HC Deb 06 April 1976 vol 909 cc367-87

10.1 p.m.

Mr. Kenneth Clarke (Rushcliffe)

I beg to move, That this House takes note of the Occupational Pension Schemes (Preservation of Benefit) Amendment Regulations 1976 (S.I., 1976, No. 140), the Occupational Pension Schemes (Equal Access to Membership) Regulations 1976 (S.I., 1976, No. 142), the Contracted-out Employment (Notifications, Premium Payment and Miscellaneous Provisions) Regulations 1976 (S.I., 1976, No. 143) and the Social Security Pensions Act 1975 (Commencement No. 5) Order 1976 (S.I., 1976, No. 141). I should like to begin by paying tribute to the Minister of State, Mr. Brian O'Malley, whose unfortunate death yesterday evening undoubtedly casts a considerable cloud over tonight's debate. I know that the Secretary of State, as one of his closest colleagues, is particularly distressed by his death and will no doubt pay a tribute in her own way. I am sure that, throughout the House, her sense of shock is shared.

We all realise that we have lost a considerable colleague of great ability and great popularity. We on this side learned to respect his unrivalled expertise on this subject and the great deal of work that he did in the Act which lies behind these Statutory Instruments. It is no disrespect to the right hon. Lady to say that, in all the detailed work, Mr. O'Malley was the principal architect of the 1975 Act.

If I might add a personal note, as one who served on a number of Standing Committees with Mr. O'Malley and against him on this subject, I learned to have not only a considerable respect for his expertise and skill, but also a considerable regard for his straightforwardness and his honesty and the way in which one could rely on what he said, both within the Chamber and outside.

The three sets of Regulations arise out of the 1975 Social Security Pensions Act. There is also an Order on a slightly different subject-matter. The three sets of Regulations deal with arrangements to be made for the payment of premia and other matters by those with contracted-out schemes, with equal access to occupational pensions schemes for women, and with the commencement Order which emphasises that the commencement date for the new scheme will be 6th April 1978.

It is therefore appropriate, when three of the most important Orders to come before the House under that legislation are being debated, to consider how we are getting on with putting into practice that important Act which in the end was the subject of all-party agreement. What is the likely timetable for implementation of the new scheme now that we have agreed it? Do we seem likely to have a healthy level of contracting out of the new scheme and a worthwhile size of occupational pension sector in view of the arrangements set out in the Regulations for premia payments and other things? Shall we extend the pension of occupational pensions to those groups who in the past have been least well served by them—broadly, women and manual workers?

This is an appropriate time to consider those questions because it is a key time for decision-making by employers and trade unions about whether existing occupational schemes should be contracted out of the new two-tier State scheme when it comes into effect in 1978. In making their decisions, employers and unions will have regard to the subject matter of these Regulations.

The sets of regulations cover ground familiar to us all. No. 143, on premia and other things, contains the Government's most important concession, on the question of the previously open-ended commitment which might have rested on pensions funds to revalue the preserved pension rights of early leavers from employment.

The Government in the Regulations for the calculation of the premia have accepted the case put forward by the industry for some time and by the Opposition during the passage of the Bill. It is another concession won in this field, so that the terms for contracting out of the new State Scheme and therefore for the survival of the best of occupational funded pension schemes have been made more attractive. It is now possible to limit that commitment to 8½ per cent., with no payment of any premium to the Government if this method is the one preferred by a pension fund. We pressed very much for this kind of provision when the Bill was going through. We thought that 8 per cent. would be the right figure as a fixed commitment to revalue these preserved rights, but half a per cent. will not cause a battle. We accept the advice of the Government Actuary.

Then we have the Regulations on equal access, of which the right hon. Lady is proud. These make it clear that there should be no distinction in respect of the entry into occupational pension schemes between male and female employees of a particular employer. That is taking further the great opening for women in pensions which the 1973 Act represented when it went on the statute book. That is a welcome provision.

Finally, there is the Commencement Order bringing into force important provisions on 6th April 1978.

