476
PUBLIC RECORD OFFICE
Reference :--
HC.O.882/11
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH-NOT TO
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9. In paragraph 2 of their memorandum dated 6th May, 1931, the Civil Service Association raise an interesting point to which I think a reference is necessary. "To argue," they say, "that because the further stage of self-Government embodied in the new Order in Council may in some respects not render the conditions of service of public servants worse than they had grown to be under the present Constitution, and that therefore the new Constitution affords little, if any, grounds of compensation, is to ignore the accumulated essect of various constitutional changes and the fact that the conditions of service under the new Constitution will differ fundamentally and very materially from those obtaining under Crown Colony Government. (I have underlined the words to which I desire to draw attention.) I do not think that it can be seriously suggested that the Government has argued that the new Constitution affords little, if any, grounds of compensation; as Your Lordship has already agreed, the right to retire at any time on no more than the "accrued " pension would be in itself an extremely substantial measure of compensation which in these discussions is, I think, too easily lost sight of; but the argument has been used (and I think soundly and effectively used) that exaggerated estimates of the degree of compensation which should be awarded overlook the fact that in some respects the new conditions may be less adverse to public officers than they have been in recent years. The Civil Service Association now meet that argument by stating that the compensation for which they ask is in respect not only of the change which the new Order in Council will effect but in respect of all the changes by which the characteristic features of Crown Colony Government have been obliterated. This contention seems to me to pay insuffi- cient regard to the fact that a by no means inconsiderable number of the officers, who will under the new Constitution have the right to retire, have received their appointments since the adoption of those changes which the Civil Service Association would like to have taken into account in the assessment of the compensation due to them. I am not sure that there is any practical advantage to be gained from these somewhat theoretical arguments, whether they tend to make little or much of the difficulties with which public officers will be faced. Even if the parties who have taken part in this discussion had been in complete agreement on general principles, there would almost certainly have been the same or a similar divergence of view in regard to what represented adequate compensation. I may say, however, that I have approached the subject definitely from the point of view that the Services should be compensated for the changes in the conditions of service which will result directly from the new Constitution, and not for the changes in conditions which have already taken place as a result of previous changes of the Constitution, and I have assumed that this was Your Lordship's intention."
10. As I have already stated, I am in agreement with the reasoning and con- clusions of the Treasurer's report (enclosure ), but I desire in particular to record expressly my agreement with him that even with a maximum addition of 71/60ths (which is the addition proposed in the scheme now submitted for approval) the contrast between the position of an officer whose health breaks down in service and that of an officer who retires under the Order in Council will be sufficiently striking, and that it is inadvisable to accentuate that contrast by greater liberality to the latter officer (paragraph 11 of enclosure I). I also agree with him as to the desirability of regarding the Medical Certificate " pension as the basic or "service" part of an Order in Council pension, and of retaining the pension fraction of 720ths on which "Medical Certificate pensions are computed (paragraph 16 of enclosure I). I share strongly his view that the schemes now put forward by the Civil Service Association (enclosure II) would yield excessive (in some cases greatly excessive) additions to the Medical Certificate "pension of an officer retiring between the ages of 40 and 50 (paragraphs 18 and 19 of enclosure I).
11. I will not repeat in this despatch a description of the scheme which I recom. mend for adoption. An adequate description is contained in paragraphs 4-7 of the Treasurer's report (enclosure I), and it is embodied in the draft regulations which are annexed to the Treasurer's report (annexure C to enclosure I); nor will I repeat or amplify further than I have done already the arguments with which the Treasurer supports the scheme. Although at present the Service Associations press for better terms than will be afforded by this scheme, I have little doubt that, if the scheme which I propose is promulgated, it will on further reflection be accepted by the great majority of public officers as a just, satisfactory, and balanced settlement. I do not indeed see how it could be otherwise, for, after all, the terms proposed are generous : in addition to securing the right to retire at any time on his "accrued " pension, an officer will secure also the right to claim a compensatory pension which at its maximum
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will be 74/60ths of his salary. There is, I think, no case for offering better terms than these, which without being so attractive as to encourage retirements will enable those officers to go who feel that they must.
