Pensions Bill [Lords]

HC Deb 24 April 1995 vol 258 cc525-620

[Relevant documents: Memoranda submitted to the Social Security Committee on the Operation of Pension Funds: the Pensions Bill [Lords] (HC 336).]

Order for Second Reading read.

Madam Speaker

I have selected the amendment in the name of the Leader of the Opposition.

3.35 pm

The Secretary of State for Social Security (Mr. Peter Lilley)

I beg to move, That the Bill be now read a Second time.

I should like to begin by putting the Bill in context. Pensions are a matter on which Conservatives can be proud of their record. Pensioners retiring now are on average 52 per cent. better off than those who retired in 1979, after allowing for inflation. More of them have private pensions than ever before. Their savings produce a flow of £50 billion a year into industry. The success of private pension provision has enabled us to channel an extra £1 billion to help the less well-off pensioners.

We also need to see the Bill in an international context.

Mr. David Winnick (Walsall, North)

Will the Secretary of State give way?

Mr. Lilley

Perhaps the hon. Gentleman will allow me to make a little progress. He may find that I answer his points.

Throughout the world, more people are living longer and enjoying longer in retirement, but there will be fewer people of working age to support them. How to pay for those pensions is the most important single issue facing every Government. In most countries, the bulk of all pensions is provided by the state. Indeed, that is the approach that the Labour party would always have preferred for pensions in Britain. When the state finances pensions, this year's pensions are invariably paid out of this year's taxes. It is pay-as-you-go. Nothing is saved or set aside for the future. So in most countries, more and more retired people will impose an ever more crippling burden of tax on the declining number of people of working age.

Mr. Winnick

The Secretary of State said at the beginning that there had been a substantial improvement in the lives of pensioners, but is he not aware, as he should be as Secretary of State, of the literally millions of people in Britain who are retired and live on a pittance on the state pension and income support? They believe that they have been victimised as a result of the Government's changes of the past few years. The Secretary of State should be aware that, with growing unemployment and the rest, it is difficult for potential pensioners to make safeguards for their retirement.

Mr. Lilley

The hon. Gentleman is as ignorant as he is insufferable and I do not know why I gave way to him. He knows full well that every pensioner in Britain is or can be better off. No one need be at the level at which he or she was left by the last Labour Government, who wiped out a quarter of people's savings in a single year of inflation.

In Britain, the Conservatives' strategy has been to encourage private pension provision, building on the basic state pension. When people opt for private pensions, their money is genuinely saved. It is invested in industry. It goes into the assets that will generate the profits which will pay for their pensions in 10, 20 or 30 years when they retire, without taxing the economy to death.

Our policy has been increasingly successful. About three quarters of those eligible have opted out of the state earnings-related scheme and invested in occupational or personal pensions. Collectively, funded pension schemes have accumulated £500 billion of assets to pay for future pensions. That is more than all the assets in all the equivalent schemes in the rest of the European Community put together, which is why other countries look enviously at our system as a model for themselves to follow.

Mr. John Denham (Southampton, Itchen)

The Secretary of State said a moment ago that when individuals have personal pensions, their money is genuinely saved. Does he agree that a significant number of low income earners, who opted out of the state earnings-related pension scheme, find that all their savings are absorbed by the fees and charges of the private pension companies from which their pensions are meant to be paid?

Mr. Lilley

Although the hon. Gentleman did not mention it, he must know about and welcome the fact that the Securities and Investments Board has guaranteed that anyone who has been mis-sold a pension in that way will have redress. He is wrong to try to scare people by suggesting that that is not the case.

When I came to the Department of Social Security, there were four outstanding issues on my desk, all of which are addressed by aspects of the Bill. The first set of problems arose from the gaping hole left in the Maxwell pension schemes by that socialist millionaire who, strangely, is never mentioned when wrongdoing is discussed in the media. Existing pensions were then about to be cut off and remaining assets were about £400 million short of those required to pay for future liabilities. The prospect of prolonged and costly litigation looked set to consume much of any assets regained, and confidence in occupation schemes generally was threatened by fears that the regulatory structure was inadequate.