I hope that hon. Members on both sides of the House remain agreed on the aims which this legislation is trying to achieve as we see the details unfolding in practice. Both sides are agreed, I hope, that we want the new scheme to be set up by 1978, which means that new pensions will become payable from 1979 onwards; that we want existing good occupational schemes contracted out to the maximum possible extent and that we shall regard it as one measure of the success of the new scheme if it has a very high level of contracting out; that we want the poorer schemes which may at present fall short of what is needed for contracting out under the new Act to be improved and then contracted out; and that we want pension schemes to be extended to those groups previously excluded, particularly manual workers and women.

But if these are the Government's purposes in the unfolding of these Regulations, as the Department emphasises, we hope that from now on this aim will not be cut across by the uncertainties of the pay policy and the activities of other Departments of State which have created very great difficulties in the past few months in the pension world. The operation of the early stages of the Government's pay policy have threatened to cause very considerable damage to the occupational pensions industry. So far the Government's pay policy has threatened to put a spoke in the wheels of the new two-tier occupational pension scheme.

I hope therefore that the Secretary of State will reassure us this evening that the pay policy will not at the next stage contradict the purpose of all these Regulations. If, as indicated in her contribution, she emphasises particularly the benefits which she sees her new Act bringing to women, arising out of the equal access Regulations, I hope that she will make it clear that she has realised that to open up the provision of private occupational funded pensions to women will require very considerable improvements in existing schemes and will mean the creation of new schemes where none exist, and that this purpose, and hence her aim of extending pension rights to more and more women, is likely to be frustrated if the Government's pay policy continues to be as hamfisted towards pensions as in the recent past.

There is no need to go back—and it would be outside the scope of the present debate—over the shambles of the £6 policy set out in the Remuneration, Charges and Grants Act 1975. When that Act came forward it was clear that the sponsoring Department, the Department of Employment, had no idea about the pensions world, had no idea of the Government's own pension policy, which was still going through Parliament at that stage, and had paid no heed to pension provisions when preparing the original draft of that Bill. Fortunately there were some late amendments which had the effect of minimising the conflicts betwen the Government's first pay policy and the policy set out in the 1975 Social Security Pensions Act by the Secretary of State for Social Services.

These Regulations, the detailed working out of the Pensions Act of last year, emerge when we are about to discuss phase 2 of the Government's pay policy—phase 5 of the pay policy if we take an overall global view over the past three or four years of the pay policy of this country. The present situation, even with the amendments won last year, is very unsatisfactory. If it remains, it will cut across all the purposes implicit in these regulations.

Under phase 1 of this Government's pay policy all improvements to occupational pensions are within the £6 limit and the £8,500 cut-off. If there are actuarial deficits in schemes which have to be met to keep up present benefit levels or increases in funding necessary to raise pension benefits following allowed pay increases, "topping-up" will be permitted. There are some strange arrangements. Even when actuarial surpluses are made, pension benefits cannot be increased and employees' contributions to the fund cannot be reduced outside the pay policy limits. It is completely obscure whether in that situation employers' contributions can be reduced.

The Government say that after 31st July it will be open to those with pension schemes to improve them by the minimum necessary to achieve the contracting-out standard required by the Pensions Act by April 1978. Fortunately, that includes improvements for the purposes of the equal access Regulations. They will not be thwarted by the pay policy.

I hope that what I have said about pay policy will underline what a mess the present situation is to employers, their pension advisers and trade unionists following pension policy. These regulations will be thwarted unless the next stage of the pay policy takes into account the impact on pensions and includes a much more sensible policy on pension matters.

Considerable exemptions from the counter-inflation policy are required for pension provision if we are to continue the policy of the Pensions Act 1975. In particular, the Government must return to the position adopted by all previous Conservative Governments of exempting pension provisions from pay and prices policy, otherwise, particular difficulties will arise under phase 2 of the Government's policy.

Employees, particularly women, who are not members of schemes because their employers do not operate them will have no idea when the law will permit an employer to contemplate setting up a scheme contracted out of the Act. Manual workers will find that they cannot have the benefits under their schemes put up to the level of the schemes for white collar workers in their industry if the necessary improvements exceed the Government's pay policy guidelines.

The poorer schemes will be able to be brought up only to the minimum necessary standard for contracting out. The purpose of the Act has never been just to bring the poorer schemes up to this minimum level. That level was meant to be a bare minimum. We were meant to be encouraging employers to set up schemes to provide benefits well beyond what the State could provide.

