§ [Relevant document: First Report from the Social Security Committee of Session 1992–93 on The Operation of Pension Funds: The Recovery of Assets ( House of Commons Paper No. 189)]
§ Motion made, and Question proposed,
That a further sum, not exceeding £1,505,632,000, and including a Supplementary Sum of £810,000, be granted to Her Majesty out of the Consolidated Fund to defray the charges that will come in course of payment during the year ending on 31st March 1994 for expenditure by the Department of Social Security on administration, for agency payments, and for certain other services including grants to local authorities and voluntary organisations.—[Mr. Hague.]
§ Mr. Frank Field (Birkenhead)
It is a pleasure to open this afternoon's debate on a vote that takes note of a report by the Select Committee on Social Security and which draws attention to the grants in aid to the occupational pensions advisory service and to the Maxwell pensioners' trust.
I begin the debate by putting on record the Select Committee's thanks to a number of individuals and organisations. When the Committee began what is now turning out to be a mammoth task, considering the ownership and control of Britain's occupational pensions schemes, we were blessed—I use that word advisedly—by the services of Philip Chappell as one of our specialist advisers. Some months ago, Philip Chappell died after bravely trying to ward off brain cancer. While that death was a total blow to his family, it was also a severe knock to radical forces in this country.
Some hon. Members will be aware that Philip Chappell and Lord Vinson formulated a number of very important radical ideas about why and how individuals should own their own pension funds. Those ideas stemmed from those two individuals. Philip was not only a most courteous and careful attender of our Select Committee gatherings; there was about him a boyish enthusiasm for ideas which endeared him to each and every member of the Committee on both sides of the table—if I may use that phrase. When one met Philip, one stretched across to meet him because his moral earnestness was totally attractive.
There is a sadness about our debate today as we have lost a great radical champion on pensions and capital ownership in this country. As my grandmother would say, "Dark clouds have silver linings." The Committee has similarly been blessed by an initiative of the National Audit Office which has allowed us to have seconded to the Committee one of its staff—Mr. Jonathan Cable.
All members of the Committee would wish me to say that the quality of our work in this area and related areas is very much determined by the high standards that Jonathan brings to his work. He does that in conjunction 495 with our new special adviser, Peter Mills. The Committee is thankful to both those people as it is to the House of Commons Library for the care and diligence that it shows us when answering our inquiries.
I begin one part of the debate by recapping for the House the reports of the Select Committee and the work that it has undertaken, not merely in the field of the ownership of pension funds, but specifically relating to the plight of the Maxwell pensioners. Some hon. Members were not in the House when we made our first report on the theft by Maxwell of much of the pension fund.
Following the publication of that report, the Government responded very quickly to one of our main proposals, which was to establish the Goode committee. This will report in late September. If it does not report on the key question of the ownership and control of pension funds, that will be seen by many of us to be a cop-out and the loss of a great deal of parliamentary time. I hope that that initial report helped to sharpen and focus the debate that has ensued.
Secondly, the Select Committee reported two persons to the House for contempt. It is not advisable to dwell on that report for contempt now. I merely wish to record that at some stage the Select Committee, which has a long memory, will wish it to be debated in the House.
Thirdly, the Select Committee has already reported on the recovery process. It said that that was an initial report and part of today's debate is about it. Shortly, however, we shall be making a much more major contribution to the study of the recovery process, when we will look at three of the four agents deputised for the task of recovering both assets which were stolen and assets which were misappropriated or are in disarray as a result of Robert Maxwell's behaviour, and then his death.
It is true to say that, while we have rightly been concerned with the Maxwell pensioners, and it has been totally proper for the Select Committee to put them at the centre of its consideration—indeed, they have looked to the Select Committee to champion their cause—the Committee has not been concerned only with their plight. We have tried to use what has happened to those tens of thousands of people as a barium meal is used for an X-ray; we have been concerned to draw out the weaknesses of occupational pensions, to enliven and inform the debate, and to draw general policy conclusions from our considerations, not being concerned only—I emphasise the word only—with the Maxwell pensioners, important though they are.
I turn now to what the Government have done in this area. I hope that I do not embarrass the Under-Secretary —whom I welcome for the first time in this debate to his post on the Treasury Bench—by going through the various moves that the Government have accomplished.
First, very soon after the extent of this awful theft became apparent, the Government agreed to drip-feed the pension funds to ensure that pensions were paid. The Government are to be congratulated on that and on using taxpayers' money—not their money—to good effect. That initial sum has already been spent.
The second move made by the Government to help to minimise the horror of this enormous theft of pension funds was, in effect, to give the pension funds a loan of £100 million or so, which the Government have every right to call in now. to underwrite the guaranteed mint mum pension under the relevant social security Act. So they are to be congratulated on that.
496 Next, they deserve congratulation on setting up the Maxwell pension units and, above all, on appointing Sir John Cuckney to an overseeing job in this whole area. Our friends who sit elsewhere in this Chamber have been slow to wake up to the importance of this initiative. When we look at the initiative that the Government have taken in trying to combine public responsibility and private initiative, the Maxwell pension units and the role of Sir John Cuckney will, I believe, be at the forefront of the debate.
I am sure that the whole House joins me in emphasising the thanks that I now pay publicly to Sir John for the work that he does and the skill that he brings to that task. He is a public servant of considerable distinction. Many Maxwell pensioners are particularly grateful to him, because it is from the trust fund that he established that they are now being paid their weekly or monthly pensions.
The next reason for which we have to record thanks to the Government is that, through the initiative of Sir John Cuckney, we now have in place Sir Peter Webster, a retired High Court judge, who is attempting to build up some expertise in the area of mediation in this country. It is fair to say that he is probably the first person of that standing to attempt such a task and our thanks go to him.
Next, the Government have established the Goode committee, and we await patiently, but anxiously, its findings, due in September this year.
Lastly, the Government have taken the initiative, through the Board of Trade, to investigate the Mirror group prospectus. The Select Committee believes that that has very important repercussions for many of the pensioners.
I shall end by calling for some Government action, but it is right and proper that, in looking at this today, we should record what the Government have done. I shall watch with considerable interest how schizophrenic the Under-Secretary is when he comments on the Government's record. He knows that, if he is too boastful about what the Government have done, he will clearly be committing them to an interventionist line, from which they have tried to shield themselves. So I am sure that we shall have that pleasure before too many hours have passed.
There are two topics on which I shall not comment, because I am anxious that every hon. Member who has played a part in previous debates and in the Select Committee should have a chance to speak.
The first is the cost of the recovery process. It will probably reach something like £50 million before the task is finished, which is a ginormous sum. I will not dwell on it, because I know that my hon. Friend the Member for Liverpool, Broadgreen (Mrs. Kennedy), who hopes to catch your eye, Mr. Deputy Speaker, intends to concentrate on that aspect. The second area of real concern relates to the two pensioner groups that have been left out in the cold. I guess that the hon. Member for Dover (Mr. Shaw) will be dealing with that.
I will end by looking at the actions that we now want the Government to take, or not to take.
The first crucial necessity is that pressure is kept up on the main players in the Maxwell saga so that it is brought to an end as quickly as possible. There are a number of ways in which we as Members can help—by having debates such as we are having today, the work that the Select Committee can do, the statements that Ministers and Opposition spokespersons can make in their 497 contributions to these debates, and the comments that Ministers can make both throughout the country and in letters that are published.
It is essential that none of the main players—whether it be those who are, in a sense, in the dock for playing a part in the theft of these assets, or those committed by the courts to the recovery of the assets—believes that they can relax, sit back and take their time, because the patience of the pensioners is clearly running out. Keeping up the pressure, therefore, is a very important task, in which this debate will play some part.
Secondly, there is the question of the distribution of the common investment fund. As I expected, the hon. Member for Hertfordshire, South-West (Mr. Page) is in his place. Given that he has given the parties to the common investment fund such a good old shaking in the past, and a justifiable one, I need not dwell too long on that. I leave the common investment fund and its main participants to his gentle but firm boot.
Thirdly, I hope that we are not going to hear today that the Government should call a halt to the whole proceedings and shovel out large sums of taxpayers' money. There is something that the Government. can do, but I am not in favour of their taking over the entire deficit and suggesting that the taxpayer should meet the total cost.
The recovery process is in operation and other forces are at work to gather funds for the depleted pension funds. However, I believe that, in the near future, the Government should make a statement on what they believe to be the likely shortfall when the whole process has been concluded, which may not be for three or four years, and at that stage to suggest how they envisage that sum being made up.
Some of us noted that the Securities and Investments Board recently fined Invesco MIM £750,000 for malpractices over its stewardship of some of the Maxwell pension funds. I hope that the Government will be asking the SIB to pay that fine, and other fines that we shall hear about shortly which will make £750,000 mere chicken feed, and that those funds will be paid into the Maxwell pension funds to help rebuild the capital stock.
I hope that the Government will judge the situation carefully and, if they consider that it would be useful to bring the parties together soon, to suggest a round table meeting. There will be three parties to that round table meeting.
Thanks to the hon. Member for Hertfordshire, South-West and others, the Government need not concern themselves too much with the distribution of the common investment fund. The money is there; the question is when the assets are realised and how they are distributed. I am sure that the process will take its natural course.
There is also the disputed ownership of some assets. Sadly, it is now clear that those disputes will probably end in the courts, will cost a great deal of money in legal fees and, at the end of the day, will be settled. I hope that rightful restitution will ensue from that activity and that the assets will be returned to Maxwell pension fund holders.
There is another matter on which the Government may be able to act. There are already some writs out, but there will be many more on those City institutions which were 498 only too willing to work with Robert Maxwell and take his fees. Some of them are grand institutions, and I am sure that they now wish that Mr. Maxwell had never crossed their path.
They know perfectly well that, if matters are not settled, they will be dragged through the courts and that process will be time-consuming and immensely expensive. Their professional reputations will suffer and some may be fatally flawed as a result of those cases. At some stage soon they may well have an interest in settling, and I hope the Government will keep a watching brief so that, when the minds of those people are concentrated—as Doctor Johnson said, being hanged in the morning concentrates the mind wonderfully, and so does losing one's professional reputation—the Government will act swiftly to bring the parties together.
When they know what the shortfall will be, the Government may consider what small, modest contribution the taxpayer should make, but they should suggest to those professional bodies that the time has come for them to contribute and make good whatever shortfall there is when the recovery process and the legal proceedings have been completed.
I end as I began, by underlining our commitment to the Maxwell pensioners.
§ Mr. David Porter (Waveney)
The hon. Gentleman will recall that I was briefly a member of the Select Committee in the last Parliament. May I ask him just two questions? First, will the Committee keep a watching eye on Maxwell victims who are part of British International Helicopters and who had a particular problem which made them different from other Maxwell victims?
Secondly, in its first report, the Committee suggested that, if the Government did not produce a Bill on occupational pensions, the Committee itself might do so. Is that still the hon. Gentleman's intention?
§ Mr. Field
I hope that, following the Goode committee. the Government will bring forward its most radical proposals. If not, I hope that they will at least seek to amend those proposals.
On the hon. Gentleman's second point about those caught in the sale of the helicopter company, when the hon. Gentleman was a member of the Select Committee, he was a doughty champion of his and some other Members' constituents, and his intervention underlines that point. However, I understand that the hon. Member for Dover will deal with that point if he is lucky enough to catch your eye, Mr. Deputy Speaker.