So I appointed Sir John Cuckney, who has successfully brought about a major settlement of the various Maxwell pension disputes. That was an enormous achievement. He has secured the position of 30,000 of our constituents and put their fears at rest. The House will want to join me in thanking him for what he has so skilfully done.

Mr. David Shaw (Dover)

As a member of the Select Committee on Social Security, may I congratulate my right hon. Friend because he set up the Maxwell Pensioners Trust and made the arrangements that made that settlement possible? May I also demand an answer from him as to how one of the people responsible for managing about £75 million of the Maxwell money that went missing is on the Labour Front Bench in the House of Lords?

Mr. Lilley

I am grateful to my hon. Friend for his complimentary remarks. I honestly think that his last question should be addressed to the Opposition Front-Bench team, and no doubt those hon. Members will tackle it in subsequent speeches.

Mr. John Butterfill (Bournemouth, West)

As honorary adviser to the Mirror Group Newspapers pension trustees, may I put it on record that they are very grateful to my right hon. Friend for the changes that he and his officials made to the regulations, which have enabled them to restructure schemes in such a way as to secure the pensions of all the employees?

Mr. Lilley

I am grateful to my hon. Friend. I am also grateful for the helpful advice that I received from him, my hon. Friend the Member for Dover (Mr. Shaw) and others—and, indeed from Opposition Members—when we were in the early stages of trying to tackle the Maxwell pension problem.

To restore confidence in the regulatory regime for occupational pensions, I asked Professor Goode to chair the Pension Law Review Committee. His invaluable report provided the essential framework for the parts of the Bill that deal with occupational pensions, which incorporate all that report's major recommendations. Following the committee's recommendations, the Bill establishes six lines of defence against fraud and misuse of pension scheme assets.

First, the members are given new rights, notably to nominate a third of the trustees. Of course, that is not a panacea—the main Maxwell schemes had 50 per cent. member trustees. None the less, it will ensure that trust boards have a range of different perspectives on the responsibilities that they are required to discharge. That is why we have gone somewhat further than the Pension Law Review Committee recommendations and proposed that the new requirements should apply to all schemes regardless of their size.

The second line of defence is the trustees themselves. Their powers and duties will be clearly defined and they will be responsible, of course, to the scheme. The third line of defence is the professionals—the actuaries, auditors, lawyers and so on, who will report to the trustees rather than to the employer. Actuaries and auditors will have the duty, and other professionals the right, to blow the whistle to the new regulator if they suspect any abuse.

The fourth line of defence is the minimum funding requirement. We have adjusted that in the light of consultation and the arrangements now proposed are as often criticised for being too onerous as for being inadequate, so I suspect that we may have got them just about right.

The fifth line of defence is the new regulator—the occupational pensions regulatory authority. That authority will have all the main powers recommended by the Pension Law Review Committee, but it will not have to get bogged down in the bureaucratic processing of routine forms. It has been suggested that the cost of the regulator should be met from taxation. We believe that a levy on schemes is more appropriate since the benefits of well-regulated schemes accrue only to members and employers. Many taxpayers are not members of schemes, so why should they pay? Finally, if all else fails, we have the compensation scheme, which stands ready to restore up to 90 per cent. of misappropriated funds if an employer is insolvent.

Mr. Hugh Bayley (York)

Given that pension funds—occupational pension schemes—exist solely for the purpose of providing pensions to their members and not for the purpose of supporting the companies for which their members work, why does not the Secretary of State accept that those members should appoint 50 per cent. of the trustees of a pension fund? That would ensure that the interests of the members, who are the beneficiaries, were properly represented.

Mr. Lilley

The hon. Gentleman will know that all trustees have to act in the interests of the trust and the scheme and not in the interests of any particular section that may have appointed them, whether that be the employer or some particular section of the members. We believe that it is right to insist that a minimum of one third of the trustees be appointed by the members in normal circumstances—it could be more if necessary—to ensure the diversity of backgrounds. It is not the case that members appointed by the employer will represent that individual. Those members have a duty under trust law to look after the best interests of the scheme.

