. At the moment there are about 41,000 British old-age pensioners in Canada. The fact that they are there does not mean in any sense that they have turned their backs on Britain. Many of them are proud to retain their links with Britain. They went to Canada for family reasons, possibly because their last living relatives are there and they decided to join them.

Most of these people paid full national insurance contributions during their working lives in Britain. However, the moment they left our shores, the pensions for which they worked all their lives were frozen. Many of them spent a full working life in Britain and did not leave this country until late in life.

I submit that this is manifestly unfair and unjust and that no civilised country should tolerate it. I am glad to say that this Government and previous Governments have worked out with no fewer than 27 other countries throughout the world a social security agreement or convention, whereby British pensioners living in those countries are entitled to receive regular uprating increases in their pensions. But that list does not include Canada.

Why is this? Why has Canada been excluded from a reciprocal agreement with many other countries in the world? As I have already said, there are about 41,000 British pensioners in Canada. Due to the absence of a social security agreement, no fewer than 20,000 of them receive a pension of less than £10 a week. In Canadian terms, that is about $15. I know from correspondence with the pensioners or their representatives that the hardship involved is very real. One may say that for one reason or another they chose to live in Canada and that the Canadian Government should assist them in their time of need. However, the Canadian Government will not provide financial help for people unless they qualify for financial aid by having been resident in Canada for at least 10 years.

Both Westminster and Whitehall are not unaware of the paradox that faces British pensioners in Canada. As long ago as the 1970s our Government expressed interest in a social security agreement with Canada. In 1983, United Kingdom officials said that the Government might be prepared to allocate the necessary funds. Indeed, later that year the need for an urgent agreement was discussed by my right hon. Friend the Prime Minister and Mr. Trudeau at a meeting of Commonwealth Prime Ministers.

However, in November 1983 the Canadian Government were informed that the British Government could not proceed with the social security agreement, and there the situation remains. As my hon. Friend the Under-Secretary told me only last Friday in reply to questions that I tabled on this, officials from his Department and the Canadian Department of Health and Welfare have work in hand on the agreement but the finance “is not available”. What finance is needed? In another reply last Friday my hon. Friend was kind enough to say that annually to uprate would cost about £4.8 million in the first year. I can possibly add a little more information because of my understanding of the discussions that have been taking place. As I understand it – I am speaking with fairly good authority – the tentative agreement that was reached between Canadian and British officials but not implemented at the end of 1983 would have cost the British Government £4 million in uprating pensions for the first year and the Canadian Government $21.5 million.

I was a little disappointed that in his reply to me last Friday my hon. Friend mentioned a figure of £35 million as a possible cost to the United Kingdom Government. I was disappointed because, for a start, I did not ask him what the cost would be of bringing up the level of the pensions of all pensioners in Canada to that of pensions in Britain today. My question was what would be the cost of annual uprating, which is about £4 million or £4.8 million per annum. The cost of £35 million which my hon. Friend included in his reply is the cost of a full uprating. All I am asking for at this time is, as happens in every other country with which the British Government have a social security agreement, not the full uprating but simply the payment of increases as and when they become due in Britain.

Another point which my hon. Friend mentioned in his reply to one of my questions last Friday was that the cost of uprating in the first year would be £4.8 million, “rising progressively”. But I question whether that figure is likely to rise markedly at all, simply because, if my hon. Friend looks at the available statistics for 1966 and 1967, which were important years for British emigration to Canada, no fewer than 74,000 Britons went to live in Canada. Such has been the change since then that in the past two years for which figures are available, 1983 and 1984, the figure of 74,000 has been reduced to only 7,000.

There has been a change in the pattern of emigration from Britain to Canada. I accept that if one did not take into account the fact that by natural attrition many of the existing British pensioners in Canada will have died, perhaps by the year 2000 the cost could be £35 million a year. But the statistics that I have relating to subsequent emigration from Britain show that the cost is unlikely ever to be one of which the British Government should not be able to shoulder with ease and great pleasure.

Finally, I would like to stress that there is no other country in the world in which Britons live in some numbers, apart from South Africa, where we do not have a social security agreement. In every country where, for one reason or another there are sizeable pockets of British people living – except South Africa for obvious reasons – there is a social security agreement that entitles those Britons to have the right to pension upratings.