I end as I began by focusing our attention on the Maxwell pensioners. Since the House last debated the plight of Maxwell pensioners, a considerable number of them have died. That should concentrate our minds on the task of maintaining pressure and trying to seek settlements without resort to the courts.
We should also expect the Government, who do not have a bad record in protecting the interests of the Maxwell pensioners, not to be frightened by their record but to build on it and, if the timing is right, to try to get those professional organisations which grew fat on fees from Robert Maxwell to pass on some of that fat to rebuilding the pension funds, so that, when we next debate the plight of Maxwell pensioners, it will be in celebration of reaching a conclusion instead of recording that more of them have died awaiting a resolution to their plight.
§ 5.6 pm
§ Mr. Richard Page (Hertfordshire, South-West)
If have two reasons for speaking in the debate: first, I have been fortunate to catch your eye, Mr. Deputy Speaker; and, secondly, my constituency abuts that of Watford, the one-time print centre of the United Kingdom until Robert Maxwell operated upon it, leaving a considerable number of unemployed people and a large number of pensioners. When I heard of his death late in 1991, little did I know the difficulties and the effect that his passing would have not only on me but, more important, on my constituents.
It is ironic that, three months before Robert Maxwell's death, I saw a line diagram of the management structure of the Maxwell empire. I remember thinking that it was a management structure designed for purposes other than ease of management control. Little did I know that within a few months I would be among those trying to unravel where the money had gone. I believe that the behaviour of some British institutions in that affair requires the type of examination to which the hon. Member for Birkenhead (Mr. Field) referred.
The House can imagine my horror and dismay when I found that hundreds of pensioners in my constituency were in danger of having the roof taken from above their heads. When the truth began to filter through, I cursed the man for what he was doing to my constituents. However, now that there is some stability for those pensioners" I can see, perhaps with a little more tolerance, part of the reasoning behind his actions.
It is true that Robert Maxwell was an egotist, a bully and a thug, but. I can understand what drove him to try to save his empire. I make that comment because Robert Maxwell is not unique. In future, there will be other Maxwells; I hope that they will not be as big but will be teeny ones. The House should face the fact that other pensioners in other occupational schemes are going short, and will go short, of their pensions because we have not closed the loophole that allows pension funds to be raided in that way.
Fortunately, in this case, a large number of Maxwell pensioners were involved when the shortfall in funds began to show in early 1992. I say "fortunately" because, had there been only a small number of them, the case would not have received the same publicity and they woulld not have been in the fortunate position that they are in today. They were also fortunate in that Maxwell was a flashy character who commanded plenty of newsprint before and after his departure. But, as I say, other pensioners in other occupational schemes have not been so lucky.
The Government's position is simple, and I understand and support it. They cannot be expected to bail out every pension scheme that goes wrong. It would be morally wrong to use vast sums of taxpayers' money in that way. But in the Maxwell case, with such large numbers descending on the social security services for support—to pay mortgages and make up for lost pensions—more money would have been lost had the Government not contributed.
When I first examined the position of the pensioners, I thought of R. A. Butler. If an hon. Member went to Rab with a problem, one of his first questions always was, "How many of you are there?" If the reply was, "Just me," the chances of achieving a favourable response or a change 500 of Government policy were slim. But a reply such as, "I have a large number of people outside demanding action," focused Rab's mind on the issue in hand.
I admit to being a mere spear-carrier in the great Conservative party. I appreciated early on that, if I was to be of real help in the pensioners' cause, I needed the strength of numbers around me. I did a trawl through the House and was fortunate to persuade more than 70 hon. Members to attend the first Maxwell pensioners' meeting. I thank the hon. Member for Birkenhead for joining me as co-chairman of the group, which helped to make it an all-party affair and to lift it out of the endless possibilities of party bickering that the situation could have engendered. I also appreciate the efforts of other hon. Members who supported my idea of a lifebelt.
I shall not go into the details of the many meetings that took place. I am grateful to the Secretary of State not only for taking up the suggestion that was made in that context but for going much further and setting up the pension units and seconding senior civil servants to enable moneys to be traced. Setting up the Cuckney fund was of great assistance, and I am grateful to Sir John Cuckney and Mr. Ballard, both of whom dealt with some of the trustees of the fund in a more delicate fashion than I did at various stages of the affair.
With the partial distribution of the common investment fund, we have a breathing space, but it is only that and we must look to the future urgently. We cannot relax and say. "We need not worry. Nothing will happen for another two or three years." We must press on with all speed.
Looking to the future and to the position of Government on pensions, it is clear that they face a huge dilemma. A study of the demographic profile of this country reveals an aging population, a subject on which my hon. Friend the Member for Dover (Mr. Shaw) will speak if he has an opportunity to address the House. He has done research and majored on that issue and has expressed much concern about the future.
In 1901, only 17 per cent. of men and 22 per cent. of women lived to be 75. The figures are now 52 and 70 respectively, and it is calculated that the 4 million people involved will grow to 6 million in the next four decades. The numbers aged over 85 will triple in those four decades. The Daily Mail today points out that one in five are over 60, an increase of 8 per cent. in 10 years, and that the trend will continue.
The dilemma facing the Government is horrendous. They must persuade as many people as possible to accept the full responsibility of pension payments, getting them into occupational schemes as well as disclaiming financial responsibility for those schemes.
The Government want to get people into occupational schemes for obvious and sensible financial reasons, but surely they have a moral responsibility to ensure that those people are protected. The Government cannot say, "You are now out of the state scheme, into occupational schemes, and on your own." They must accept that, when people are moved from one to the other—let us not forget the contributions of 2 per cent., or whatever the figure was, which encouraged people to move from SERPS to occupational pension schemes—they retain some responsibility.
Some may point to the work of the Investment Management Regulatory Organisation, and I agree that it has received some criticism during the Maxwell affair. I fear that it was a stable door closing operation, the horse 501 having bolted; the door being closed, the remaining horses are locked in the stable. Unfortunately, the horse that got out has caused an immense amount of damage and hardship to pensioners.
We are awaiting the Goode report and cannot predict what it will contain, but it must propose some form of safety net. What I am suggesting is not like a bolt from the blue. There is already in place, for example, the air travel trust. Under that, if people book a package holiday and the airline on which they are to travel fails, there is a £30 million fund to pick up the costs of the failure. That money is made up of a levy on the industry, authorised by the Government. With the recent collapse of the International Leisure Group, a great chunk of that £30 million was absorbed. It is now being rebuilt and the Government are guaranteeing it.
I see no reason why another fund, paid for by the pension companies, should not be established. The levy need not be vast, bearing in mind the billions of pounds that go into occupational pension funds every year. Whatever form it takes, a safety net organisation should be established to pick up the Maxwells of the future to prevent pensioners falling on hard times.
I shall detail only one of the many cases that have come to my attention, literally that of the proverbial little old lady. In no way could she have survived in her house without her pension money. Her small mortgage was coming to an end and she needed money to pay the mortgage if she was to remain in her home.
It is incumbent on the Government to ensure that a scheme is established involving the whole pensions industry. The House has a duty to make sure that, should there be Maxwells in the future, pensioners will be protected.
§ Mr. John Gunnell (Morley and Leeds, South)
It is clear to me as I look around the House that the overwhelming majority of hon. Members who will take part in the debate are members of the Select Committee and have therefore developed a certain expertise in the subject. My only expertise comes from frequently meeting many of the Maxwell pensioners who live in Leeds.
Leeds is the home of the former printers, E. J. Arnold, the company which was taken over by Robert Maxwell and which was the basis of the Headington pension fund, one of the funds that is less happy just now. There are also in Leeds a number of other printers who were taken over by Maxwell, but the pensioners in those companies come under the Maxwell works scheme and are more fortunate than their fellows, although they attend the same meetings as pensioners from the Headington scheme.
Those pensioners meet about once a month and I often attend their meetings. I am always struck by the way in which they cannot take for granted the almost everyday matters that we accept as normal. For example, we assume that at the end of the month there will be a salary cheque waiting for us. Most of us also assume that, having put in our claims, we shall receive our travel allowances, and so on. We know that those will come at the end of the month so we do not worry about them.
As Robert Maxwell has been gone for 20 months, but pensions have nevertheless been paid, we might expect 502 pensioners to believe that they will continue to be paid. My hon. Friend the Member for Birkenhead (Mr. Field) was right to praise the actions that have been taken to ensure that. However, the Maxwell pensioners are not entirely certain that their pensions will continue to arrive.
That might seem strange, given existing guarantees, but it is not really that strange, because the original £2.5 million that was properly made available is now exhausted and the money is coming from the £6 million that Sir John Cuckney was able to raise through voluntary donations. Obviously, the pensioners can estimate the length of time that that is likely to last before it, too, is exhausted.
Elderly people rely on their pension cheques arriving for the rest of their lives and they need to be reassured that that will happen. Hon. Members concerned about the matter should meet pensioners and talk to them. Indeed, the Minister represents a seat not so far from Leeds—I welcome a Yorkshire Member in the office that he holds —and the Maxwell pensioners would be happy to meet him. Although some things have not gone as they hoped and they have had disappointments, I am sure that they would not shout at him. They would have a sensible discussion about the issues on the table and the best way forward.
The whole community of Leeds have been involved in supporting the Maxwell pensioners. I pay tribute to the work of the Yorkshire newspapers, particularly the Yorkshire Evening Post, which continually emphasised the injustice suffered by the pensioners and our obligation to ensure that their pensions were paid.
I pay particular tribute to one blind pensioner in my constituency, Ivy Needham, who leads the Leeds pensioners. When we think of Robert Maxwell and his wealth and of Ivy Needham struggling in her council house in Middleton, it is clear that Ivy is an apt symbol of the injustice that the pensioners have suffered. I knew Ivy before all this arose. She put pressure on me because a class for the blind and partially sighted in a local school faced a rent increase. She certainly let me know what she thought of that. In some ways, the injustice of the events surrounding Robert Maxwell inspired Ivy to lead the Maxwell pensioners, despite her physical handicap.
As the Minister knows, Ivy was recently granted up to £7,500 legal aid for her application to the European Court where, as the symbolic pensioner, she is pursuing a claim against the Government for failing to implement EC directive 80/897, which requires member states to take the steps that are necessary to protect the pensions of former employees of insolvent companies. The legal aid covers the preliminary work needed to establish whether there is a case to be heard.
I believe that it is in the Government's interests that that case is heard. It would be valuable to know whether the directive applies. I regret that the Government are not committed to ensuring that the case is heard so that we can know what judgments will be made. To have knowledge of such judgments would be helpful not just to Ivy Needham, the symbolic pensioner, but to the Select Committee—which, I am sure, would want to see European judgments on the matter—and the Government.
There are one or two matters that I hope will be resolved in today's debate. I recognise that setting up the Maxwell pension unit is an achievement for the Government. The civil servant who heads that unit is leaving—or he may have just left. As he gave good and clear leadership to the unit, I want the Minister to assure 503 me that the fact that he has returned to his native department does not mean any lessening of the Government's commitment to the work of that unit. As my hon. Friend the Member for Birkenhead said, there are tasks still to be carried out. There is a clear co-ordinating job for the unit as the distribution of the Cuckney investment fund is arranged and assets are recovered. The unit's excellent leadership has been especially helpful in that process.
I want the Minister to clarify the position on the state earnings-related pension scheme. We recognise that not having to pay to get back into SERPS is a positive move by the Government, and it should be seen as such. However, people are a little uncertain about when and whether that money will become payable. We need to know what the shortfall will be between the money raised and the money required. The £100 million involved in that is clearly relevant.