Mr. Robert Jackson (Wantage)

My right hon. Friend is aware that the Consumers Association is not happy with the strength of the regulator's powers. In particular, concern has been expressed about the absence of any specification of the duties of the regulator, which exist in other areas where regulators are appointed. Can my right hon. Friend explain why that is the case?

Mr. Lilley

As I said, we have included in the Bill all the powers recommended by the Pension Law Review Committee. Some people thought that we would water down those powers, but we have not done so. We have reflected the full powers that the committee wanted us to incorporate. I do not think that anyone need have any worries that the regulatory authority will lack those powers.

After we dealt with the problems arising out of Maxwell, the next big issue was that arising from the European Court ruling in the Barber case. In the 1986 directive on equal treatment and occupational pension schemes, we specifically negotiated the right for occupational schemes to reflect unequal ages as long as they persisted in the state scheme. Unfortunately, the European Court overruled that in the Barber case and required occupational pension schemes to give men and women equal treatment. The appalling prospect that that obligation might be retrospective was ended by the protocol successfully negotiated by my right hon. Friend the Prime Minister at Maastricht and the subsequent Coloroll judgment.

None the less, all private pension schemes had to equalise all rights accruing from the date of the Barber judgment—17 May 1990. That placed British occupational pension schemes in a dilemma. They were simultaneously required, under European law, to offer equal pension ages and, under British law, to mirror the unequal rights that would have accrued had members remained in the state earnings-related pension scheme.

The Bill brings domestic legislation into line with European law and it resolves the dilemma by breaking the links for the future between benefits due under occupational schemes and those due under SERPS. Instead, contracted-out schemes will have to be certified as offering benefits that overall match or surpass those available under SERPS.

It is paradoxical, to say the least, that the majority of European Community pension funds are in Britain and only for us are occupational pension schemes a crucial part of pension provision, yet British policy is largely being driven by decisions taken by 15 unelected judges in Luxembourg. For that reason, Conservative Members have no intention to sign the social chapter and extend those powers further. [HON. MEMBERS: "Hear, hear."] Still less are we likely to follow the advice of the Leader of the Opposition and go even further and propose majority voting on subjects such as the environment and the others that he specified.

Mr. Nick Hawkins (Blackpool, South)

Will my right hon. Friend give way?

Mr. Lilley

I will, but I hope that I shall be able to make some progress afterwards.

Mr. Hawkins

Does my right hon. Friend agree that many British companies are delighted with his firm stance on the matter that he has just mentioned? He might be interested to know that, this very morning, I was with representatives of a successful British multinational company who have witnessed the harm that the social chapter has done in continental factories in the ways that he mentioned, and do not want to have any of that nonsense here.

Mr. Lilley

I think that such people are even more grateful to my right hon. Friend the Prime Minister for the firm stand that he took in obtaining that protocol and in obtaining the opt-out on the social chapter.

Mr. Harry Cohen (Leyton)

Will the right hon. Gentleman give way?

Mr. Lilley

I shall make progress, if I may.

The third issue on my desk when I took over was how best to fulfil our election promise to equalise the state pension age. My predecessor had initiated a public consultation about the main options for implementing that. After studying all the evidence, I concluded that the arguments in favour of equalising at the age of 65 were overwhelming.

People are living longer, healthier lives. Women increasingly expect to work and to earn their own pension. The trend worldwide is to equalise at the higher pension age and even to increase that age. The support ratio of people of working age to those above the existing pension age is on course to decline to 2.1:1—only slightly more than two people of working age to one who has passed the present retirement age—by the year 2030. Moreover, by then the cost of equalising at age 60 rather than 65 would be an extra £12 billion a year; hence our decision to equalise gradually between 2010 and 2020, so that no woman born before 1950 will be affected by that decision.

At present, people can defer drawing their pension for up to five years after they reach the basic state pension age, and in return they receive an extra 7.5 per cent. on their subsequent pension for each year of deferral. In future, we shall extend that period of flexibility indefinitely and boost the increment to 10 per cent. for each year of deferral.