If pay policy continues to blight the development and improvement of occupational pensions, the economy as a whole will lose the benefit from higher savings and investment, of which pension funds remain an important source. Pay policy could also stop the process of bringing pensions into collective bargaining in industry. The welcome process of the last few years of making trade unions and employers more pensions minded will be brought to a halt. We cannot have a stop-go policy in this kind of bargaining caused by interference from ill-thought-out pay policies.

Although in the Regulations before the House the Government, through one Department, are trying to sort out the detailed problems of getting right the methods of calculating premia and equal access for women, and getting a date set for the implementation of their policy, all those matters are vitally threatened by the next phase of pay policy if it continues to inhibit pension provision. The considerable damage, going right to the root of what I hope is the common purpose of the House on pensions, that could be done is illustrated in a memorandum from the Life Offices' Association sent to the Paymaster-General on 18th February 1976, which deals with the restrictions that pay policy imposes on pensions provision. That memorandum reads as follows: The announced restrictions make it impossible for new or improved schemes to be introduced above the minimum level and therefore all the advantages of a good private scheme will be lost. In the circumstances, it would be difficult—or even impossible—for pensions advisers to recommend that these minimum schemes should be contracted-out, so long as the restrictions remain. This means that if the announced restrictions from August 1976 go ahead unchanged, there will not be sufficient time to recover from them in time for April 1978. Indeed, if no amendments are made, we suggest that 1978 as a starting date for the new scheme is completely impossible so far as contracting-out is concerned. The result will be that the Government's pledges, promises and exhortations about a partnership will be seen as empty words. Those pledges, promises and exhortations about partnerships with the pensions industry came from the right hon. Lady and her colleagues in the Department. They have been accepted in good faith by the Opposition and, during the passage of the 1975 legislation and thereafter, we tried to produce a political truce to give some certainty outside that would lead to the development of much better occupational pensions for many people in industry. Those promises, pledges and exhortations by the right hon. Lady are in danger of being frustrated by the incompetence of her right hon. Friend the Secretary of State for Employment.

When the discussions on the next round of pay policy get under way I hope that the right hon. Lady will be much more involved and much more consulted by her colleague. I know that the right hon. Lady is not the responsible Minister for the intended legislation on pay policy, but I hope that she is vitally involved in the consultations and discussions on the pensions side. I hope that she will give us an assurance that she is involved in discussions with the Department of Employment, that these Regulations which continue the 1975 Act policy demonstrate the policy of the Government as a whole and that that policy remains the encouragement of the maximum level of contracting-out and improvement in the pension provision.

Our proceedings in the next few days will to some extent be concerned with the consultations between the Government, the TUC, the CBI and other bodies on the broad outline of pay policy. In those consultations the pensions industry and pensions interests have to be involved because their contributions on aspects of pay policy and the counter-inflationary policy are as vital as any others. I hope that the right hon. Lady will make sure that these consultations will not be bungled a second time round and that the Government will move substantially from their present position which is so inhibiting the future development of pension provision.

I know that equal access for women will take up part of the right hon. Lady's speech because it is a part of the 1975 Act which is particularly dear to her. We have debated this subject before, and I do not want to debate it at length now because we welcome what lies behind the Regulations. The right hon. Lady has made women more equal than men in important respects in the pensions field. That stands out particularly in the national insurance scheme when women who work until 65 for the same income as men who work until 65, receive a pension one-third greater than those men, although the women have not made any contributions for the last five years before retirement.

I am sure that the right hon. Lady is aware that something more than equality is embodied in some parts of her legislation. That is mainly because she is encumbered, as all previous Governments, with the different retirement age which the country imposed upon itself in the 1940s. We have not been able to get rid of the artificial concept that women are expected to retire at 60 whereas men have to wait until they are 65 before they can draw exactly the same pension.

I know that it is difficult to change retiring ages. We have discussed this matter before, and it is appreciated that it is difficult to suggest that women should retire any later than the current retirement age. It would be fiendishly expensive to propose reducing the retirement age for men. However, the present situation is a nonsense. Now that we have equal access and now that we have the new scheme, the nonsense is further underlined. It will persist in our system until some move is made away from the present anomalous discrepancy.