We must look at pension funds that are especially disadvantaged. People in Leeds come from two different schemes, so they are able to compare one with the other. The Maxwell pensioners had hoped for a 5 per cent. increase but are to get 3 per cent. When they compare their position with that of pensioners in the other scheme, who are to have no increase, perhaps they will not feel too badly about not getting the full 5 per cent. There should be justice between the schemes and I hope that the Minister will say something about that.
As hon. Members have said, at the end of the day there will be some shortfall. Assets have been identified and there are now mechanisms to ensure that they are recovered. That fact gives some validity to the Government's assertion that had they underwritten the necessary money from the start, that information would not have been discovered and the assets identified and recovered.
It becomes less valid as more information is received. At some point there will be a gap, and I want to be certain that when it is reached, the matter will be positively resolved. I do not want my pensioners, who worry week by week, to continue worrying into the distant future. The time must come when Maxwell pensioners in Leeds will be able to celebrate and to say, "We can stop meeting on the basis that we meet now, because we are assured that our pensions will continue to arrive in the post for as long as we need them."
§ Mr. David Shaw (Dover)
Eleven million people have occupational pensions, and 5 million have personal pensions. That is a major success story and a tremendous achievement by the Government, which has contributed to a true capital-owning democracy, greater security in retirement and a better understanding by many more people of the economic processes by which this country creates wealth.
When the history of the Thatcher and Major Governments is written, people will pay great attention to the fact that so many members of the public were able to increase their ownership of the community by home ownership, pension ownership or other assets.
§ Mr. Paul Flynn (Newport, West)
Is the hon. Gentleman aware that, in the final quarter of 1992, 44,000 owners of personal pensions allowed them to lapse? What 504 will they think when they look back on the age of Thatcherism? They have no personal or occupational pension or SERPS.
§ Mr. Shaw
There will always be people who, for one reason or another, do not continue their payments. Sadly, many people are oversold individual schemes—but they can obtain restitution under the Financial Services Act 1986. A lapse of 44,000 pensions schemes out of 5 million is not enormously significant—and it occurred at the peak of a recessionary period, when many people may have felt that it was difficult to keep up their payments. I have every confidence that many of them will return to their schemes, and that a large number of them may be members of other schemes anyway. Some people discover that they are in too many schemes and that the Inland Revenue has rules that prohibit that. There are several reasons why membership of schemes is cancelled.
I have not even mentioned the number of people who have life assurance policies and who save through unit trusts. A major change has been achieved and I look forward to the day when the Labour party will join that debate on an equal footing and will welcome that development.
Many of the 16 million pension scheme members have no problems or fears, whether their schemes are personal or occupational. They will pursue worthwhile careers while they save for their years of retirement and will then enjoy many years of happy retirement with no problems. However, members of the Social Security Select Committee recognise that some schemes have problems.
The Select Committee has examined several schemes, including the Harland and Wolff scheme in Northern Ireland, which has problems, and has discussed the Belling and Lucas schemes. The Select Committee is also concerned about the Dormobile scheme, with which I had a particular problem, because a number of my constituents were concerned about a mysterious loan that had been made.
Sadly, some schemes have been brought to the Select Committee's attention and they need careful investigation and review. However, it surely cannot be the long-term role of a Select Committee to become involved in problems of that kind. We must establish a mechanism that allows for problems to be resolved in a better way.
A number of organisations are involved, including the occupational pensions advisory service, and they do the best job that they can in the circumstances. Perhaps the Goode report will recommend that a better way be found of structuring the various advisory bodies and support mechanisms. I hope that the Government will always play an active role in supporting them. Given that there are 16 million pension scheme members, it is incumbent on the Government never to abandon or be accused of abandoning those people, but always to examine better ways of protecting the interests of scheme members and of ensuring that this country's pension system remains one of the best in the world.
The Select Committee began examining occupational pension schemes in general in July 1991. When the Chairman and I began discussing with colleagues our producing a report on occupational schemes, little did we realise that Mr. Maxwell was at that very moment already secretly ripping off his company's pension fund to the tune of £220 million. As our report got under way, that figure was to grow to £450 million. We must have had a sixth 505 sense in July 1991. Mr. Maxwell went overboard—jumped overboard, as it would now appear—in November 1991, and within a month it was apparent that the Maxwell fund was encountering serious difficulties. The Select Committee therefore extended its investigations.
Following the Select Committee's initial work in the last Parliament, the Department of Trade and Industry announced that the Mirror Group prospectus would be investigated, and the Government established the Goode committee to investigate aspects of occupational pensions. The Securities and Futures Association—unbeknown to some, but this is now know to all—investigated Goldman Sachs and its role in the Maxwell dealings.
The Investment Management Regulatory Organisation appeared before the Select Committee, and there came to light a number of deficiencies in the way that it had treated the Maxwell companies. As a consequence, IMRO examined its own organisation and the role of its members, and that led to Invesco MIM recently being fined £2 million including costs. There is no question but that, in just those four areas, the Select Committee had a considerable impact on initiating serious examination of some of the problems surrounding the Maxwell affair.
I am delighted with the Government's response to the Select Committee. There is no question but that the action of my right hon. Friend the Secretary of State for Social Security in establishing the Maxwell pension unit displayed remarkable sensitivity in recognising that a serious problem existed that required special attention. That unit has been an incredible success. The Maxwell pension trust, which my right hon. Friend also initiated, has also been enormously successful, with the Government paying its administrative costs, so that it has not been a burden on any pensioners. That trust has helped to raise a considerable amount of money, to ensure that Maxwell pensioners have their legitimate current needs met for the foreseeable future.
The Government's contribution of £2.5 million to support certain pensioners in pension schemes in financial difficulties is an important and compassionate measure that has helped a number of pensioners—including a small number who were direct pensioners of companies that went into liquidation. There was therefore no pension scheme to pay them and they were dependent on those companies' survival. Once the companies went into liquidation, the pensioners were left without any money. The Government's £2.5 million certainly came to their rescue.
More important than anything else, the Government have, in effect, lent £100 million to the Maxwell pension schemes by deferring collection of state scheme premiums. Many of us have difficulty in understanding how it operates, and I will not attempt to explain the complexities of that particular transaction. It is one that, even as an accountant, I find difficult to follow; it is very intricate. There is no doubt that the Maxwell pensioners have benefited a great deal from collection being deferred and that there is no interest payable.
§ Mr. Frank Field
It is worth putting on record the fact that both the hon. Gentleman and I have sounded sycophantic when talking about the Government. That is because the Government did many of the things that we asked them to do.
§ Mr. Shaw
I am grateful to the hon. Gentleman, as an Opposition Member, for pointing that out. It is a delight that hon. Members on both sides of the House recognise that there has been an all-party move on this issue to keep it off the main political agenda. Inevitably, there are differing political views about certain aspects and individuals involved, but there has been tremendous cross-party agreement. My hon. Friend the Member for Hertfordshire, South-West (Mr. Page) made great efforts, together with the hon. Member for Birkenhead (Mr. Field) and myself, to avoid getting to a point where the Maxwell pensioners lost because of political wrangling.
§ Mr. David Lidington (Aylesbury)
Does my hon. Friend agree that there is considerable concern—particularly among the deferred pensioners involved in the Maxwell schemes—that the Government's intention might be to postpone premium and interest payments only until the pension funds are able once again to meet their liabilities to pensioners currently in receipt of pensions, rather than until the schemes are able to cope with their liabilities to deferred pensioners? It would be reassuring to many of the deferred pensioners, including those whom I represent, if the Government responded generously this evening.
§ Mr. Shaw
I commend that course to my hon. Friend the Minister. We welcome him to the Front Bench for his first major debate on this issue, which I hope will be one of many—although not too many!
My hon. Friend the Member for Aylesbury (Mr. Lidington) makes a strong point about deferred pensioners. There will be considerable concern if the Government cannot find a way of bridging the gap. The Committee has increasing confidence that that can be done, if the institutions that have done wrong meet their commitments to make restitution. Moreover, because of the various events that have taken place with the pension funds, the Committee feels that it might be possible to reconstruct the position and enable much of what has been lost to be recovered. That can be achieved, as my hon. Friend has pointed out, only if we get to a point where the Government can ensure that there is enough support in the intervening period.
I hope that the institutions that are to blame will come forward, in the not too distant future, and recognise their responsibility. That would ensure that the public-purse commitment would not continue for long. We have to consider the many other pensioners, the many disabled and other people who need help from the public purse. If the institutions and companies involved with Mr. Maxwell have done wrong, they should be made to pay out soon. We could then get on with the business of government and Parliament and ensure that the £300 billion a year of public spending goes to those in need, and not to finance those financial institutions that may have done wrong.
I am particularly concerned about two pension schemes. One is the Maxwell Communication Corporation works pension scheme, and the other is the British Island Helicopters pension scheme. My hon. Friends the Members for Waveney (Mr. Porter) and for St. Ives (Mr. Harris)—both former members of the Select Committee—have taken considerable interest in that matter during the last year and a half.
Those two schemes are in a terrible position. Mirror Group Newspapers issued a prospectus that said, in paragraph 3(a) of the accountant's report, that the works 507 scheme would be incorporated into the Mirror Group Newspapers pension scheme. The prospectus was issued in April 1991; by the time Mr. Maxwell had jumped overboard in November 1991, a commitment to the board of directors, in a prospectus—a doctrine issued under the Companies Act—had not been carried out. That is an appalling state of affairs for someone like myself who has been involved in the issuing of prospectuses; it is appalling that a commitment should have been given and, many months later, not been carried out.
There is no doubt that the directors of Mirror Group Newspapers—many of whom are still directors—must address the issue of meeting the commitment in the prospectus, or should resign and cease to hold any public or corporate office in the land. They are unfit to be directors of public companies—as Mr. Maxwell was described—if they cannot meet the commitment in the prospectus.
There is also an appalling situation with British Island Helicopters. Mr. Maxwell said that he would bring those pensioners into the Mirror Group Newspapers scheme, and in that instance he did so. There was a substantial liability, therefore, to pay pensions to British Island Helicopters employees. What has happened is that the old Mirror Group Newspapers scheme has effectively been closed and a new scheme started, but the British Island Helicopters members are not included in the new scheme.
A clear commitment was made by Mirror Group Newspapers and its pension fund to British Island Helicopters' members. There is clearly a moral commitment, even if legal devices enable the fund to get out of it. It is totally unsatisfactory that an existing legal and moral commitment like that could be avoided by closing down an old scheme and opening a new one.
I turn now to the issue of whistleblowing and corporate governance. As I said at the beginning of my speech, this has cost the Government money. The Government have, compassionately, come up with money, but they should not have had to do so. If the Maxwell empire had been properly run—and the people who know about the irregularities in it had spoken at an earlier stage—we would not have had this problem.
Deborah Maxwell is no relation to any of the Maxwell family—it is coincidental that she has that name—but she is a solicitor, a member of the Law Society, and on 19 November 1990 she wrote three memoranda. Having read the memoranda, I think that she is a very competent solicitor, with considerable skills and abilities.
In one memorandum, Deborah Maxwell points out that there are implications in the share dealing involving MCC shares that concern the takeover code. She refers to stock exchange compliance in relation to family private companies and their shareholdings in public companies and also to section 134 in part VI of the Companies Act 1985, which deals with the 3 per cent. disclosure rules in regard to shareholdings in public companies. She mentions that there had been a panel ruling in relation to Maxwell family companies and their concert-party relationships, and she refers to the put option by Goldman Sachs and the notification to the stock exchange of the implications arising from that put option. That was a substantive and well-produced memorandum.