The decision about equalising the state pension age is of enormous importance; in terms of expenditure, it is almost certainly the biggest single decision taken during this Parliament, so it is reasonable to ask the Opposition where they stand. [HON. MEMBERS: "Hear, hear."] As usual, the Opposition have refused to commit themselves to a clear policy. Usually, there is a total vacuum. In this case, we have a profusion of policies.

The Labour party's most recent manifesto promised to equalise the state pension age at 60.

Dr. Norman A. Godman (Greenock and Port Glasgow)

Will the Secretary of State give way?

Mr. Lilley

May I make a little more progress before I—as always—give way to the hon. Gentleman?

Last year, the Labour party's annual conference reaffirmed that commitment to equalise at 60. That is a £12 billion spending pledge—not bad for starters.

Mr. Alistair Darling (Edinburgh, Central)

The right hon. Gentleman just said that we did not have any policies.

Mr. Lilley

I said that the Opposition had a profusion of policies in that area.

Labour's Commission on Social Justice, on the other hand, has supported the Government pretty unequivocally. It says that it is quite reasonable to start phasing in a common pension age of 65 in the next century.

The hon. Member for Glasgow, Garscadden (Mr. Dewar) has attempted to hedge his bets. In an article in The Independent, he argued that it should be possible to draw a pension at any time between 60 and 70. He stated: The argument points to 63 as a pivotal age at which people draw their full pension. But the hon. Gentleman needs to explain three things about flexible decades. First, in practice, nearly everyone opts to take his or her pension the first year that he or she can. That is certainly the case at present—well over 90 per cent. of people do so. Secondly, a pivotal age of 63 for when people would receive the full basic pension at its present value implies that the pension available at 60 would be about one quarter less than the current pension. Thirdly, because people would retire earlier, the hon. Gentleman's scheme would result in up-front costs in the early years of £5 billion a year more than under our proposals.

Therefore, in practice, the hon. Gentleman's suggestion means that the majority of pensioners would take their pension at the beginning of the decade, at age 60, but at a lower level than is currently available, and struggle into old age on pensions smaller than they currently receive. As usual, however, the hon. Gentleman will not commit himself firmly to that or to any other of the array of policies in the Labour party's portfolio.

The House will want a clear answer today to the £12 billion question. What would Labour do in government? Would they equalise the pension age at 60, 63 or 65? I shall give way to the hon. Member for Garscadden now if he cares to put us out of our misery and end our uncertainty. He obviously needs more time to think.

Mr. Bayley

rose—

Mr. Lilley

I do not think that the hon. Gentleman has yet made the Front Bench, although that promotion will doubtless come.

The Government's policy intentions on pensions are clear. We want a system that offers the best chance of security to pensioners while not placing unsustainable burdens on future taxpayers. The Labour party's pension policies are a study in vagueness, ambiguity and evasion. The reasoned amendment that it has tabled today is devoid of reasons, opaque as to meaning and in breach of assurances that the hon. Member for Garscadden previously gave the House. When I announced my pension plans in the White Paper, the hon. Gentleman promised:

No one in the House will deny the need for urgent reform."—[Official Report, 23 June 1994; Vol. 245, c. 362.] However, in its reasoned amendment the Labour party seeks flatly to refuse to give the Bill a Second Reading. The reform that it previously accepted as urgent, it now wishes to put off for another year. The reasons given for that volte face are so opaque that I genuinely cannot understand what the Labour party is getting at in the reasoned amendment. I offer the hon. Member for Garscadden the opportunity to explain his reasons.

Mr. Andrew Miller (Ellesmere Port and Neston)

Will the Secretary of State give way?

Mr. Lilley

No, I must make further progress.

The Bill addresses the issue of giving more choice in pension provision, as we promised in our manifesto. The Government have done a great deal and the Bill further extends that choice.

Mr. Miller

rose—

Mr. Lilley

I think that I am answering the hon. Gentleman's point and he will have to be content with that.

It is important to continue to encourage the provision of personal pensions. For those who change jobs frequently or whose employers do not run pension schemes, personal pensions can be by far the best way to build up savings for retirement—indeed, for the latter group, they are the only way. But as people grow older, their funds have less time to grow, so under the present system, personal pensions become less attractive than SERPS for those above a certain age. The Bill solves the problem by introducing an age-related rebate to make it equally attractive for people of all ages to stay opted out of the state scheme.