Other countries are introducing the concept of flexible retirement for men. They allow those who have made adequate pension provision to retire early with a somewhat lower pension that is calculated on an actuarial basis. Men can retire before the fixed retirement age which applies in this country. We are not yet ready to introduce flexible retirement. However, I hope that the Government will accept that it is high time that we began to undertake some urgent work on the problems involved in the concept of flexible retirement. At some stage a Government will have to move towards that improvement in pensions. That can be done only when resources permit it.

Finally, I refer briefly to the one Regulation to which I have not yet referred, which deals with preservation. It was the 1973 Act that first introduced the concept of preserving occupational rights when employees left pensionable employment. The Regulations illustrate how fiendishly complex the whole problem of preserving pension rights has proved to be and what a considerable achievement it was to get the concept on to the statute book in 1973.

Although we are still absorbing the complexities of preservation, and although the Occupational Pensions Board is still catching up with huge arrears of work in approving schemes of preservation, those interested in pension matters should be looking ahead to the problem of better transferability of pension rights between different occupational schemes. It threatens to be an extremely complex matter, but it is exceedingly important if we are to develop occupational pension provision. At some stage we should be able to produce a scheme that guarantees proper transferability between schemes so that those who change employment can carry with them the benefit of the pension entitlement to which they have been contributing in various employments.

I hope that the right hon. Lady will confirm that although the Government may not be ready to legislate to improve transferability, work has not in any way abated on transferability in her Department and that the Government realise that it is a problem that must be kept in the forefront of pension policy over the next few years.

10.24 p.m.

Mr. A. G. F. Hall-Davis (Morecambe and Lonsdale)

I begin by adding my feeling of great regret following the death of Mr. Brian O'Malley. He showed immense patience, courtesy and a real willingness to listen to all Back Benchers who served on pension Bills. We all appreciated those qualities and the news this week has been a sad shock. I am sure that the whole House will wish to convey its sympathy to his widow and daughter at this sad time.

I shall be brief as my hon. Friend the Member for Rushcliffe (Mr. Clarke) has touched on every matter that I felt required comment. I wish to emphasise that if the whole purpose of our long and detailed deliberations, with the joint aim of securing the maximum contracting out, is not to be frustrated, there will have to be a different attitude with regard to phase 2 of the pay policy as compared with the first phase.

It must have been as big a shock for the right hon. Lady and her Ministerial colleagues as it was to the Opposition to discover last summer that, apparently, the Chancellor of the Exchequer and the Department of Employment had little knowledge of these matters and had given little thought to their impact. This relates to the most critical phase of pension scheme development seen in this country probably for two decades.

To say that the improvement should come out of the £6 figure was difficult enough in the first year, but it is always easier in the first year to deal with a policy of this kind. Hope deferred for a year is tolerable. But when I listened to the Chancellor this afternoon, I felt that it would be ludicrous to suggest that there was any room for improvement within the limit if he were able to secure agreement to a 3 per cent. pay increase round. Therefore, this point requires fundamental thought.

I wish to make one observation which may be of some assistance to the right hon. Lady. As I understand the position, in April 1978 employers contributing to national insurance in respect of employees who are not contracted out will have to increase contributions by 11/2 per cent. of earnings. It would be ironical if employers who had not made provision for their employees within a scheme were able to expend an additional 13/4 per cent. of pay roll, whereas those who had schemes in operation were not able to make a similar improvement in benefit expectation for members of contracted-out schemes. To compel those those employees are not contracted out to up employer costs by 1½ per cent. but at the same time to forbid those with contracted-out schemes to make improvements without these coming out of pay limits would be ironical.

In recent weeks I have given thought to the practical operation of integrated contracted-out schemes under the new arrangements. I concluded—it may be a mistaken view—that it will be much more difficult for schemes, other than those of the highest quality, to integrate with the right hon. Lady's scheme than perhaps some of us had anticipated even in the lengthy Committee debates.