A second memorandum states:The failure to disclose this holding could have consequences under section 47 of the Financial Services Act 508 1986, a copy of which I attach. This concerns, inter alia, the making of misleading statements to and the concealment of any material facts from the investment community.The memorandum goes on to state:Trevor Cook has I believe advised you separately on the IMR0 aspects of this holding … The other matter of this which you must be satisfied about is that the trustees of BIM"—Bishopsgate Investment Management—have properly carried out their duties, inter alia, to act in the best interests of the various pensions funds in making these investment decisions.Deborah Maxwell was querying whether investment decisions were being made properly by the trustees of BIM, or whether investment decisions were being made by Maxwell in his personal or family interest.
The third memorandum states:Following my conversation with Robert Maxwell on Saturday, it has as you know been agreed that, with effect from today, I am relieved of any compliance responsibilities in relation to BIM and MCC generally.I am attaching two files relating respectively to the private holdings in MCC (the family and the Maxwell Foundation)in Liechtenstein, of course—and BIM's holding in MCC. Each file has a summary on top to show the present status. I will tomorrow let you have such other files as I keep relating to other companies in which BIM owns shares.I recommend that you give the BIM file to Trevor Cook who is already up to date with the position. I consider that the MCC private side holdings file should go to Robert Bunn who knows all the background information and has up to date details.Those are three very good memoranda. They are clear and to the point. As I have just shown, in the third memo, Deborah Maxwell gave up her duties. She resigned. Hon. Members may be sad to know that, according to another memorandum, when she resigned she moved down the corridor and was given a salary increase of some £75,000 a year. She was also paid £50,000 in cash for leaving her job as compliance officer. She used £40,000 cash to repay her mortgage with the building society.
Hon. Members will no doubt be concerned that this person, who on 19 November 1990—a year before Mr. Maxwell jumped overboard—had substantial knowledge about the fact that Mr. Maxwell, in a host of areas, was potentially breaking the law or breaking City codes and regulations, had received a substantial sum and ceased her duties when whistleblowing could have occurred. It is a great tragedy for the pensioners, who, in the end, have lost many hundreds of millions of pounds, that £50,000 managed to secure her silence in a way that could have been critical in the circumstances.
We should not blame Deborah Maxwell alone. There were many other potential whistleblowers who could have prevented the enormous cost that the Government have incurred in helping the Maxwell pensioners. A number of directors of MCC knew of the problems. Sadly, they did not know of much else. I have seen the board minutes of that corporation. It is difficult to envisage what the board thought was the business of MCC. I understood that it was publishing, but the board minutes show no reference to publishing. All one can see is a number of transactions with banks as Mr. Maxwell was rapidly renegotiating his loans.
As I have said, we know that Deborah Maxwell knew. We also know that Goldman Sachs had immense knowledge of the Maxwell empire. It knew that he was a desperate man from the way in which he was structuring 509 his deals. It knew that he was short of cash and was involved in strange deals. It knew that there was a severe risk of a false market developing for MCC shares. Indeed, many people believe that there was a false market. We also know that Lord Donoughue knew of irregularities involving stock lending.
There were many more who knew about problems in the Maxwell empire because there were many resignations in Maxwell companies in the last two years. In many instances, the money involved, as with Deborah Maxwell, was only £50,000. In other instances, people received £100,000. In the Maxwell empire, £100,000 here or £100,000 there was nothing if it secured silence. It was £250,000 that secured the silence of Lord Donoughue.
Mr. Deputy Speaker. (Mr. Geoffrey Lofthouse)
Order. The hon. Gentleman is probably aware that he must not criticise Members of the other place.
§ Mr. Shaw
It has been difficult. I have tried merely to state fact and avoid criticism. A payment of £250,000 was made and, in the view of many, it did secure silence.
Occasionally, the sums involved were greater than £250,000. Jean-Pierre Anselmimi, as far as one can make out from documentation, knew virtually everything that went on in the Maxwell empire up to his resignation. It took £300,000 to buy his silence.
My final point concerns restitution. Who will pay back the pensioners' money? Enough information about wrongdoing is now emerging. I do not think that we need to see a trial next year in order to establish whether serious wrongdoing has occurred. Common sense shows that there has been some wrongdoing by some parties who must, in many instances, remain nameless for the purposes of this debate and for legal reasons.
The Government have committed no wrong. As I said earlier, they have bent over backwards to try to assist in different ways. The reality is that private individuals and the private sector have failed the Maxwell pensioners. There is no justification for public expenditure being taken away from important Government programmes in order to continue bailing out those involved in this affair and so that some institutions and private individuals can be let off the hook. The City firms that failed in their duties in their enthusiasm to do business with Maxwell, and the private individuals who were directors of his companies and took large sums of money on resignation simply because they knew too much, must make their contributions to restitution for the pensioners.
I believe that a list should be prepared showing all those involved. Contributions should be invited and every lawful method should be used to ensure that contributions are made. It may be that the largest contribution should be £100 million. Many hon. Members know what sort of financial institution should be contributing at that level. Smaller contributions should also be made, right down to £50,000 or so from some private individuals who have benefited enormously from the Maxwell pension problems.
I hope that the Government will do everything that they can to continue to help the pensioners. I hope that they will take a particular interest in the plight of the MCC works pensioners and the British Island Helicopters pensioners, who have particular problems, even worse than those of 510 many others. I hope that we are not far away from a resolution—perhaps on the second anniversary, or just before it, of Mr. Maxwell going overboard—to this awful and appalling problem that has upset so many people in their pension years.
§ 6.9 pm
§ Mr. Malcolm Bruce (Gordon)
I apologise to the House, and especially to the hon. Member for Birkenhead (Mr. Field), for being a little late. I was hosting a reception for Deaf Accord, which overran slightly. I did not hear everything that the hon. Gentleman had to say but I heard some. As other hon. Members have done, I thank him for the work that he has done since the sad story broke and I also thank the Select Committee on Social Security for the progress that it has made.
May I reverse the sycophancy and say that, although it is good to witness the hon. Gentleman's good nature in his thanking the Government for their response, the House must nevertheless be grateful to him for his work and for ensuring that the arguments were presented in a way that would secure that response. I shall not break the spirit of all-party accord, but I believe that the Government have a little more responsibility for certain aspects of the matter than has been acknowledged.
I pick up where the hon. Member for Dover (Mr. Shaw) left off. He spoke of those who should contribute to reinstating the Maxwell pension fund. It is deeply disappointing that the City of London appears to have lost sight of just how much damage has been done to its interests, and that it has shown so little concern about what it could and should do to repair that damage.
In the last Parliament, I was a member of the Select Committee on Trade and Industry, which compiled a report on financial services and the single market. We travelled to the main European financial centres such as Paris, Madrid, Milan and Frankfurt. There was no doubt that the credibility of British financial institutions had been deeply undermined by the Maxwell experience. That was especially so in Germany, where we have had considerable difficulty in getting our way of managing pension funds accepted. If the Germans had their way, our system would not be admitted in the European Community.
I acknowledge that considerable benefits have accrued from the way in which the reputable life and pension institutions in the City of London make a pound work much harder than almost any other comparable institutions in the world. We do not want to lose that, so I wish to make it clear that my remarks are not designed to undermine those institutions, although I suppose that one could argue—and the Germans surely would argue —that, if our pension administration followed their law, the Maxwell case could not have arisen.
We must complete the reform of our pension fund law to ensure that such an occurrence is almost impossible in the future. If we can achieve that, we might eventually be able to ensure that the pensioners who have been defrauded will receive full compensation, including contributions from the City. I accept that the Government should not jump straight in and pay for the consequences of fraud, but on behalf of the pensioners I am obliged to say that, although the bit-by-bit access to funds is better than nothing and although it ensures that the day-to-day bills can be paid, it does not make for a long, happy and 511 planned retirement. It seriously undermines the plans that many people had for their retirement, and we can all have a great deal of sympathy for people in that situation.
§ Mr. Page
I understand the hon. Gentleman's concern about the mental processes of pensioners who are wondering where the next penny will come from, but does he accept that it is incumbent on the unit to ensure that the money was supplied only to the various pension funds when it was needed—in other words, to continue to apply pressure on to reach a decision, because some were not over-hasty in, for example, resolving the common investment fund allocations?
§ Mr. Mark Wolfson (Sevenoaks)
Does the hon. Gentleman agree that it is important that one of the messages that goes out to the pensioners from this debate is one of reassurance that the House is ultimately determined to ensure that restitution in full is made but that we are also adamant that payment, as far as possible in full, must be made by those who made mistakes or were responsible for wrongdoing?
§ Mr. Bruce
I entirely agree. Having had numerous meetings with Ministers, I understand their difficulty in saying that in such terms although I think that many would like to. All we can ask is that they say nothing that undermines the sentiment that the hon. Gentleman has expressed.
The hon. Member for Morley and Leeds, South (Mr. Gunnell) referred to members of pension schemes with annual reviews but no guaranteed increase. I have been contacted on their behalf, and I understand that more than 1,000 people are members of two or three such schemes. Following on from what I said earlier, it is understood that getting a payment is better than not getting a payment, but their concern is that, had the money not been stolen, they could reasonably have been assured that they would have received at least a cost of living rise every year for the foreseeable future.
For those who retired recently and perhaps took early retirement, the thought that their pension is fixed for the next 20 or 30 years, if they live that long, or even for 15 or 20 years, is a further worry. I therefore hope that full restitution might include returning to those people the money that they might reasonably have expected to get from the fund if it had not been stolen. I have been asked to make that suggestion to the House.
I echo the points made about deferred pensioners. There appear to be different views. The claim that the £100 million to which the Secretary of State referred is effectively an interest free loan cannot be squared, but the issue was raised in an intervention. I am sure that the Minister has taken note, and I merely want to reinforce the point.
My hon. Friend the Member for Bath (Mr. Foster) has members of three different former Maxwell schemes in his constituency and has asked to be associated with my remarks. He has been active on their behalf and has made representations to try to ensure that they get full refund of that to which they are entitled.
512 My particular point of constituency interest has already been mentioned by the hon. Member for Dover. I do not mean to criticise him in his absence, but the correct name of the firm to which he referred is British International Helicopters, not British Island Helicopters. The firm has its headquarters in my constituency. I have been very much involved with the company—more involved than I might have wished—since it was sold by British Airways.
When selling the company, British Airways' management behaved dishonestly and despicably towards its work force. The management, especially the then chairman and the current chief executive and chairman—I do not need to name them because everyone knows who they are—treated members of all parties with absolute contempt.
They convened a meeting shortly after I was elected. They invited me, the then hon. Member for Banff and Buchan, Sir Albert McQuarrie who was a Conservative, and the present hon. Member for Aberdeen, North (Mr. Hughes). In front of an audience of several hundred employees, they asked us to campaign for the Nott assurances to be implemented and for British Airways to be privatised as a single entity, specifically on behalf of the work force of British International Helicopters.
Before the ink on the privatisation agreement was dry, we discovered that the management were in secret negotiations to sell the company, initially to a Mr. Meade —a person at least as disreputable as, if not more so than, the person to whom it ultimately was sold. I managed to blow the whistle on that deal when I heard about it, because I happened to be due to ask the Prime Minister a parliamentary question that day, and the negotiations were broken off 24 hours after the matter was raised during Prime Minister's questions. According to information brought to my attention more recently, Ministers had intervened to say that that sale should not go through.