We also propose to allow individuals on retirement to withdraw an income from their personal pension fund while deferring the purchase of an annuity until the age of 75. That extra flexibility will allow personal pension holders to time the purchase of their annuity to obtain the best possible income in retirement.

I now refer to some of the amendments introduced during the Bill's passage through the House of Lords.

Mr. Miller

I am grateful to the Minister for giving way. I was waiting with bated breath for his fourth point, because I assumed that it would be a response to the commitment that his Department gave to me on 10 December 1992, when I sought to introduce a private Member's Bill on the subject of takeovers. The Minister at the time said: I can confirm my support for the general intention of your Bill and he went on to praise the intentions of my Bill. Where are takeovers addressed in the Government's Bill? Are the six principles of my private Member's Bill in the legislation? If they are not, I hope that the Minister will find a place to insert them.

Mr. Lilley

I appreciate that the hon. Gentleman is using this opportunity to remind me about his measure. However, it was not one of the four most important items in my in-tray when I assumed responsibility for the Department. My hon. Friend the Minister for Social Security and Disabled People will refer to the specific points that the hon. Gentleman has raised when he has found out what it is all about.

In this 50th anniversary year of the end of the second world war, the whole nation wants to recognise those who sacrificed their lives so that we could be free. This country has rightly long made generous pension provision for the war widows whom they left behind. Nearly all war widows receive almost £143 a week tax free, which is not means-tested, for life unless they remarry.

However, as a result of debates in the House and in the other place, it has become clear that the position of some former war widows who lose their second husbands is unacceptable. I have decided that the war widows pension should be restored to war widows who are widowed a second time, divorced or legally separated. The change will benefit an estimated 16,500 war widows and it will cost about £40 million in a full year. It will be one of the first measures in the Bill to come into effect. Subject to the Bill's progress, claims will be dealt with from this October. I am sure that that announcement will be well received by the whole country as it demonstrates this nation's recognition of the debt that we owe to so many.

Mr. Winston Churchill (Davyhulme)

I am grateful to my right hon. Friend for that announcement and I am grateful to the Government for agreeing to the amendment proposed in another place by the noble Lord Freyberg. It will go a long way towards alleviating the pain, hardship and unfairness endured by those who have suffered under the present arrangements. On their behalf and on behalf of all those who have been involved in the campaign in both Houses of Parliament, I express my appreciation of the Government's attitude.

Mr. Lilley

I am grateful to my hon. Friend, who played a not inconsiderable part in highlighting the problems in that area. I hope that the whole House will be content with the change that we have announced.

Mr. Donald Dewar (Glasgow, Garscadden)

I welcome the Minister's announcement on behalf of the Opposition. The amendment that he has accepted was backed by the Labour Front Bench in another place. As far as I am aware, the only hon. Members who voted against it were those on the Government Front Bench. Why was that so?

Mr. Lilley

I am sorry that the hon. Gentleman has tried to make a party political point about a matter of national importance, which will alter rules that have been in force for 50 years under a variety of Governments, at such an inappropriate time.

I refer to another amendment that was also introduced in the House of Lords. We are aware of the strength of feeling about the issue of equal treatment of pensions upon divorce and we have listened to the concerns expressed. It is a complex issue and we believe that the courts already have powers to offset pension rights against capital assets in divorce settlements. We have responded in the House of Lords with proposals that re-emphasise the courts' ability and that enable the courts to value those pensions.

The amendments carried in the other place will allow pension payments to be included in a deferred maintenance order. They will also allow courts to require pension schemes to make payments under deferred maintenance orders rather than require individuals to pay their former spouses. We accept the intention behind the amendments, although their details will have to be resolved in Committee and there may be further technical amendments to achieve the required effect.

Mr. Butterfill

Does my right hon. Friend agree that it would be preferable if those arrangements could be more immediate and if the separation of assets was made at the time of divorce? Would not it also be better if they reflected the number of years that the couple concerned had been married?