12. There are one or two questions subsidiary to the main issue to which 1 must now briefly allude. On the questions of notice, leave, and passages, I would merely refer to paragraph 31 of the Treasurer's report (enclosure 1) and to Sections 11-13 of the draft regulations (annexure C to enclosure 1). There remains the subject of comurutation. In both sets of the draft regulations which were forwarded with Sir Herbert Stanley's despatch of the 14th October last it was laid down that no part of the pensions granted under the Order in Council would be subject to commutation. This provision was included because the drain on our resources to provide for gratuities in partial commutation of pension under the Pension Minute has already proved embarrassing, and it was desired to avoid the considerable additional outlay which would be required if Order in Council pensions were subject to partial commutation. I have, however, come to the conclusion that the Government cannot adhere to this position. Rightly or wrongly, now that the right of commutation is an established principle of the ordinary pension system, the Services would regard the refusal to allow this right to be exercised in respect of Order in Council pensions as little short of a breach of faith. I think therefore that officers must be given the right of commuting a one-fourth part of their Order in Council pension. It is proposed that commutation of one-quarter of the pension should be calculated at 10 years' purchase (as in the case of commuta- tion under the Pension Minute) if the officer has already reached 55 at the date of retirement, and that, if he is less than 55, the number of years' purchase will be as. shown in the table embodied in the regulations (annexure ( to enclosure 1). This table is taken from Command Paper 2025 (1921)-Rules framed by the Secretary of State for India in Council under Section 96 B (2) and (3), Government of India Act, relating to premature retirement on proportionate pension. It seems eminently suitable for the purpose in view, as the number of years' purchase when the age next birthday is 56 is all but ten years, which, as I have stated, is the number of years allowed under the Pension Minute to officers retiring in circumstances entitling them to pension. It has, however, been brought to my notice that the Indian table which has been embodied in the draft regulation is no longer in force. having been superseded by tables which appear on pages 423 and 424 of the India Office List for 1931. I further understand that these last-mentioned tables have also been superseded by yet other tables which are not available here. I should be unable to recommend the adoption of any table which gave more than 10 years' purchase at the age of 55. The partial commutation of Order in Council pensions must be regarded as an extension to this particular field of the commutation provisions in the Pension Minute. If tables providing at 55 and over a number of years' purchase in excess of ten were to be applied to Order in Council pensions, it would be necessary to adopt also the provision in the Indian regu- lations which requires an officer electing to commute to undergo examination by a Medical Board. I am particularly anxious to avoid reproducing this feature in Ceylon for reasons on which I need not enlarge. As what I propose is, in effect, an extension to Order in Council pensions of the system of partial commutation now generally embodied in Colonial pension legislation, I think that the essential feature of that system must be retained. What I regard as the essential feature is the grant of 10 years' purchase of one-fourth of the pension payable on ordinary retirement which, except on medical grounds, cannot take place before the age of 55. In short, on or after the 55th birthday an officer whether retiring under the Pension Minute or the Order in Council should receive no more than 10 years' purchase.
13. If this view is accepted (and the only alternative is to adopt a totally distinct set of commutation regulations for Order in Council pensions, a course which I would deplore as tending still further to weigh the scales in favour of the officer who will not stay) it is necessary to decide what tables should be adopted for determining the years of purchase at the earlier ages. Prima facie the tables embodied in the regula- tions (annexure C to enclosure I would appear to meet the case, but I have no means of knowing whether from an actuarial point of view they would be regarded as fair alike to the officer and to the Government. Your Lordship may possibly feel disposed to take actuarial opinion on the point and I should not demur if the table now in the draft regulation was replaced by another table, if Your Lordship con- sidered this advisable; provided always that the number of years purchase should be graded down from a maximum of 10 at 55 and over, and that the table should be framed on the basis that the officer must exercise his option under the conditions