That is a pertinent point. Hon. Members with a particular interest in British International Helicopters have had numerous meetings with Ministers, and we believe not only that the employees have been appallingly treated, but that the Government have a responsibility rather different from any responsibility that they may have for the other companies.
Basically, the Government gave their approval to the sale to Robert Maxwell, whom they had previously designated as a person unfit to run a public company. I am sure that the Minister is already aware of the fact, but I should like to make it clear to him that the hon. Members apart from myself who have a constituency interest in the company include the hon. Members for St. Ives (Mr. Harris), for Waveney (Mr. Porter), and for Kincardine and Deeside (Mr. Kynoch), my hon. Friend the Member for Orkney and Shetland (Mr. Wallace), the hon. Members for Aberdeen, North (Mr. Hughes) and for Angus, East (Mr. Welsh) and the Secretary of State for Transport. So it certainly is an all-party group.
I do not expect the Minister to acknowledge the belief that the Government have a moral responsibility arising out of the sale—indeed, some of his colleagues have refused to accept that. Nevertheless, everyone in the all-party group believes that that moral responsibility exists. That is not simply a personal view of mine. The hon. Member for St. Ives, in particular, has vigorously expressed the same view.
The hon. Member for Dover has to some extent brought us up to date on the way in which the Mirror Group has treated BI H pensioners. Those pensioners were 513 induced by an agreement between Maxwell and British Airways to transfer from the British Airways pension fund to the Mirror Group pension fund. They then contributed to the Mirror Group fund, and the day that Robert Maxwell fell overboard the company went into administration because of the way it had been managed. I should like to put on record the fact that the company has been bought out by its management and staff and is now trading successfully. Nevertheless, not only those people's pensions but their entire livelihoods were put at risk. Indeed, a number of them lost their jobs.
I find it breathtaking that the directors and management of the Mirror Group can simply expel a group of people from the pension fund with impunity. I read with some interest the exchanges between the hon. Member for Dover and the chairman of the trustees, Mr. Colin Cornwall, and the brittleness of the atmosphere comes through even on the printed page. I have met Mr. Cornwall, and I appreciate his compromised position, but I am concerned by the fact that he felt unable to speak out in a more forthright way as a trustee of the original fund.
In response to the question asked by the hon. Member for Dover in the Select Committee, Mr. Cornwall said that the decision effectively to freeze the old scheme and to set up a new scheme to which the employees were not partywas a decision of MGN. The trustees really had no status in the matter of who should or who should not be eligible for the Past Service Scheme … we simply are not in a position to bandy words with MGN, which has the sole control over who is and who is not admitted in their Past Service Scheme".That may be the literal and legal truth, but in terms of moral justice it is an outrageous position for the trustees to have taken. I certainly hope that it may yet be possible to resolve the matter without recourse to the courts, but legal action is still not ruled out.
At a meeting between the all-party group and the present Parliamentary Under-Secretary of State for Employment, the hon. Member for Maidstone (Miss Widdecombe), who was then a Minister responsible for social security, it was suggested that we might try to secure arbitration. Sir John Cuckney was approached, but he felt unable to arbitrate.
I have been told that representatives of the BIH pensioners have now briefed officials of the Maxwell pension unit on their legal claims, and we are now waiting to see whether that will secure some kind of mediation. The legal claims being made by BIH staff against the Mirror Group and its professional advisers have been shown to me and, although I am not a qualified lawyer, they seem to me to have a strong legal case. They certainly believe that they have.
I repeat that the moral responsibility seems to me incontrovertible, and I should regard it as most regrettable if the case had to go to court. I hope that we may be able to secure some justice, and anything that the Minister can do behind the scenes to bring that about would be much appreciated by all the parties involved in and concerned about BIH. I repeat my belief that the Government have more responsibility here than they have for some of the other schemes.
Arthur Andersen, which acted as the administrator for BIH, has accepted liability under section 58(b), covering contracting back into SERPS, and the negotiation concerns only the size of that liability. The firm has 514 approached the Inland Revenue because the Revenue is a preferred creditor in the liquidation of BIH, ahead of the trustees, and there is an £11 million corporation tax bill. The firm has asked the Revenue to allow payment, once the figure is decided, to be tax deductible.
The current position is that the Revenue has said:tax credits, having been given once, cannot be repeated".The sources in BIH to whom I have been talking say that they understand that argument, and that in normal circumstances they would accept it, but that if the Government could re-assess the matter, that would be of enormous assistance in enabling the transition to take place. I know that such a procedure would be exceptional, but I argue that the Government's involvement is exceptional, and it would be a gesture that might help to move the matter forward.
Each debate that we have had in the House and in the Committees has enabled us to secure progress. I am grateful for the cross-party nature of the support and for the constructive attitude of Ministers. Even if the questions that I have asked cannot be answered in a forthright manner at the Dispatch Box today, I hope that they will be taken fully on board, and that ultimately we shall be able to ensure that every pensioner who has been affected will have his or her rights fully restored.
§ Mr. David Willetts (Havant)
I begin by congratulating the Chairman of the Select Committee on Social Security, on which I serve, on the way in which he has conducted the Committee's deliberations on this subject. Many members of the Select Committee, of all party loyalties, are surprised that the hon. Member for Birkenhead (Mr. Field) is not yet the leader of the Labour party. If he ever gets fed up with waiting for that distinguished post, the outstanding way in which he has conducted our investigations into the Maxwell affair over the past two years suggests that he would make an ideal candidate to run the Serious Fraud Office, which clearly needs improved management. The training and expertise that the hon. Gentleman has developed in investigating fraud make him the ideal man to take on that responsibility.
I am a layman in such debates. I have no accountancy or legal expertise, so some of the arguments and investigations of the tangled affairs of Mr. Maxwell have been beyond me. Three or four points, however, emerged strongly from the Committee hearings.
First, I was surprised at how easy it is in the City simply to transfer securities from one holder to another and from one physical location to another. Because so many securities are bearer certificates—there is no stamp on them saying who they belong to or what organisation claims their ownership—it seems to be possible to pick them up, carry them somewhere else and claim to own them, or to dispose of them. That surprised me.
Secondly, I was surprised by the way in which apparently elementary tricks, such as calling one firm BIM, Bishopsgate Investment Management, and another BIT, Bishopsgate Investment Trust, makes it possible to shuffle shares around with no one noticing what is being done, because BIT and BIM look so similar on a transaction document. Robert Maxwell did not need to develop extraordinary accountancy skills to carry out some of his frauds. Elementary techniques of that kind were used.
515 Thirdly, it appears that the regulatory organisations let Maxwell pensioners down. The Investment Management Regulatory Organisation has already accepted some responsibility. Many of us have been rather surprised at the narrow role that the Occupational Pensions Board has played in the affair. I hope that the Goode committee—an ingenious and suitable name—will examine the possibility of establishing a new regulatory authority to supervise pension funds. However, any new organisation that is established must displace an existing one. It would be a pity if there were a multiplicity of organisations.
§ Sir Donald Thompson (Calder Valley)
I have just joined the debate, having been about my duties in other parts of the House, and I shall intervene only briefly. Committee members will know that, by nature, people who have retired are getting older and worry more and more, once they have retired, about their pensions going wrong. Does my hon. Friend think it a good idea, not only that there should be an ombudsman, but that there should be a system whereby pensioners could appeal, for example, to special commissioners? They could then give evidence and at least get that worry off their chest and into the open.
§ Mr. Willetts
My hon. Friend's suggestion is an interesting one, which I hope that the Minister will consider and perhaps deal with in his speech.
My final observation about the investigation of the Maxwell affair is simply on the extraordinary cost of professional fees, which are clocking up at a very high rate. That is an additional argument to the many already advanced in our debate for a negotiated settlement, which does not involve years of elaborate wranglings in the courts. I understand that many of the organisations involved are ready for a negotiated settlement, but a problem has arisen because of insurance entitlements. Many insurance companies will pay out only if a final legal case has resolved liability. I hope that Sir John Cuckney —who has made such a distinguished contribution to solving those problems—is able to solve that one as well.
There is a danger of these debates—we have fallen into that trap a little today—ending with exchanges of mutual admiration in which different members of the Select Committee agree on how marvellously it has done. So I was thinking of something controversial and outrageous to say.
§ Mr. Willetts
I thank my hon. Friend for that. I was thinking of saying something uncharacteristically outrageous and controversial.
We have better prospects for a sensible pensions policy in this country than almost every other advanced western country.
§ Mr. Willetts
Yes. What an outrageous remark. I was afraid that it would stir up dispute.
I was very surprised by the remarks made by the hon. Member for Gordon (Mr. Bruce), who committed the classic Liberal Democratic assumption that it is all better in Germany; they have all got it sorted out on the continent. We heard eloquent praise of how German pension regulation would have made the Maxwell affair impossible here.
516 However, the extraordinarily high self-investment in the German system is shocking, with company pension funds investing in the companies for which the employees work. That is one reason why Germany does not have a healthy takeover market for its firms. The only way in which they can manage to run the risks of self-investment is by pension funds insuring against the risk that the company in which they invest does not go bankrupt.
Such insurance is only possible in a stable economic environment. It will be interesting to observe, as Germany goes into deep recession, whether the insurance premiums that German pensioners have to pay rise and whether that forces a change in the behaviour of German pension funds, by opening up German capital markets so that they more closely resemble those in Britain and America. We have a healthy system of properly funded private pension arrangements, which is much better than in most other advanced countries.
Secondly, the public sector has avoided making the bogus promises that have brought state social security arrangements into such disrepute in many other countries. We have not been trapped in the seductive politics, but dangerous economics, of the chain letter, which has bedevilled state pension arrangements in other countries. Ending the link between the basic pension and earnings and linking it solely with prices has been crucial.
Thirdly, in this country we do not face the dramatic demographic change that is in prospect for some other advanced western nations. Although there will be an increase in the number of old-age pensioners in the 21st century, I think that it is manageable. I do not think that it is, of itself, a reason for crisis measures.
The Government surely should base their approach to pensions policy on the fundamental principle that we in the Conservative party believe that it is best that claims on future resources should be registered in the form of private contracts wherever possible. I appreciate that one could not imagine that slogan on the blue baize of the Conservative party conference platform—it might need to be put rather more crisply—but it is a fundamental principle.
It is better if people's claims on the resources on which they are to live in retirement can be registered through the ownership of private assets—through their personal pensions, savings or occupational pensions. That is more reliable than relying on the state's promise that it will tax future generations to pay for pensions.
§ Mr. Frank Field
The hon. Gentleman promised that he would be controversial. At what part of his speech will that start?
§ Mr. Willetts
One of the other pleasures of serving under the hon. Member for Birkenhead on the Social Security Select Committee is that occasionally he comes up with ideas so radical and imaginative that we Conservative members find ourselves acting the role of the boring old greybeards. I know that we have in prospect an exciting pamphlet for him on pensions policy, which may be an example of that.
§ Mr. Willetts
I will not detain the House with a learned debate on the nature of the demographic change confronting the country. Suffice it to say that, in the 1960s and 1970s, we had an age-dependency ratio rather worse than the average for OECD countries. In the next century, we face the prospect of an age-dependency ratio rather better than that in other advanced OECD countries. That subject is obviously being discussed at the G7 summit this week, and quite rightly so. Anything that can be done to shift the burden of pension provision from the public to the private sector makes sense, but we do not face the sort of demographic crisis which confronts countries such as Japan.