Mr. Lilley

The amendments are enabling, not requiring. They do not require the courts to make such orders in any or all cases, but enable the courts to do so when they think that that is right in the circumstances. In general, the courts have preferred to make clean-break settlements. If my hon. Friend is referring to the possibility of the courts having power to split the assets in the fund, that extremely complex issue certainly could not be resolved in the time span of the Bill. When hon. Members study the details, as I have done, they will see that the problems are far greater than at first sight. The cost could be considerable, with something like £300 million in tax revenues forgone. The reason is that a divorced couple would effectively be in a more privileged tax position than a married couple. I do not believe that the House wants to create a tax advantage on divorce. Perhaps the Opposition will say if they want to do so.

Mr. Dewar

Will the right hon. Gentleman give way?

Mr. Lilley

I shall, but the hon. Gentleman is always more interested in making partisan points than in informing the House of Labour's policies in response to my questions.

Mr. Dewar

I assure the right hon. Gentleman that I shall say something about that issue when I make my contribution to the debate. There will be some disappointment at the Secretary of State's remarks about the possibility of splitting the pension fund at the time of divorce. I shall return to that point. I want to ask him a specific question. If it is to be a form of deferred maintenance, with the pension split in payment between the ex-spouse and the pension holder, a proposition that found favour in the House of Lords was that the duty to pay should be on the pension provider and not on the pension holder. Do the Government accept that, or do they intend to reverse that policy?

Mr. Lilley

I was explaining that we shall accept that and make it technically more feasible.

Mr. Cohen

Will the right hon. Gentleman give way?

Mr. Lilley

I want to make progress. I have given way a number of times on that and other issues. The hon. Gentleman will be able to make his points in his own speech.

Mr. Cohen

I had a ten-minute Bill on the subject.

Mr. Lilley

I am sorry. I did not realise that the hon. Gentleman has been pursuing the issue. I am happy to give way to him.

Mr. Cohen

I am grateful for the general principle of accepting the division of a pension on divorce, but as my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, there will be disappointment that the courts will not be given the power to split the fund money. Why not give the courts that power in principle? That proposal is supported by the Pensions Management Institute. The cost could be met by the couple themselves.

Mr. Lilley

The Pensions Management Institute and others discovered how complex the issue is when they examined it. The more that one does, the more complex it becomes. For example, what would be the treatment of SERPS, especially when one does not know the rights that an individual will have until the end of the whole period, because of various allowances for years off and the interaction between husband and wife? The matter is far more complex than it even struck me at the beginning. The more that one studies it, the more one realises that a snap, off-the-cuff judgment would be the wrong way to approach such a serious issue.

Mr. Alan Howarth (Stratford-on-Avon)

I am sure that the House agrees with my right hon. Friend that there should not be financial advantage in divorce. I welcome his desire to ensure a fair deal for occupational pensioners, but I invite him to agree that we ought to act to remedy a wholly unsatisfactory state of affairs in this respect. If a married person enters long-term residential or nursing home care, the local authority is entitled to take the whole of that person's occupational pension, leaving the spouse—most often a wife—worse off than if she or he were divorced or widowed. Will my right hon. Friend agree that we ought to act to remedy that state of affairs and provide that, in such circumstances, the spouse should be entitled to half the occupational pension?

Mr. Lilley

I know that that is a matter of concern, but the Government give advice to local authorities, which have some discretion in that matter. I hope that local authorities will act in the spirit of that advice and not as my hon. Friend and a number of others have suggested they do. We are talking usually about Labour authorities, which could perhaps be influenced by Labour Front Benchers.

Mr. Dewar

No partisan points.

Mr. Lilley

The hon. Gentleman brought them in first.

Another point endorsed by Labour Front-Bench Members in the House of Lords was to be found in the amendment to the way in which the state earnings-related pension scheme will be calculated. The amendment stated that SERPS should be based on the best 44 years of earnings instead of on a full working life. The amendment would increase expenditure in a poorly targeted way and would cost more than £2.5 billion a year by the middle of the next century.

I believe that my proposals provide for a viable and affordable SERPS in the longer term, and I shall therefore be asking the House to reverse the effects of that costly Labour amendment.

