HC Deb 13 December 1984 vol 69 cc1198-200
9. Mr. Waller

asked the Chancellor of the Exchequer whether he has any plans to change the tax treatment of contributions to occupational pension funds.

Mr. Lawson

I am well aware of the speculation on this subject, which I can assure my hon. Friend did not emanate from Treasury Ministers. As my hon. Friend also knows, it has not normally been the practice of any Chancellor to comment on pre-Budget speculation.

Mr. Waller

Does my right hon. Friend agree that those who wish to provide for their own retirement should not in any way be deterred from doing so? Does he accept that it is important for those at work to be able to plan with reasonable certainty?

Mr. Lawson

My hon. Friend will understand that I can neither confirm nor deny rumours about the contents of my Budget. I am concerned, however, about reports that some people may be contemplating premature retirement on the basis of rumours about the tax treatment of pension lump sums. I can assure the House that there is no reason for anyone to retire early on account of such rumours. This Government would not propose and the House would not accept retrospective legislation of that kind.

Mr. Robert Sheldon

Will the Chancellor of the Exchequer accept that his answer will give some encouragement to those who might be making their decisions in such a way as to cover themselves against a legislative change that is contrary to what he intends? Is the Chancellor of the Exchequer aware that the task of the tax reformer is a very difficult one? If he gets it wrong he is in difficulty, and even if he gets it right the benefit will accrue only to his successor— and it is very unlikely that he will get this one right?

Mr. Lawson

There is a kernel of truth in what the right hon. Gentleman says. The task of the tax reformer is indeed a very difficult one.

Sir William Clark

Will my right hon. Friend accept that his statement will be welcome, at least on the Government Benches? Does he agree that if there is any change in the tax arrangements for pension funds, and if the pension that has been promised is to be maintained, contributions to the fund must inevitably increase? Does my right hon. Friend agree that if there were an increase in contributions that would add to the unit cost of labour, which is contrary to Conservative policy?

Mr. Lawson

I have noted carefully what my hon. Friend has said. He will understand, as an experienced Member of the House of Commons — and being particularly experienced in financial and budgetary matters — that it is impossible for a Chancellor of the Exchequer to confirm or deny or comment in any way on rumours as to what may or may not be in a forthcoming Budget.

Mr. Kirkwood

From the Liberal Benches I concur with the welcome that has been given to the right hon. Gentleman's statement. He has probably gone as far as he can go. If I am asked by my local police, for example, whether they should retire early to avoid tax, am I secure in saying no?

Mr. Lawson

Yes.

Mr. Tapsell

Does my right hon. Friend recall that when some of us first entered public life it was one of the prime aims of the Conservative party to ensure that as many people as possible in the years ahead would come to enjoy two pensions — the state pension and an occupational pension? Enormous improvements have been made in that respect in the past 25 years. Will my right hon. Friend be careful to take no steps that will reverse that trend?

Mr. Lawson

On this occasion I entirely agree with my hon. Friend. He knows that I do not agree with him on every occasion. I, too, want to see a further expansion of private occupational pensions. That is the policy of the Government as a whole, and it is one of the reasons why my right hon. Friend the Secretary of State for Social Services has put forward his proposals on personal portable pensions.

Mr. Robert Hughes

The Chancellor of the Exchequer appears to have recognised that many people on modest occupational pensions are seriously alarmed at reports of his proposals. When he says that there will be no retrospective legislation, is he saying that those who are currently in occupational pension schemes will not have their position changed, or is he simply saying that any such proposals would not be retrospective to the coming Budget?

Mr. Lawson

If the hon. Gentleman studies the Official Report tomorrow, he will see precisely what I said.

Mr. McCrindle

May I press my right hon. Friend to go a little further than his welcome statement of a few minutes ago? As the tax-free lump sum under pension schemes is frequently seen as a nest-egg by millions of people, and as plans are made well in advance with regard to the use of the nest-egg, would it not relieve a great deal of anxiety if, in addition to what he has told us this afternoon, my right hon. Friend were able to say that any tax change would apply only to membership of pension schemes which began after the presentation of his Budget?

Mr. Lawson

I have noted carefully what my hon. Friend said. I am grateful to him for the words of welcome with which he began his question.

Mr. Wigley

Does the Chancellor of the Exchequer accept that many people on modest incomes have been making provision for retirement along these lines and would welcome a categorical statement now, not with-standing the convention of not saying things in advance of the Budget? In this instance, surely there is every case for saying categorically that such a scheme will not go forward.

Mr. Lawson

I am quite sure that the hon. Gentleman is right. I am sure that many people would welcome categorical statements about several matters in advance of the Budget, but, for the reasons that are well known and well hallowed, I shall not make any such statements. However, there was a particular problem in this case, in that there was a possibility that people might take premature retirement on the basis of the premise of retrospective legislation taking effect, which was wholly false. I should not like to see that happen. That is why I made my statement, which will be important to many people in both the private sector and public services.

Mr. Higgins

I welcome my right hon. Friend's condemnation of retrospective legislation, but does he agree that it would also be retrospective if changes were made in future taxation of lump sum pensions in relation to contributions that had been made in the past?

Mr. Lawson

I am not quite sure of the precise point that my right hon. Friend is making—[HON. MEMBERS: "Oh!"]—but I think that the answer is yes.

Mr. Hattersley

In his carefully prepared and read supplementary answer, the Chancellor promised no retrospection in this particular. He must know—or at least he should know — that what has caused the uncertainty, particularly in the public service, and the early retirement, is not the fear of retrospection, but the fear that the new regulations will be applied for a period after the Budget. Is the right hon. Gentleman prepared to end that uncertainty now, or is he prepared to see early retirements and the damage caused thereby going on?

Mr. Lawson

As usual, the right hon. Gentleman does not understand the point. The point is that several people were concerned that if they retired after the Budget they would be disadvantaged, as compared with retiring before the Budget. Therefore, they sought to retire prematurely. The assurance that I have given them means that they no longer have to make that disposition of their affairs.