I hope that we can provide for British pensioners in Canada in the same way as we have provided for them in EEC countries and in Australia, the United States of America and all other civilised countries where such pensioners live in some numbers. We should do for those pensioners in Canada what we do for others elsewhere.

I am very proud to be associated with some of the achievements of the Government. I only hope that my hon. Friend the Minister will be able to assure me that we can show a little generosity and so recognise what is an obvious case of manifest unfairness in relation to British pensioners in Canada.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Major) My hon. Friend the Member for Harborough (Sir J. Farr) presented his case, as ever, with force and clarity, and I will endeavour to reply to the important points that he made.

I would first like to congratulate my hon. Friend on his constancy and his commitment upon this issue which he has pursued, as the House will know, for many years. If I may say so, I think that British pensioners in Canada are fortunate to have my hon. Friend as their advocate in this House.

The present position for expatriate United Kingdom pensioners in Canada, as my hon. Friend is well aware, is that their pensions are paid at the rate in force when the pensioner left this country or, alternatively, when he first qualified for a pension if he was in Canada at the time he reached the appropriate age. At present, pensions are not subsequently uprated; that is the substantive cause of my hon. Friend’s concern.

The background to that position is fairly clear. Until July 1955, British pensions were payable outside this country only within the Commonwealth or for short periods of absence. In July 1955 the National Insurance (Residence and Persons Abroad) Amendment Regulations 1955 came into force. Those regulations made provision, for the first time, for United Kingdom pensions to be paid anywhere in the world. There was no provision for the pensions which were to be paid abroad to be uprated.

The reason for that decision was that it was considered at the time that the social security system was primarily designed for people living in the United Kingdom. As my hon. Friend will know, the national insurance fund, then as now, is run on a “pay-as-you-go” basis rather than on a strict funding basis. That means that each year we estimate expenditure and set the rate of national insurance contributions so as to produce an income which will roughly match expenditure. The estimates of expenditure allow for the fact that pensions paid overseas are in general not uprated and would clearly have to be amended were that circumstance changed.

The purpose of the review and uprating of pensions was to ensure that they retained their value in relation to the cost of living in the United Kingdom. Also, as the cost of increasing benefits falls mainly on contributors and employers in the United Kingdom, it was at that time considered unreasonable to ask them to bear the cost of increases paid to people who have voluntarily left the country, in the absence of a social security convention. My hon. Friend mentioned the convention and I will return to that point later. Successive Governments have endorsed that general policy.

At this point I should explain, for it is entirely relevant, that the United Kingdom has agreements on social security with a number of other countries and these are properly called bilateral conventions on social security. At present there are 31 such agreements. They vary quite widely in scope but broadly their main aims are to ensure that a person working abroad does not have to pay contributions for two social security schemes at the same time and that the benefits that should accrue from any contributions paid are not lost.

Some agreements allow for pensions to be uprated but about 60 per cent. of United Kingdom pensioners living abroad do not receive pension increases on an annual uprating basis. There already exists an agreement on social security between the United Kingdom and Canada which has been in force since 1959, but that is limited in scope and does not cover pension uprating. Unfortunately, in 1972, when the United Kingdom Government proposed a comprehensive agreement with Canada which would have included pension upratings, the Canadian authorities were unable to enter into negotiations. Since 1972, a situation has developed where financial constraints have prevented the United Kingdom from concluding an appropriate agreement.

In Canada, the number of people receiving United Kingdom pensions at the end of 1985 was over 56,000, rather more than my hon. Friend mentioned. The number has matured and grown a little in recent years. To bring their pensions up to the level of pensions paid in the United Kingdom would cost about £35 million a year. I shall return to that sum in a moment because my hon. Friend referred to it specifically.

To pay the future cost-of-living increases alone, ignoring past increases, would cost £4.8 million in the first year, and that cost would rise progressively. I return to the sum of £35 million, for our calculations are that the figure would rise progressively to precisely that sum of £35 million over a period of years. My hon. Friend queried whether that cost was accurate, and in the light of what he has said and his long knowledge of these matters, I shall ask to have it re-examined and re-checked to determine whether it is.

My hon. Friend will be aware – he could scarcely fail to be so – that Government spending is subject to strict constraints and that the cost of entering into a comprehensive social security convention with Canada would need to be assessed alongside the Government’s priorities for improvements to our domestic social security system. The resources are not available currently to make all the desirable improvements in social security that the House would wish.