As I said at the beginning, pensions are a Tory success story. Pensioners' incomes have risen nearly as much every year under this Government as they did in the entire four years of the Labour Government. That is because we have routed inflation, which was destroying pensioners' savings at the rate of 25 per cent. a year under Labour, and we have encouraged an ever rising proportion of people to make pension provision for themselves by means of occupational and personal pension schemes.

Dr. Godman

rose—

Mr. Lilley

I shall try in future to give way to the hon. Gentleman: he is a regular.

In 1979, 43 per cent. of pensioners had occupational pensions. Among those currently retiring, the proportion is nearer 70 per cent. The Labour party is in a state of confusion and disarray over its pensions policy, as I have shown. The Opposition cannot make up their minds, because their political instincts are in conflict with their electoral calculations. Instinctively, the Opposition still hate private pension provision. They seize on any problems with relish and they pour scorn on successes. They would prefer compulsory monopoly state provision; but they know that the British electorate will not stand for it and that the taxpayer cannot afford it.

By contrast, this Conservative Government have a clear, coherent and successful strategy. It is being copied abroad and has been endorsed by the World bank. The recent Federal Trust report makes it a paradigm for pension provision throughout Europe.

When the Bill is enacted, I believe that we can give a fresh impetus to the pension-owning democracy in Britain—safer occupational pensions, more group personal schemes and more flexible personal schemes. The Bill will bring greater security, equality and choice to our pensions, and I commend it to the House.

4.13 pm

Mr. Donald Dewar (Glasgow, Garscadden)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:

That this House declines to give a Second Reading to the Pensions Bill [Lords] because although it contains some welcome proposals drawn from the report of the Pensions Law Review Committee intended to strengthen the regulatory framework within which occupational pension schemes operate, it does not fully reflect the importance of pensions as a form of deferred pay, takes too rigid an approach to the equal treatment of men and women under the State pension scheme, and includes a range of proposals designed to undermine the State Earnings-Related Pension Scheme and disadvantage occupational as against private pension provision. I am afraid that I may occasionally stray into what the Secretary of State will call a partisan point—but his own record of the past 40 minutes allows me that luxury.

I start, non-contentiously, by repeating our welcome for what the right hon. Gentleman said about war widows pensions. I welcome the decision to accept the amendment moved in another place. It was agreed to after considered debate, and I shall no doubt raise the Secretary of State's ire when I say that he is now making something of a virtue of necessity. According to the newspapers, there was a battle in the Cabinet Committee between the Treasury and the DSS. Perhaps, therefore, I should congratulate the right hon. Gentleman on beating the Chancellor—although I do not know whether he would welcome that accolade. I suspect that the decision had a lot to do with the approaching anniversary; that, too, was mentioned in the reports. Nevertheless, I welcome the decision; it is a change that will mean something to an important group in the community.

The Secretary of State made a somewhat slighting reference to the fact that we are to vote tonight. I concede that it has not been entirely easy, because there is a balance to be struck, there are points to be made and there are points of importance, which I shall come to, but that does not detract from the fact that the Opposition support much of what is in the Bill. The regulatory framework for occupational pensions needs strengthening. It is all too clear in the aftermath of the Maxwell disaster that that is so. It is not just a matter of Maxwell. There has also been an enormous increase in the amount of litigation over pensions, which reflects the unhappiness about the way in which the system has been working. There is an increasing public awareness, which I welcome, of the importance of pensions as assets of the individual. For all those reasons, there has been a spotlight on the regulatory framework, and it is clear that it needs strengthening, hence the Goode committee report, which Opposition Members have consistently welcomed.

The Bill undoubtedly goes some way—although I am not convinced that it goes far enough—to meet the requirements. We welcome what we have, but for reasons that I shall explain I think that there is a case for more.

We have tabled an amendment because the Bill departs from the Goode agenda and moves on to a darker side when it feeds on what I believe are the Government's prejudices. I was asked recently by a brave optimist whether I could send him a copy of the Bill, because he wanted to read it and know what was intended. I have met many optimists in my time, but I fear that he will learn little from reading the text. Hon. Members may remember that Alice in Wonderland thought that no book without conversation and pictures was worth reading. The Bill certainly fails that particular test. It is a peculiarly opaque document.