The right hon. Lady's scheme is ingenious in its rapid accelerated build-up over 20 years, but one does not finish even then. Having provided minimum pension requirement over that period, the fact that one can select the best 20 years of the working life means that one has to look at minimum pension requirement throughout the whole working life of members of a scheme. It will not be possible for designers of pension schemes to make improvements barely sufficient to meet minimum pension requirements. Nobody will want to run schemes balanced on a knife edge from year to year as regards meeting minimum pension requirements. There must be a safety margin. One has to be confident that a scheme will meet the minimum pension requirement throughout the whole employment span of the individual.

To do this will require quite sizeable improvements in the schemes which are not of the highest quality at present. Those improvements may well be made if the economic climate is favourable and if the employer is free to do so under the restrictions, or exhortations, shall we say, of other Government Departments—the Chancellor of the Exchequer and the Department of Employment.

However, if by any chance, because of the tightness of the pay increase for which the Chancellor is now aiming, the Government should adhere to what they have presented as a rather generous concession—I know that the right hon. Lady the Secretary of State must have swallowed her pride to do so, and that she probably has not so presented it—and continue to permit schemes just to meet the minimum guaranteed pension, what I am sure will happen is that when firms look at the administrative and organisational problems involved, they will decide that it is not on to contract out.

I accept that the right hon. Lady and the Chancellor of the Exchequer want to see schemes contracted out. There must be a bit of leeway and latitude. One will have to go quite some distance beyond meeting the minimum guaranteed pension requirements if one is to be sure throughout the full span of employment that one is not one minute behind or one minute just in front.

The right hon. Lady has time between now and July to see that these matters are really understood by those concerned. There must be some room for manoeuvre. Good schemes must not be unduly penalised when employers who have not been so forward are able to give substantial concessions, because if that is not narrowing the differentials, I do not know what is.

10.32 p.m.

The Secretary of State for Social Services (Mrs. Barbara Castle)

I should like, first, to express my personal appreciation and that of all my right hon. and hon. Friends for the generous remarks that have been made about someone whom I find it impossible not to continue to describe as my right hon. Friend the Member for Rotherham.

I am very grateful for what the hon. Member for Rushcliffe (Mr. Clarke) and the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) have said, and for what the right hon. Member for Wanstead and Woodford (Mr. Jenkin) expressed to me privately earlier in the day.

I believe that I may have an opportunity tomorrow, before a rather larger House, to pay a tribute to my friend, Brian O'Malley, but it would be quite wrong for us to let an occasion such as this pass by, when we are discussing the field in which he was such a master, without referring to the great contribution that he made, as has been rightly said, to the construction of this new pension scheme. It is a comfort to us to know that he has left behind this remarkable memorial to his work.

We remember Brian O'Malley as not only a warm and loyal colleague and friend but as a great parliamentarian. I do not think that any of us will ever forget the very spirited debates that he used to have with the hon. Member for Rushcliffe. We shall miss their swordplay. All of us remember Brian O'Malley's generosity, good nature, sense of humour and total lack of malice. I shall certainly see that the sentiments that have been expressed tonight are conveyed to his wife and daughter.

I shall answer this short but important debate by pointing out that it would be an odd tribute to Brian O'Malley if we as a Department or a Government were to allow anything to be done to endanger the great pension scheme to the successful introduction of which he devoted so much of his efforts and his brilliant intelligence. We must therefore take this as a relevant starting point. I am as determined as any of the hon. Members who have spoken that our plan for the scheme to be introduced and fully operational in April 1978 shall not be thwarted.

The hon. Member for Rushcliffe said very fairly that he did not believe that we would wish to endanger the scheme or the amount of contracting out which we have done a great deal to make possible. So we are not facing the situation, I gather, in which the Government are being accused of wanting to slaughter their own child. It is rather more complex than that.

Since the scheme was first put on the statute book last summer, Brian O'Malley and I have continued to press ahead with the completion of the arrangements for bringing it into effect on the target date. There has never been the breath of a suspicion that, in spite of the economic difficulties facing the country, the Government had any intention of seeking to postpone the scheme. On the contrary, we have exploited to the fullest extent possible the completion of the regulation-making that had to be carried through.

