The report of the Armed Forces Pay Review Body, and the Government's response to its recommendations on pay, are expected to be announced shortly. MOD has been in discussion with the Review Body about proposals for new pay systems to be introduced for the Services from 1 April 2000 and, in addition to the pay recommendations for this year, the 1999 Report will contain references to those systems and give the Review Body's views. I thought it might be useful if I wrote setting out the broad principles which will govern the new systems.

  The new arrangements for basic pay (known as Pay 2000) have been designed to provide a simpler, fairer more flexible pay structure. The system will include annual increments for Other Ranks for the first time, offering financial recognition for increased experience and qualifications. The same arrangements will be introduced across the three Services and will include flexibilities to meet individual Service requirements. The new structure will base pay on job weight so that those with more heavily weighted jobs will earn more.

  MOD has also reviewed current arrangements for Additional Pay which is used to provide extra pay for those activities where there are specific recruitment and/or retention problems (eg Flying Pay and Submarine Pay). The new arrangements will provide a more flexible system, easier to understand and apply and capable of rapid response and targeting to address new recruitment and retention problems.

  The AFPRB have broadly welcomed both new systems. They have reflected a number of concerns in the report, however, the main being that MOD has missed the opportunity to re-address the link between rank and job weight. Before the system goes live in April 2000 we will jointly undertake some developmental work to help identify and rectify any potential problems.

  The Review Body would also have preferred to see more of the Additional Pay items incorporated into basic bay. MOD has undertaken to look further at the smaller, non-specialist items to see whether they can be attached to specific posts and addressed through job evaluation. More generally, MOD takes the view that the pay systems for the Armed Forces will continue to adapt and evolve after initial implementation.

  Further work is in hand to ensure that the new pay system is ready for implementation on 1 April 2000 for the Regular forces, with the Reserves and specialist groups being brought in by April 2001. For example, job evaluation work has to be completed to identify where each trade should be placed on the pay structure according to job weight, and pay rates have to be attached to the new system (at this time next year) based on Review Body recommendations. I will, however, keep you in touch with significant developments in the interim.

1 February 1999