I hope that, in his concluding remarks, the Minister will range also into the wider aspects of the debate on occupational pensions. We look forward with keen anticipation to his first speech from the Dispatch Box—the first of many, no doubt. As occupational pension provision is covered by the estimate, I hope that he will give a signal to the occupational pension industry, which is seeking clear guidance on what will happen to the pension age.
Almost all experts agree that the case for equalising the pension age at 65 is unassailable. That is widely accepted. I have not come across a single expert on social policy who, if he were given £3 billion by Father Christmas, would spend it on pensions for men aged 60 to 65. That is not a sensible priority. It is much more sensible to move towards a higher equal pension age of 65 for women. That is the trend in other advanced western countries and I hope that we shall participate in that trend.
I hope also that there will be progress on establishing an age-related bonus for people who opt out of the state earnings-related pension scheme. To achieve success in encouraging people to opt out of SERPS and to take out personal pensions, a sensible framework of incentives is required. That means that the incentives have to be age-related. I hope that we shall hear more on the encouragement of personal pensions.
I am concerned that the personal pension regime will experience the same difficulties as the Government's policy on share ownership. They had enormous success in spreading share ownership more widely, but insufficient success in making that share ownership deep. Similarly, the Government have had enormous success in increasing the take-up of personal pensions—5 million new personal pensions have been taken out. But those personal pensions need to be substantial. They need to be deep and valuable investments. That means encouraging employers wherever possible to contribute to personal pensions.
I have been told by people in the industry that, at the moment, group personal pensions, which would provide the right incentive for employers to contribute to personal pension arrangements, are virtually impossible to organise in Britain because of the absurd regulations under the Financial Services Act 1986. It would be marvellous if encouragement could be given to group personal pensions as a way of ensuring that personal pension provision was deep as well as wide.
I hope that the important connection between the occupational pension provision and the tax regime will be recognised in this debate. Having served for several years as the Chancellor's PPS, the Minister is in an ideal position —I can see him perking up—to have a broad view and to bring together the fundamental considerations of tax policy and those of pensions policy.
518 Is it right, for example, that tax rules oblige people when they retire to take the full income from their occupational pension immediately? There might be a lot of sense in allowing people to take a rather lower income initially and to continue to accumulate savings in their pension scheme so that if later they need nursing home provision or greater social services provision, they can take a higher pension. I hope that, in his keenly awaited debut, the Minister will be able to address some of those questions.
§ Mrs. Jane Kennedy (Liverpool, Broadgreen)
As my hon. Friend the Member for Birkenhead (Mr. Field) will confirm, I am too new a Member of the House to remember the beginning of the Select Committee's review of pensions. When I joined the Committee last October, many months of work had already been completed.
First, let me echo the welcome that has been given to the establishment of the pension law review committee, which I suspect has given rise to a sense of relief among those serving on the Select Committee. Had the Government not accepted the case for the establishment of that committee and had we been committed to doing the work ourselves, I for one would have felt many years older by now.
I have been comforted by the fact that members and non-members of the Select Committee alike have confessed to finding the subject complex. I enjoyed our interview with Sir Peter Webster two days ago. Sir Peter was able to tell us little—in fact, he came to tell us how little he could tell us, as it is in the nature of his job as mediator that he shares confidential information with the parties between whom he is mediating—but he did tell us that this was the most complicated affair that he had encountered.
I may not feel any less at sea, but it is a comfort to know that others also feel at sea in this very complicated affair. I commend Sir Peter's appointment as a mediator. I wish him success in his endeavours, and I feel that his role will be vital in persuading those who hold disputed assets to seek resolution of the disputes rather than allowing the matter to drag on in the courts.
The criminal aspects of the affair have greatly curtailed the work of the Select Committee and have caused us problems. I shall not refer to those aspects except to say that, as a member of the Select Committee, I am very concerned about costs. Thousands of hours are being spent by lawyers, receivers and administrators and their support staff on work that is clearly essential, and it is worth putting on record the real fear that the money being recovered on behalf of the various creditors—not just the pensioners—is being quickly eroded. As my hon. Friend the Member for Birkenhead explained, he estimates that the figure will reach £50 million. I think that that is a conservative estimate, although I hope that it will not greatly exceed that.
There are one or two people who regularly attend our open sessions, whose faces tell their own story—I refer to the representatives of the pensioners, who listen carefully to the comments of those whom we interview. I can see Mr. Ken Trench—the chairman of the Mirror Pensioners Action Group—in the Gallery, listening carefully to our debate.
519 We interviewed representatives of Price Waterhouse, Robson Rhodes, Buehler Phillips and Arthur Andersen —the four agencies referred to by my hon. Friend the Member for Birkenhead. We know the fees that are being charged by those four reputable and highly thought-of companies—fees no doubt commensurate with their standing—and I get the impression that the pensioners are not yet convinced that the labourers are worthy of their hire.
The people representing those four agencies must be able to demonstrate not just to the Select Committee but to the pensioners that the work that they are doing justifies the costs that they are bringing in this case. They have some way to go in doing that, although I particularly commend the representatives of Arthur Andersen, who have impressed me by the openness of their approach and their readiness to share with us the details of their work.
As a member of the Select Committee, my second concern is about the recovery process being undertaken in relation to Maxwell Communications Corporation. It became clear that the Law Debenture Corporation, as trustees for the pensioner group, is not being given observer status on the creditors' committee.
I accept that there is not an organised conspiracy among the other creditors to keep the pensioners' representatives off the committee; however, the thought that, in trading the millions and millions of pounds worth of debt related to this whole sorry affair, major banks—including Barclays and banks in America—are swapping places on the creditors' committee at a time when representatives of the pensioners cannot participate in it, leaves me with a bad taste in my mouth. I hope that that can be rectified in the near future.
I should like to touch on the situation in the north-west, where almost every constituency has pensioners or deferred pensioners who are affected, either directly through the Mirror Group or through the hundreds of other companies that Maxwell bought up.
As a member of the Select Committee on Social Security, I put on record my thanks to those hon. Members of all parties in the north-west who have worked to represent pensioners, although few pensioners in my constituency were affected. I am grateful to other hon. Members for the knowledge and expertise that they have brought to this matter.
I do not wish to score a political point, but Robert Maxwell did not lay the ground rules as to how pension funds could be raided. I hope that the Government will take that on board in their dealings with the pension funds of the state enterprises that they currently own and are considering privatising.
§ Mr. Mark Wolfson (Sevenoaks)
I would describe myself as one of the lay members of the original Maxwell pensioners group of Members of Parliament. More than 100 of us were active immediately the situation arose. Since then, much work has been done, particularly by the hon. Member for Birkenhead (Mr. Field) and by my hon. Friends the Member for Hertfordshire, South-West (Mr. Page) and for Dover (Mr. Shaw). On behalf of my constituents, I should like to thank them for their continuing work and assiduous approach.
520 I have a number of pensioners from a variety of Maxwell companies who were subjected to his blandishments, not only through written submissions to them when he took over their companies, but by his video film, which encouraged them to think that he, of all people, would look after them from the cradle to the grave. They faced an appalling situation and there has been real progress since those early days by the Government and the agencies that they established to deal with the problem. I congratulate my right hon. and hon. Friends on that action.
Many points have been well covered in the debate and I shall not go over them again except to emphasise what has already been said: that the standing of the City took a terrible beating by the Maxwell example and it behoves the City to continue to play a full part in righting that wrong. The standing of particular companies in the City also took a beating, as did that of individuals. I support the strictures of my hon. Friend the Member for Dover concerning individuals who should not be running companies where they clearly carried out wrongdoing over the Maxwell pensions.
Equally, in addressing the broader issue of pensions, it is important that, ultimately, the independence of more trustees on pension funds from the companies whose pensions they are running is established. It is difficult for staff representatives, for example, or company directors, who may also be pension trustees, to stand up against even more powerful people in a company who may wish to take action that is not correct in pension terms. I ask for a better balance in trustees.
I used to work for Hambro's bank. All of us, as prospective pensioners, were grateful for the good offices of the senior people there who were trustees of the fund, because they handled it extremely well. We want to keep them doing that, but we also need to take action to deal with those who may not handle pensions properly. That needs to be covered for the future.
As I said in an intervention, hon. Members cannot rest easy until all those pensioners receive restitution in full for what they are owed. By that, I mean not only current pensions, but pensions in the future. The roll-up of interest would have enabled those pension funds to keep pace with increases in the cost of living, or other commitments that those pensions had in them when people joined them in terms of improvements over the years. These are big targets to achieve, but I believe that, on the progress achieved so far, their achievement is not out of our reach.
I congratulate the Government on their action so far. I welcome my hon. Friend the Minister who is to make his first contribution on this important issue. I hope that he will prove to us that the Maxwell pensioners' future will be safe in his hands and those of his right hon. and hon. Friends.
§ Mr. Paul Flynn (Newport, West)
I shall resist the temptation to be sycophantic towards the Government. That will not be difficult because, with the exception of the hon. Member for Havant (Mr. Willetts), Conservative Members have spoken with an air of complacency and self-satisfaction which is misplaced.
The hon. Member for Havant valuably suggested that the demographic time bomb will not be as great as expected. At most, it will occur for a 10-year period, and after that there will be no problem. But that demographic 521 time bomb was the reason that the Government degraded SERPS. The Maxwell pensioners, the deferred Maxwell pensioners and everyone else are now in considerable peril. The great problem is that the Select Committee's report might well dissuade people from some of the advantages of occupational pensions and put them into the difficult waters of personal pension schemes.
Conservative Members have boasted about the 5 million in those schemes. When 4 million were in the schemes a distinguished actuary, Bryn Davies, said that at least 1 million had been persuaded against their financial interests and they should opt back into SERPS. Neither the Government nor anyone else will advise them on that.
The situation is far worse today. I gave examples of those who have not kept up their contributions. We know about only a tiny group in one quarter of last year who had been in schemes for fewer than two years. Of them, 44,000 have allowed their schemes to lapse. They have no personal pension scheme, no SERPS and no occupational scheme. They can look forward to the future with fear.
Choice is a fine thing, but it means nothing unless one can make an informed choice. It is virtually impossible to make the choices that are necessary now. On joining a personal pension scheme, the first matter to consider is age. Generally, a lower age should be a great advantage. Last week, the distinguished firm of actuaries Bacon and Woodrow produced the valuable expert calculation that the pivotal age was 47 for men and 39 for women. Even more valuably, it went through what advice was on offer from the insurance companies. That varied from 40 to 52 for men and 30 and 47 for women. That means that on that crucial decision, on the so-called best advice, many women will be going into pension schemes nine years too soon and others eight years too long.
But age is not the only factor when deciding whether to join the scheme. Other decisions and calculations have to be made that are impossible for a lay person. On the question of terminating contributions to a personal pension scheme—a serious matter because the schemes have been in existence for only a short time, a maximum of six years—Bacon and Woodrow said that many firms are charging two years' premiums for people to pull out. Those who have been bribed to come out of the scheme by all kinds of incentives, by attacking SERPS and denigrating its value, find themselves in that dilemma.
A fortnight ago, a financial adviser from Independent Financial Services in Paignton, Devon, gave a typical example of that. It is a remarkable story. He wrote:We are acting for a client who effected an Albany Life retirement annuity seven years ago for a monthly contribution of £40. So far the value built up within the contract amounts to just over £4,100.The client wishes to transfer, because of changes in his circumstances, to another fund provider. The transfer value offered him is £2,700. A huge £1,400 is being deducted by the existing provider.