The debate has centred around three of the four Regulations which we have before us tonight and which are an important step toward that end. The Commencement No. 5 Order means that appointed dates have been set for all the contracting-out provisions in the Act. The Contracted-out Employment Regulations embody the final solution to the problem of the open-ended commitment in respect of early leavers. The hon. Member for Rushcliffe admitted that the Government had made another important concession here which we hope and believe will end the argument about the open-ended commitment and will finally remove what was held to be one of the outstanding stumbling blocks to whole-hearted co-operation in the scheme.

We took power in the closing stages of the Bill to provide an alternative to our original proposal for dealing with this problem. It was a power which Brian O'Malley gave no undertaking would be actually exercised, but one of his last tasks was to enter into detailed negotiations with the industry to see whether an alternative could be worked out that was fair to the State scheme, which was within our criteria and which would be acceptable to the pensions industry.

The formula of the 8½ per cent. fixed rate in place of the 5 per cent. limited revaluation premium which is embodied in this Regulation has met all those requirements and has been widely welcomed in the pensions industry. That is another proof that we meant what we said and also that the Government meant what they said when they declared that we were engaged in a serious partnership, removing every possible difficulty with a view to pressing ahead for full implementation on the date we had always set ourselves.

I shall turn to the equal access Regulation in a moment, because the hon. Gentleman developed a rather separate side of that, but the only outstanding Regulations now on contracting out are those concerning the actuarial tables, which set out the method to be used in calculating State scheme premiums. I hope to be able to circulate these Regulations for comment before Easter, although I think the House appreciates that they are rather complicated and will require consultation and cannot be rushed. We have, therefore, cleared the way as quickly as possible for the implementation of the scheme on the target date set.

It is against this background that I want to deal with the major point pressed on me by the hon. Gentleman, but perhaps before I turn to that I should refer briefly to the two other points that have been made. I come first to the equal access Regulations.

The hon. Gentleman seemed to imagine that I would use this occasion for another triumphal chorus about what I had done for women. He is aware, of course, as I am, that if Brian O'Malley had any faults whatsoever, there was just a slight, faint tinge from time to time of male chauvinism, which my presence was necessary to correct. But, of course, I am glad and proud that we have established through these Regulations that membership of an occupational pension scheme must be open to both men and women on terms which are the same in regard to age, length of service, and whether membership is voluntary or obligatory.

I am not in a mood to make debating points tonight, but I could not refrain from a small smile when the hon. Member for Rushcliffe told us innocently that there has been a continuation of the progress towards equality for women made under our predecessors' late and unlamented scheme. I remember as a member of the Standing Committee which discussed the 1973 legislation moving an amendment to secure equal access for women in occupational pension schemes. I moved it in vain, because it was turned down by the Conservative majority. But I shall not labour that point.

The hon. Gentleman is right, of course, in thinking that this succession of steps towards equality of treatment for women in this country has tipped the scales in their favour a little at the present time in regard to social security. I accept that. But I am sure that the hon. Gentleman was not suggesting that it was his party's policy to increase the retirement age for woman who have contributed all their lives in the belief that they would retire at the age of 60.

I do not believe that it is the Conservative Party's policy to maintain that the country can at present afford the cost of reducing the pension age for men from 65 to 60 in order to achieve equality, because it would cost about an extra £1,600 million a year if the pattern of retirement remained the same between 60 and 65 as it is now between 65 and 70. That figure takes the offset savings in short-term benefits fully into account. We must face that situation.

I agree that we should continue to study all possible variants of a flexible scheme, but none of them is cheap. They involve more money or later retirement for women. We shall have to continue to consider the matter, but in the meantime I have no doubt that it was right to graft on to the present discrepancies in retirement age the new panoply of equal rights for women.

The hon. Gentleman rightly said that the Preservation of Benefits Regulations were a useful step forward although they did not have the transferability which it was once dreamed they could have. I have made clear that I shall refer the issue of transferability to the Occupational Pensions Board for advice. The Board has an invaluable role in producing reports on the various aspects of pensions which we have referred to it. I am sure that the House is grateful for those reports, and more are to come. The Board has a substantial work programme and I cannot yet confirm when I shall refer the problem of transferability to the Board. I must allow it to complete its existing work before giving it any more.

