OCCUPATIONAL PENSION SCHEMES (Hansard, 14 July 1987)

§ Mr. Tony Marlow (Northampton, North)
I beg to move amendment No. 4, in page 29, line 9, at end add— '(2) Any benefit received under any scheme approved under Chapter II of Part II of the Finance Act 1970 shall be exempt from income tax on the first £5 per week, when the recipient is aged 65 or more.'.

§ The Temporary Chairman (Mr. Donald Coleman)
With this it will be convenient to take the following amendments: No. 5, in page 29, line 9, at end add— '(2A) Any benefit received under any scheme approved under Chapter II of Part II of the Finance Act 1970 shall be exempt from income tax on the first £10 per week, when the recipient is aged 65 or more.'. No. 6, in page 29, line 9, at end add— '(2B) Any benefit received under any scheme approved under Chapter II of Part II of the Finance Act 1970 shall be exempt from income tax on the first £20 per week, when the recipient is aged 65 or more.'.

§ Mr. Marlow
General elections are useful. They give the public the opportunity to say yet again, time after time, that they prefer our lot to that lot on the other side of the Committee. But it is also three weeks of high profile 1057 politics when the electorate as a whole can give prospective Members of Parliament a right royal ear-bashing about the issues which they think are most important.
Apart from the fact that I was often told, "If the other lot get in, then, your Honour, we'll have to emigrate," and, "For goodness sake, do something quickly about the rates and introduce the community charge," the issue that was brought to my attention more than any other was the position of some old-age pensioners.
As you know, Mr. Coleman, many of those who have recently retired have supplementary pensions, earnings-related supplements and savings. People in that position are much better off as a result of eight years of Conservative Government than they were when the Labour Government were in power. Those on the basic state pension are also often entitled to supplementary benefit in many of its forms, including the various forms of housing benefit. They, too, are better off than they were in 1979 when the Government took office.
But somewhere in the middle there is a slice of people with limited personal savings and a limited occupational pension of perhaps £5, £10 or £15 a week. They are God's Conservatives—Thatcherites. When they were younger, in employment and creating wealth, they put a bit by for their old age so that they could be better off and enjoy some privileges and advantages in their old age. They have found that they are scarcely better off than their neighbours down the road who did not save and who do not have an occupational pension, but who receive supplementary benefit. This matter was brought to my attention on copious occasions during the election campaign and more than virtually anything else. I know from having spoken to many colleagues that it was also brought to their attention and I know that Ministers are worried about these people.
We as a nation are much better off than we were in 1979. We have a great deal to be thankful for and there is a great deal that we have worked for together that we have achieved. But this particular section of our community who no longer have the opportunity to generate more wealth for themselves—they have had their working life and put their savings on one side—are not benefiting. If the rates increase and they do not get a rate rebate, some find that they must cash their savings, which they hoped would stretch until they were in their 80s or 90s, to pay the rates. These people feel, not only that they are not better off, but that they are worse off than when they first retired and worse off than they deserve.
I know that the Government have done a great deal for pensions and pensioners as a whole, but this particular group has slipped through the net. The amendment seeks to allow that group of people with small savings and small supplementary pensions to have tax-free a slice of their pension which they have saved for during their working life. Amendment No. 4 seeks to allow £5 a week to be tax-free, amendment No. 5 £10 a week and amendment No. 6 £20 a week. I do not know how generous my right hon. Friend is inclined to be today. I should like my right hon. Friend to go the whole hog. I know that he is sensitive to the issue, and I am sure that the Committee will be very interested to hear what he has to say.

§ Mr. Blair
I want to respond briefly to the amendments. The hon. Member for Northampton, North (Mr. Marlow) is to be congratulated on drawing our attention to the plight of pensioners in the United Kingdom. The Labour 1058 party drew attention to that plight regularly during the election campaign, during which, I understand, people such as the hon. Member for Northampton, North described how well the pensioners were doing. However, he is right to raise the plight of pensioners and the difficulties that they face. I am not at all sure that it is appropriate to deal with the matter in the way that the hon. Gentleman suggests.