The firm concerned asks how the company could justify the equivalent of three years' contributions from a retirement annuity that has been in force for just seven years. It asks:Do the financial advisers selling Albany's products realise how high the charges are?The implications of that question are serious, because companies such as Albany Life are giving advice.
522 On Monday, while I was driving to the House of Commons, I heard a splendind programme, "Money Box", on which a man rang in to describe his situation. I was so surprised to hear it that I checked with the producers of the programme to see whether the figures given where right.
The firm that the person described was a reputable body, the Scottish Amicable Life Assurance Society, which was behaving in a rather less than amicable way with him. He is in business on his own; he took out a flexible retirement plan and paid £3,000 in the first year. He had trouble in the second year with the recession and his contribution to the flexible plan was £1,500. He has just discovered that the society deducted commission of £1,700 from the total because he had disturbed the scheme. That is little short of criminal, but it is not unusual.
Virtually all the 5 million people who joined personal pension schemes have seen almost the whole value of their bribe, the initial contribution given to them, disappear in the first year as a result of commission charges taken by commission-hungry salesmen and by administration charges. The pensioners' funds are virtually worthless after that period. They will live to regret their decision to join the personal pension scheme.
They will not look back with satisfaction, although the hon. Member for Dover (Mr. Shaw) claimed that they would. By joing such personal pensions, they have been cheated out of SERPS, which was a sound scheme, which could have been amended and which would have got through the demographic changes in the next century.
We have a generation of people who should be looking forward to their retirement and to an income that is assured. Instead, there are 5 million people who are not looking forward to a pension scheme—they are not pension schemes—but who are contributing to saving schemes with no assured outcome. They cannot work out what changes there will be in the stock market by the time they retire. They could lose dramatically. We have a generation of people on personal pensions who can look forward to an uncertain future and a future of fear about their finances in their retirement.
§ 7.2 pm
§ Mrs. Llin Golding (Newcastle-under-Lyme)
I welcome the hon. Member for Richmond, Yorks (Mr. Hague) to his first debate as Under-Secretary of State for Social Security. I think that I have worked out the significance of my hon. Friend the Member for Birkenhead (Mr. Field) immediately transferring him back to the Treasury team; it was to remind him to bring money.
This evening, the Government should take the reputed advice of the Foreign Secretary and do something for once just because it is the right thing to do. They should give justice to the victims of the massive Maxwell fraud. The members of the Maxwell pension schemes, especially the majority who are not yet pensioners, need us to continue to give attention to their plight. They are concerned that the impression is being given that their problem has been solved. That is far from being true.
I congratulate the Select Committee and especially its Chairman, my hon. Friend the Member for Birkenhead, on their continuing effort to obtain justice for the members of the Maxwell pension scheme. The Maxwell Pensioners Action Committee is anxious that we and the public understand that enormous problems remain.
523 Those problems are the failure so far to recover the assets taken from the pension funds by Maxwell, which found their way into the banks and other financial institutions, the refusal of the insurance companies to settle the claims from the trustees, the difficulty of sorting out who is entitled to what from the common investment fund, uncertainty about section 58B settlements and the bulk transfer claims, such as that undermining the AGB scheme. One trustee pointed out that the returns so far have been small and has put the amount still outstanding at £440 million. He points out that pension funds that are being wound up need even greater assets than those that are continuing.
A considerable amount of the assets taken by Maxwell has been tracked down—to the value, I am told, of £188 million. However, it is one thing to discover where the money is and another thing to get it back. Except for NatWest, the banks and other financial institutions holding assets given as security against loans are reluctant to part with them.
The trading debt has increased the difficulties. Whatever the rights and wrongs of the situation, one thing is certain. On present form, the matter will take a long time to settle. No writs of claim have yet been issued by the trustees. The insurance companies appear to be adamant that they will not pay up the £75 million claimed by the schemes because of material non-disclosure. As the action group put it, that amounts to saying:fraud was going on at the time of the renewal. You did not tell the institutions about that fraud. Therefore the policy is void and you cannot claim for the fraud.As I have said, there is even difficulty about the allocation of moneys in the common investment fund, although it is thought that that will be sorted out fairly shortly. I have been told that there are difficulties with the implementation of section 58B of the Social Security Act 1990 which makes any deficiency in pension funds that have to be wound up a debt on the employer company. Will the Minister clarify what payments have been made when he winds up the debate?
Given all the problems that threaten the viability of the Maxwell pension schemes, is it any wonder that those who depend on them, especially the deferred pensioners, are so worried? Their worries were not dispelled when they read that the trustees of the various Maxwell pension funds had told the Select Committee that they were guardedly optimistic that, within three to five years, recoveries would be sufficient to cover in full the pensions of all current pensioners and those of most deferred pensioners.
Those pensioners ask the obvious question. What happens until the recoveries are made? What about the annual increases? Which deferred pensioners will not be covered? What happens if, as at least one trustee believes, the hopes expressed by the other trustees are too optimistic? Whether one takes an optimistic or pessimistic view, it is clear that there is an obvious need for the Government to give substantial further aid.
Some help has been given by the Government which has been acknowledged by many hon. Members who have spoken tonight. A £2.5 million grant was initially given to tide over the funds, but that has now all gone. Help is now being given from a trust fund which was created under the chairmanship of Sir John Cuckney, to whom tribute has been paid by many hon. Members tonight.
524 The fund has raised just over £6 million from outside voluntary donations. When it was established, the chairman of the National Association of Pension Funds, Brian Macmahon, said:We hope that the trust fund will grow to make up most, if not all, of the eventual shortfall in the Maxwell funds.I am afraid that the City has not been very generous.
The Secretary of State announced the deferral of state scheme premiums to the national insurance fund in respect of the payment of guaranteed minimum pensions for as long as he is satisfied thatit would not be in the best interests of scheme members to enforce payment.A press release claimed that that was equivalent to an interest-free loan of £100 million. However, according to outside experts, the value of that depends on whether it means postponement until after the liabilities to deferred members as well as those to existing pensioners have been met.
If it means only deferment until the liabilities of existing pensioners have been met, it will give nothing new—certainly not £100 million. To be helpful and for it to be something more than a public relations exercise, the Minister must defer payment until the needs of the deferred pensioners have been met. As the Minister has been asked by his hon. Friend the Member for Rutland and Melton (Mr. Duncan), what is the situation? The Minister must clear this up today. If the Government's claim to have lent £100 million interest-free proves to be wrong, there is even more reason why we should question their refusal to do more to clear up the unholy mess.
The position of the Secretary of State has been clear from the start. He claims that no Government could accept a duty to make good losses resulting from fraud or theft of savings. Ministers have added the argument that in any case, if they were to underwrite those pensions, the banks and others who hold vast sums in security against loans would be under less pressure to make settlements. These arguments understandably are rejected totally by pension scheme members. They hold the Government to be as responsible for the loss of their savings as they were for those of the Barlow Clowes investors—who, incidentally, received £160 million.
The Government were responsible in two ways. They provided a useless system of controls and failed to implement an EC directive. On the first point, there can be no doubt that their dogmatic and doctrinaire encouragement of the self-regulation of the occupational pensions sector proved to be a disaster. Given the massive potential for fraud which Maxwell exploited, there is no justification for the self-regulation of the conduct of pension funds.
The Securities and Investments Board report showed that the Investment Management Regulatory Organisation's involvement with the Maxwell companies both before and after Maxwell's death was woefully inadequate. The SIB has not for legal reasons published the whole IMRO report. When it does so, pensioners believe that it will establish even further the responsibility of the Government.
The second reason for holding the Government responsible for the plight of Maxwell pensioners is their refusal to implement Community directive 80/987 of 20 October 1980, which requires, among other things, that EC member states ensure that necessary measures are taken to protect the pensions interests of ex-employees. I know that the Government will argue that they have 525 complied because there are provisions in the Insolvency Act 1986 and statutory instruments that provide for the protection of contributions to pension funds. But these do not give required statutory protection for pension benefits. In view of that neglect, the pensioners are determined to get justice from the EC if they do not get it from the Government.
Ministers will know that the European Court has made it clear that, if the Government have not implemented the directive, the employee is entitled to damages. They will also know of the several thousand petitions that were handed to the President of the European Commission in Strasbourg in January, and that Ivy Needham has now been awarded legal aid on appeal to have her case for damages against the Government prepared for presentation to the European Court. What nonsense it is that Ivy Needham, for a pension of £52 a month, should have to expose the incompetence and callousness of the Government before she can obtain justice.
The culpability of the Government is clear. They share with Maxwell responsibility for the disaster. Clearly, had they not been blinded by their phobia of giving protection to employees, that would not have happened. They ought now to be doing everything that they possibly can to remove the anxiety from the members of the Maxwell pension scheme and to enable them to have a secure retirement.
The Government must make it clear during the period of recovery of the missing money that they will make resources available to cover the pensions. Their argument that the financial institutions would be less likely to pay up does not hold water. Those banks, insurance companies and other institutions would be far more likely to pay up if they were faced by trustees who were actively supported by the Government. The need for the Government to accept responsibility goes to the heart of the matter.
I am told, however, that there are other smaller actions which the Government could take to give help to trustees. One is to reduce even further the difficulties of the trustees in obtaining information from the liquidators and others to tackle the problem of VAT payments for schemes where the company has gone into liquidation.
I know that the reference to the Occupational Pensions Advisory Service on the Order Paper is a peg on which to hang a wider debate. However, I would not like to miss an opportunity to thank that organisation for all the work that it is doing and particularly to those volunteers who do so much good work and give so much of their time and effort.
A reference to occupational pensions in general is also included on the Order Paper. I will not, however, repeat all that I have said previously about the need to provide security for and meet the legitimate aspirations of members of pension funds. I await the report of the Goode committee with great hopes that it will end the scandal of employers who milk pension funds for their own purposes without care for their employees and of the Government who let them do it. In the meantime, I appeal to the Government to give help to those who suffered and still suffer from the Maxwell disaster.
§ The Parliamentary Under-Secretary of State for Social Security (Mr. William Hague)
This has been a wide-ranging and interesting debate with some fascinating features. Foremost among them was the fear of the hon. Member for Birkenhead (Mr. Field), who opened the debate, that it might degenerate into excessive sycophancy. A non-partisan atmosphere prevailed through most of the debate, despite the attempts of my hon. Friend the Member for Havant (Mr. Willetts) to inject some acrimony into it. In the end it took the Opposition spokesman, the hon. Member for Newcastle-under-Lyme (Mrs. Golding), whom I thank for her welcome to the Front Bench, to bring some real acrimony into the debate.
Hon. Members on both sides of the House may think on reflection that to allege that the Government share with Robert Maxwell the responsibility for the problems of Maxwell pensioners is an allegation too far. It is certainly one that I wish to reject at the outset. The debate has also been interesting because some hon. Members have spoken up strongly on behalf of their constituents. I respect them for doing so.
Some called on the Government not to do certain things as well as to do certain things. One or two called on the Government to adopt a certain policy but not to say so —a requirement that presents particular challenges for me in making a response from the Front Bench. But I shall do my best in the time available to respond to some of the points that have been made.