I now return to the central theme of the debate—the plea that the progress of the scheme will not be cut across by the next stage of pay policy. We are all naturally concerned about the impact of future pay policy on the development of occupational pension schemes. It would be wrong lightly to dismiss the importance of the concession made by the Secretary of State for Employment last July when he announced that any new or improved scheme introduced from 31st July this year would not count against a future pay policy if the improvement were not greater than that needed to reach the minimum standard for contracting out. That was a significant concession in the context of the background against which the pay policy Mark I was launched.

The priority aim was to stop inflation in its track and the policy therefore had to be simple or even crude. We never denied that it was anything but rough justice and that it had to be patently fair—over-simplified, perhaps. There had to be something so clear-cut that everybody could understand it and there had to be no suspicions of loopholes through which anyone could escape the sacrifices that were being asked of everybody else.

All other forms of fringe benefits were required to be set against the pay limits. It was only right that private pensions provision should be subject to the same constraints. The policy was evolved quickly. It was another proof of the Government's concern to safeguard and nurture their own pensions scheme that this concession was made in that very hurried near-crisis atmosphere.

I appreciate that what we are now concerned about is stage two, and that there is more time for everyone concerned to examine its aspects and consider possible refinements and all the modifications that are being pressed upon us from various sides. Last week I met representatives of the leading pensions organisations to consider this very point. They left with me a comprehensive memorandum, which I am sure the hon. Gentleman has studied. They asked, as the hon. Gentleman asked tonight, for complete exemption for pensions schemes from the stage two control. I was glad to have the opportunity of discussing that with them.

I suggested that the biggest help any Government could give the pensions industry, and the best guarantee they could give of the success of the new pensions scheme, would be to conquer inflation. They did not demur. It is clear to me that the last thing anyone connected with pensions would welcome is a return to a free-for-all in incomes. I cannot imagine anything more likely to arouse the old bogies about whether the possible commitments under this legislation are sustainable. The Government's first task must be create confidence that they are sustainable, which means that we must create the confidence that inflation will be conquered, and therefore this must have overriding priority.

What interested me in that discussion was that the representatives' main argument in support of complete exemption was the social one that the hon. Gentleman deployed, the suggestion that neglected groups such as manual workers and women would suffer unless there were a total exclusion of pensions from pay policy. This considerably under-emphasises the leeway that there is still to be made up by those two groups. Even under the present provision for improvements up to the minimum level for contracting out, alteration of the rules for the purpose of meeting the equal access requirements may be regarded as coming within this easement. That is a very important gesture.

I put this point to the pensions industry's representatives and they said that there was a danger of the present restrictions locking some workers out of the new schemes or locking workers into poorer schemes than they would otherwise have. I said that their views would be conveyed to my colleagues and taken into the coming discussions generally.

The important point for the House to realise is that the Government's attitude is not to impose a pay policy. I think that the Chancellor made that clear time and again this afternoon. The Government's policy is to accept a pay policy which would win consent. When the hon. Gentleman says that the Conservatives made a complete exemption for pensions schemes under their pay policy, the most important thing to remember is that the Conservative schemes did not succeed. It came unstuck; it led to an explosion and resentment.

I am asking the hon. Gentleman to face this central point, that if there is a considerable social argument here, the working men and women who will be forging a new pay policy by consent will be taking it into account. It would be for them to decide whether over-refining the pay policy in this way might not lead to difficulties. It is not for the Government to impose these solutions.

I believe that the workers themselves are increasingly aware of the value to them of pension developments. This legislation has helped to make them more conscious of it. This is one of the factors they and their representatives will be weighing up.

However, we must bear in mind that the more complicated the policy becomes, the more difficult it is to understand or accept. These are fine matters of balance of judgment. I asked the representatives of the pensions organisations to think about this problem and to let me have their ideas on the options which were available to us in the direction of modifying pay policy with regard to pensions schemes. I am glad to tell the House that they agreed to go away and think about what I said and to let me have their ideas. The really important priority for the workers themselves, and for the pensions industry, must surely be to make a success of the policy by common consent.