Among the points raised by the British Pensioners Association of Canada – a formidable body – is the suggestion that, because pensioners living in Canada do not use the National Health Service or the United Kingdom social services, it should be possible to offset any savings against the cost of uprating their United Kingdom pensions. I fear that it is not possible to trade that off quite so simply, even if it were possible to quantify the savings. The NHS and social services are part of the social structure that is available to residents here and they are financed on that basis. To draw an analogy, we do not give a cash benefit to those who opt for making private arrangements; nor could we do so for those who decide to live overseas.

What is the position of a British resident in Canada in relation to the Canadian social security system? Persons emigrating from the United Kingdom to Canada can receive a Canadian residence-based pension when they have completed a minimum of 10 years’ residence in that country, while 40 years’ residence is needed for a full Canadian pension. Those who satisfy the 10-year residence requirement may also be eligible for the means-tested guaranteed income supplement.

I am aware of the concern of the British Pensioners Association of Canada about the effect that the exchange rate can have on United Kingdom pensioners living in Canada. The law allows for the payment of United Kingdom pensioners in sterling rates only, as it would not be fair, or practicable either, probably, to adjust the amounts of pension to take account of the innumerable fluctuations which occur in the exchange rates between sterling and other currencies. That has clearly been a circumstance over recent years and that problem will be well understood.

Pensions will continue to be paid in sterling, but am pleased to mention to my hon. Friend that we have managed to arrange improvements in the way in which pensions and other social security benefits are paid to beneficiaries living overseas. My Department has awarded a contract to the Bank of Scotland to make these payments by credit transfer. The new system of payment, when it comes into operation – I hope that it will be later this year – will be much quicker and more efficient, in our judgment, than the present method. What is more, in addition to receiving their payments earlier, pensioners will get better exchange rates and a reduction in bank charges. The new arrangements will be available to pensioners in Canada and I hope that that will be thought to be a small but worthwhile initiative.

My hon. Friend touched particularly upon the fact that officials of the DHSS and their Canadian counterparts have been working on the preparatory technical matters for a comprehensive social security convention between the two countries. I should like to assure my hon. Friend that that work is proceeding. In the light of all that I have said, that is clearly the way forward on the problem that concerns my hon. Friend.

Unfortunately, I must reassert that, until the necessary finance is available, it will not be possible to make any substantial progress on this matter. However, we judge that it is possible to continue discussions so that we can proceed as quickly as possible once we are in a position to make the money available. Although my hon. Friend will, I know, appreciate that this evening I can give no positive undertaking to provide for the uprating of United Kingdom pensions payable in Canada in the near future, I assure him that we propose to continue work on these preparatory matters and shall certainly keep the matter firmly in front of us. I know that my hon. Friend would ensure that we did so were there to be any backsliding.

I will study with care my hon. Friend’s remarks this evening and will draw them to the attention of my right hon. Friend. I am most grateful to my hon. Friend for bringing this important matter once again before the House.

Mr. Hugh Brown (Glasgow, Provan) The Minister has not made a very convincing case. Can he tell me how many of the pensioners in Canada are in receipt of means-tested benefits? Why is Canada the only country with which it seems to be difficult to negotiate an agreement?

Mr. Major I do not know precisely how many pensioners in Canada receive what the hon. Gentleman refers to as means-tested benefits. I can tell him that there are 56,000 pensioners in Canada. That was the figure that was mentioned some time ago.

It is not a question of there being any unique difficulties in the negotiation of a convention with Canada. There are a number of countries with which we do not have conventions that permit the uprating of pensions. Speaking from memory, I believe that this also applies to Australia and New Zealand, in that pensions are payable there but there is no annual uprating following the conclusion of a convention. The problem exists with a number of countries.

Although we have what might be called comprehensive conventions with a large number of countries – I think that my hon. Friend the Member for Harborough mentioned the precise number – the system is not universal. In a number of countries – moreover, countries with which we have a long, historic and close relationship – that benign circumstance does not apply.

We take no pleasure from the fact that this problem exists. That is why we are keen to continue the technical preparatory discussions that are going on at the moment, so that, when we have the financial resources, we shall be able to proceed with the minimum of delay. But I fear that, unpalatable though the position clearly is to my hon. Friend, the financial constraints are genuine and have to be borne in mind. I am not in a position to go further this evening.

Question put and agreed to.