The debate has highlighted some difficult issues and several aspects of occupational pension provision in which many right hon. and hon. Members believe that there is a case for changing the law. Not surprisingly, much comment has focused on the position of the Maxwell pension schemes, and I shall dwell on the Maxwell affair in some detail in a moment.
It is worth remembering that the debate also takes place against the background of greatly expanded pension provision in Britain in recent years. The growth of occupational pension schemes has been of huge importance in lifting the living standards of the average pensioner well above the levels in the 1960s or 1970s.
That is why the questions raised in the debate tonight are so important and why issues surrounding the future of occupational pension schemes—whether it be the equalisation of benefits for men and women, freedom of choice in pension provision, or the framework of regulation and law within which pension schemes operate —deserve detailed and careful consideration.
The Government have clear objectives for the future of pension provision. They include encouraging individual responsibility and enabling the working population to make adequate financial provision for retirement; encouraging freedom of choice between alternative forms of pension provision; ensuring equality between men and women following the decision of the European Court of Justice in the Barber case; and improving the security of pension rights in response to the widespread and wholly understandable public concern in the wake of the Maxwell affair.
Before I deal with what should be done in future, I remind the House that in recent years we have taken some significant steps in the direction of achieving the objectives that I have outlined. We have given individuals the right to opt out of their employer's occupational pension scheme, 527 to make voluntary contributions to improve their pension provision and to contract out of SERPS into an appropriate personal pension.
The hon. Member for Newport, West (Mr. Flynn), who sadly is not with us for the moment, criticised the history of personal pensions. I draw the hon. Gentleman's attention and that of the House to a leaflet, entitled "Thinking about a Personal Pension", which was launched by my right hon. Friend the Secretary of State a couple of weeks ago. It was widely unpublicised despite the best efforts of the Department of Social Security. However, for all those contemplating a personal pension, it is well worth reading.
Millions of people have used the opportunity presented by personal pensions to enhance their pension provision in a way that they could not have done before. In addition, we have tried to ensure that individuals can make a more informed choice about their pension provision.
We may have further to go, but we have introduced regulations which place a statutory obligation on schemes to provide greater disclosure of information and there are more controls to provide for secure pension provision. Since 1990, employers have been unable to take taxable refunds from scheme surpluses if they have not first guaranteed pension increases in line with prices up to a maximum of 5 per cent. a year.
Regulations now restrict to 5 per cent. the amount that pension schemes can invest in associated or connected companies and individuals can now obtain more help if they are dissatisfied with their pension provider. I join the hon. Member for Newcastle-under-Lyme in paying tribute to the work of the occupational pensions advisory service, which represents extremely good value for money for the grant in aid that it receives from the Government. It has now been given secure financial backing and the first pensions ombudsman was appointed in April 1991 to provide an independent avenue of redress for people who have suffered injustice at the hands of their pension schemes.
The pensions registry has been set up to help scheme members trace past pension rights. The schemes must pay a levy which pays for the register and for consumer protection measures like the ombudsman. Considerable progress has been made on these issues, but I recognise that the principal concern expressed by all hon. Members has been the Maxwell affair and its aftermath.
The Government welcome the Social Security Select Committee's continuing interest in the recovery of the Maxwell pension schemes' assets. We share its concerns over the plight of the pensioners and the need for the recovery process to move rapidly towards a conclusion. I understand the anxiety that Maxwell pensioners suffer thinking about the uncertainty of payments in future. The hon. Member for Morley and Leeds, South (Mr. Gunnell) referred to that anxiety. It is a considerable tribute to the hon. Gentleman's constituent Ivy Needham that, although I have not yet met her, her name is very familiar to me after only a few weeks in office.
The hon. Member for Morley and Leeds, South asked whether I would be prepared to meet Ivy Needham and other Maxwell pensioners in Leeds. In a way, that will save me writing a letter, as I was about to write to Ivy Needham to tell her that I would be very happy to meet her arid her colleagues in Leeds. They are allowed to shout at me as much as they like, because I understand how strongly they feel about these matters.
528 The Government's response to the legacy of chaos left behind by Robert Maxwell has helped to facilitate considerable progress. We do not want—and have not tried—to give the impression that the problem has been solved. The hon. Member for Newcastle-under-Lyme referred to that impression. The problem has not been solved. However, the initiatives that we have taken have ensured that pensions continue to be paid while work continues to recover the missing pension scheme assets.
Last summer, we made available £2.5 million in funding, which the hon. Member for Birkenhead rightly insisted on calling taxpayers' money. I only wish that he could sometimes make those on the Opposition Front Bench as conscious as he is that Government money is taxpayers' money. We provided that emergency funding last year to help pension schemes pay pensions.
That role has now been taken on by the Maxwell pensioners trust which we set up under the chairmanship of Sir John Cuckney. The trust has raised more than £6.3 million—enough money to pay pensions for another three years. We have therefore created a substantial breathing space for the pension schemes to make further asset recoveries and to pursue such other claims for damages or against employers as the trustees and liquidators think fit.
Last October, my right hon. Friend the Secretary of State announced a further important measure to help the Maxwell pension schemes when he agreed to use his discretion to defer the collection of state scheme premiums. It may be helpful if I say a few words about that, because several hon. Members, including the hon. Member for Morley and Leeds, South and my hon. Friend the Member for Aylesbury (Mr. Lidington), have raised that point.
Currently, three of the Maxwell pension schemes, representing two thirds of all pension scheme members affected by Maxwell, have contracted back into the state earnings-related pension scheme. Currently some £2.7 million of annual pension entitlements of those scheme members are being met through SERPS. Those sums will increase as more pensioners reach pension age.
My right hon. Friend the Secretary of State has exercised his discretion to postpone collection of the state scheme premiums that would normally be payable and which, for those three schemes, amount to some £100 million. That is important additional assistance to rebuilding the Maxwell schemes, particularly in the shorter term. As long as my right hon. Friend is satisfied that it would not be in the interests of scheme members to enforce payment, he can choose not to do so, but it would be quite wrong, and a considerable mistake on the Government's part, to give general guarantees or blanket assurances.
I would not want scheme trustees to think that they can relax their efforts to achieve anything less than the maximum possible restoration of their assets. We will continue to discuss the exercise of that discretion with scheme trustees on a scheme-by-scheme basis. However, we have no intention of enforcing the payment of state scheme premiums automatically when a scheme has covered its liabilities for pensions in payment.
As a result of the Government's initiative, the pension scheme trustees and the liquidators have not been left to untangle the web of confusion woven by Robert Maxwell alone. They have at their disposal the considerable services of Sir John Cuckney. Many hon. Members have referred to his outstanding work, and they were right to do so. He and the Maxwell pensions unit continue to encourage 529 informal methods of dispute resolution, such as mediation, rather than lengthy and costly legal action in the courts. The Maxwell pensions unit continues to be available to assist the pension scheme trustees and the liquidators and administrators in any way it can.
Hon. Members have complimented civil servants on their good work in managing the Maxwell pensions unit. I can reassure those who raised the matter that the return to his native Department—as one hon. Member put it—of the civil servant heading the unit does not imply that the unit is ceasing its work. I expect its work to continue for some time. It is in very capable hands. The civil servant in question has become one of the trustees of the Maxwell pensioners trust and he will continue his work in that way.
Over the 18 months that have elapsed since Robert Maxwell died, I am well aware that the long-term position of some of the pension scheme members remains uncertain. However, we have made visible progress. The Headington pension plan, for example, which was unable to make any pension payments, has been able to resume paying 75 per cent. of its pensions. The remaining 25 per cent. continues to be provided by the Maxwell pensioners trust. For the longer term, the pension scheme trustees recently told the Select Committee that they were now guardedly optimistic about meeting their pension liabilities in full.
The Select Committee expressed concern in its report on the length of time that was being taken to release funds to the pension schemes from the common investment fund. Sir John and the MPU have given active encouragement to the trustees and liquidators who have recently been able to agree each scheme's minimum share of the £173 million currently held in the common investment fund. The minimum shares in total add up to 80 per cent. of the fund leaving only 20 per cent. in question.
That has enabled an initial advance of some 16 million to be made to the pension schemes and it has provided the first step in the solution to this problem. I hope that agreement will soon be reached on resolving the remaining issues. That will enable a full allocation of the common investment fund to be made and will clarify the long-term asset position of the schemes.
Some hon. Members referred to the gap and wanted to know what will happen when the extent of the gap is clarified. However, it is still too early to say what the gap will be. A substantial amount of work remains to be done. The Maxwell empire kept appalling records of what had happened to different transactions; they wove a very complex web.
I join the chairman of the SIB, who appeared before the Select Committee yesterday, in urging City institutions to resolve speedily disputes over pension scheme assets. I hope that all parties involved will work constructively with the trustees and the liquidators over the next few months to secure a speedy resolution of all these complex claims.
§ Mr. Frank Field
Would the Under-Secretary support the SIB if it paid over the fines of City institutions to the Maxwell pension fund?
§ Mr. Hague
All that I am prepared to say for the purpose of this debate is that I very much support what the hon. Gentleman said about urging everyone to come to a resolution as speedily as possible. For tonight, I must leave 530 it at that. I know that other hon. Members wish to intervene and I do not wish to take too many minutes of the time that hon. Members are hoping to spend on education matters.
Clearly, there is much work still to be done before the pensioners' distress and anxiety can be relieved. The Government will continue to support Sir John Cuckney in his efforts to bring a speedy conclusion to this affair.
The Maxwell saga has contributed to the raising of wider issues about the regulation of pension funds, many of which have been touched on in this debate. The Goode committee is continuing its review of the framework of law and regulation within which occupational pension schemes operate. The Government look forward, as I am sure does the rest of the country, to receiving that report towards the end of September.
Some hon. Members, including my hon. Friends the Members for Sevenoaks (Mr. Wolfson) and for Hertfordshire, South-West (Mr. Page), put strong views about what should happen after that. It would be wrong of me to second-guess that committee's recommendations or to comment on proposals that might pre-empt the committee's careful consideration of these important and complex issues, but the Government look forward to receiving and studying the report and hearing the comments of right hon. and hon. Members on both sides of the House on its recommendations.
Within the lifetime of this Parliament, the Government and the House will need to take a number of decisions about different aspects of occupational pensions. Taken together, they will have far-reaching implications for tomorrow's work force, for future pensioners and for society as a whole, as we grapple with the consequences of demographic change. No doubt the Select Committee will play its part in helping us to cope with the intricacies of these decisions.
There are many things that we need to do. We must legislate for equal state pension ages for men and women. Once the European Court of Justice's decision in the Coloroll case is available, we will need to address the implications for occupational pension schemes and take account of the consequences for contracting-out arrangements.
Meanwhile, we are committed to ensuring that personal pensions remain attractive across the age range, and we are considering a structure of age-related rebates to achieve this. We also want to take into account recent work on the treatment of pension rights on divorce—a very important subject in its own right.
We shall be seeking to bring about a framework for occupational pensions which is stable, while allowing pension vehicles of various types to develop and flourish; which is secure, in order to give people confidence, whatever type of pension provision they make: and which is fair to employers, employees, pensioners and deferred pensioners.
This has been a constructive, though short, debate and has been helpful in setting the scene and identifying some of the issues. We are all indebted to the hon. Member for Birkenhead and the other members of the Select Committee for the careful attention that they have paid to pensions issues in recent months, and for providing the opportunity for this debate.
§ The debate was concluded, and the Question necessary to dispose of the proceedings was deferred, pursuant to paragraph (4) of Standing Order No. 52 (Consideration of estimates).