I listened last night to "Panorama" in which Mr. Hugh Scanlon was discussing the next stage of the incomes policy with Lord Watkinson, the deputy president of the CBI. What came across to me urgently were some things Lord Watkinson said. He said: I think generally incomes policy has succeeded, and somebody ought to say it, and it has not been broken in any major aspect. And all credit to the trade unions who have done this. The second thing he said was: Year one is always much easier than year two. But if we do not get year two, we are going to go bust. That was the message that came over compellingly as those two men, with their responsibilities and anxieties, tried to work out between them whether a pay policy, stage two, could be achieved and be the success that stage one had been.

Lord Watkinson, finally, looking at Mr. Scanlon, said: All right, we will have our differences, we will have our debates and rows and we will not agree on certain things, but if we cannot agree on the main issue—and I have got to say this again—then there is no future for our country, and the man who tries to elevate the details in front of that main objective is taking a very serious responsibility at this moment. That is the message that I leave with the House. We must leave it to those who have the task of forging the next stage of the pay policy to take into consideration all the comments which have been made tonight and to reach a judgment on how best we can make the policy succeed.

11.2 p.m.

Mr. Kenneth Clarke

I thank the right hon. Lady for intervening in the debate. As she said, we are none of us in the mood for making debating points tonight. Therefore, I shall not respond too vigorously to what she said about the 1973 Act, except to say that for the first time it promised all women in work access to a funded pension scheme. That represented a considerable breakthrough from what had gone before.

I remind the right hon. Lady that one of the principal purposes of the 1973 Act was to extend funded pension provisions to manual workers and to women who were previously excluded. To that extent, I still claim that it represented a considerable advance. That is one reason why we do not oppose the Equal Pay Act Regulations which take the matter somewhat further in the new proposals.

I find startling the suggestion that the failure of the Conservative Government's pay policy was conditioned by its exemption of a pensions policy. That was always a desirable feature of our pay policy. It helped to encourage those engaged in collective bargaining to turn their attention much more to pensions provision and deferred pay than they had before. It was a positively constructive feature of all the phases of our incomes policy. I seem to recall that it was a major dispute in the mining industry which led to the end of that policy rather than anything which arose from the exemption of a pensions policy.

I do not propose to labour any of these debating points. I was reassured to hear the Secretary of State underline the Government's purpose of making sure that this new pensions policy not only gets on the statute book, but is put into effect properly in 1978 with a proper level of contracting out. I was reassured to hear the right hon. Lady describe the contacts she is having with the pensions industry and the way in which, having had discussions about the problems, she was forwarding the industry's representations through the Government to those sections where the next stage of legislation on pay policy are being worked out.

I fear that, as the right hon. Lady said, it was the lack of time when the £6 pay limit came along that caused the pensions industry not to be consulted. I also suspect that her Department was not closely involved, and therefore the first phase of the pay policy resulted in an apparent cutting across of all the policy objectives that the 1975 Act was meant to achieve.

I accept that no one in the pensions industry, and certainly not on this side of the House, is losing sight of the prime objective of getting inflation under control. It is no part of this debate to discuss anti-inflation policy and the Government's success or otherwise in achieving that goal generally. I am sure that no one on behalf of any special interest group will urge anything which will endanger that goal.

It remains our conviction that the inclusion of a pensions policy in the limits originally put forward in the crude £6 pay limit Bill last year would have been immensely damaging in the long term to investment and savings because of the damage it would have done to the occupational pensions industry. We do not believe that the concessions go far enough. We hope that phase two will result in consultation taking place, the pensions industry being listened to by the Government and its warnings heeded.

I hope that when phase 2 is finally produced, it will have some good effect and that we shall not have to initiate this kind of debate again to point out that one arm of the policy runs the risk of defeating the long-term aim for pensions provisions on which we are all agreed.

Question put and agreed to.

Resolved, That this House takes note of the Occupational Pension Schemes (Preservation of Benefit) Amendment Regulations 1976 (S.I., 1976, No. 140), the Occupational Pension Schemes (Equal Access to Membership) Regulations 1976 (S.I., 1976, No. 142), the Contracted-out Employment (Notifications, Premium Payment and Miscellaneous Provisions) Regulations 1976 (S.I., 1976, No. 143) and the Social Security Pensions Act 1975 (Commencement No. 5) Order 1976 (S.I., 1976, No. 141).

  1. ADJOURNMENT 12 words
Forward to