§ Mrs. Elaine Kellett-Bowman (Lancaster)
Why not?

§ Mr. Blair
If the hon. Lady wants to force a Division on the issue, that would be delightful and interesting.
I used to think that the hon. Member for Northampton, North was one of those hon. Members who thought that everything that came before us should be adequately costed and put together in financial terms. However, he has not given us any information about the costings of his proposals.

§ Mr. Marlow
It is late at night and I know that the Committee has a lot of business that it wants to attend to. I am grateful to the hon. Gentleman. To go as far as the first amendment would cost the taxpayer £150 million a year. The second amendment would cost £290 million and the third amendment would cost £510 million. Those figures were kindly provided for me by my right hon. Friend the Financial Secretary to the Treasury. If we consider the first figure and compare it with taking 1p off income tax, it represents about 15 per cent. or 20 per cent. of the reduction. As we know, the Government are contemplating reducing income tax and that might be one way forward.

§ Mr. Blair
I am grateful for the figures. If the amendments do not find favour with the Government tonight, at the very least perhaps the hon. Member for Northampton, North can join us in voting for a larger increase in the pension later. I do not think that this is the time to introduce what would be a fairly novel tax regime, although we have deep sympathy with the plight faced by pensioners.

§ Mr. Norman Lamont
The amendments would provide for part of the occupational pension paid to a pensioner over 65 years of age, varying from £5 to £20 in the different amendments, to be exempted from tax. In other respects, the amendments are identical.
My hon. Friend the Member for Northampton, North (Mr. Marlow) is correct to identify a particular slice of the pensioner population who often have difficulty in making ends meet, as they have put money by for their retirement, but none the less find that the small occupational pension is even smaller than they had expected. My experience mirrors that of my hon. Friend and I have come across many people who feel that they face difficult circumstances notwithstanding the fact that they have contributed to an occupational pension scheme for some years.
Unfortunately, there are a number of objections to the amendments, which would represent a significant departure from the general principle that all income, whatever its source, should be subject to income tax. An exemption of this kind would create unfairness between occupational pensioners and pensioners with different kinds of income. There is no obvious reason why a pensioner receiving a pension under an occupational pension should receive such generous treatment while someone not fortunate enough to receive an occupational 1059 pension, but who has had to rely either on the national insurance retirement pension or has simply saved and has an investment income does not receive similar treatment. He may be in that category described by my hon. Friend, but instead of contributing to an occupational pension, he may have put money into a savings account or a few stocks and shares. That pensioner may find himself in the position described by my hon. Friend.
We must recognise the circumstances of all elderly taxpayers. That, of course, is why we have provided for the age allowance, subject to an income limit giving them a higher level of personal allowance.
My hon. Friend the Member for Northampton, North knows the cost of the amendment already, as he said, because I gave it in a written answer. I think that he would agree that I cannot easily just concede such sums in a debate late at night, persuasive though my hon. Friend is. For the reasons that I have given, much as I sympathise with my hon. Friend, I think that help ought to be targeted more broadly. I entirely agree about the category of people whom my hon. Friend is trying to help, but they are not only people in occupational schemes. They may also be people with a savings income, not from a pension scheme as such. The best way to help those people is to try, by means of the age allowance, to increase the proportion of their incomes that is exempt from tax.

§ Mr. Marlow
I am grateful for the sympathetic hearing that my right hon. Friend has given the amendment, and the understanding way in which he has approached it. I appreciate that such an amendment raises all sorts of issues of great complexity, and that to do anything about that would require a more sophisticated measure than can be put forward by a modest Back-Bencher late at night. I am grateful for my right hon. Friend's acceptance, in large measure, of a problem that many hon. Members on both sides of the Committee came across during the election campaign, and I hope that before long a more generous measure than we have experienced so far, along the lines suggested by my right hon. Friend, can be introduced.
I beg to ask leave to withdraw the amendment.