Mr. Gyles Brandreth (City of Chester)

Will the hon. Gentleman give way?

Mr. Dewar

No, I wish to make a little progress.

One of the problems is that this is very much government by regulation—enabling and empowering, not the people, but certainly the Secretary of State. That concern was mentioned in many of the representations that we have had. The Bill prescribes change in the balance of the system. That is one of my concerns. It is a change that has been largely unnoticed, but it is undoubtedly a change of intent. The arithmetic has been weighted in a number of ways and there is an undermining of rights on a scale that demands debate. It will be of major interest for hon. Members who are fortunate enough to obtain a place on the Standing Committee—I can hear the rush of tiny feet from Conservative Members.

Perhaps the easiest way to illustrate the point is to draw the attention of the House to the Government Actuary's report on the Bill—Cm 2714. It contains some helpful tables and projects the expenditure on the state earnings-related pension scheme to 2050. It shows it as it was and as it will be after the Bill is enacted. There are some revealing facts. In 2050, for example, it is envisaged that SERPS will be worth, or that it will cost the Treasury—whichever way one likes to put it—some £19.3 billion. After the Bill is on the statute book—admittedly, we are talking about a long-term time scale—that sum falls to £9.9 billion. It is almost halved. That fact does not appear on the face of the Bill, in the explanations or in the briefings. No one could accuse me of being partisan if I said to the House that there is a very strong case for a genuine debate about what is happening in that area, why it is happening and what it means. We are determined to have such a debate.

Mr. Tim Smith (Beaconsfield)

What significance should we attach to the figures that the hon. Gentleman has just given to the House, when the oldest person who will be affected by what he has just announced is aged 10 at present?

Mr. Dewar

That is a very interesting view: the House of Commons is not to bother about what happens to our children. Now there is a piece of Conservative philosophy that is quite remarkable. I am almost moved to agree with the hon. Gentleman, because he could have a word with the Secretary of State, who looks at any changes that are proposed over that time scale and immediately takes them as a pledge of spending intent for the next five years. The Government cannot have it both ways. Although the shift will occur over a lengthy period, it starts quite quickly and it will involve many people in this House and many of our friends, colleagues, children and successors. It would be blind prejudice were we simply to take what is before us without proper inquiry.

There is a fallacy that savings are painless and good. In fact, there is a converse, which is that almost always savings are at the expense of someone or something. That must be balanced in the equation, but it seems to be lacking in this Bill. For example, the Bill dealing with incapacity benefit will result in substantial savings, but they have been clawed out of the budget for the long-term sick and disabled. I do not sneer at savings; I accept that the Treasury has a natural interest in controlling public expenditure—that is the business of every Government. However, balances must be struck and in the immensely important area of pension provision we have a duty to consider these matters.

At least arguably under attack are contributions that are currently being paid and that will be paid in future—investments in people's futures which are the result of thrift and proper provision through the state pension scheme, which I would have thought the House would hesitate to reduce in the way now proposed.

The proposed reduction is dramatic. I remind the House of the proposed change to the SERPS calculation—a highly technical matter. Currently, we value the total earnings for each year in line with the increase in average earnings and then deduct the annual lower earnings limit for the last complete tax year to produce the surplus on which the pension is based. In future, the annual lower earnings limit will be deducted before revaluation takes place each year. So what? Over the projection period I have mentioned, that will reduce the value of SERPS by £2.7 billion annually. It is an enormous change and an enormous deduction.

There is the equally difficult and technical matter of the contracting-out provision and the consolidation of female SERPS entitlements, which will be aligned with those for men. The Government Actuary reckons that by 2050 that will mean taking £4.2 billion annually from the value of SERPS.

Those are enormous sums, but they have been nodded through in the fine print without any of us having had the opportunity to raise and debate the issue. I give the Secretary of State fair notice—which I hope he will take in the spirit in which it is offered—that we will want to look closely at this area in Committee. I know that he will not personally be in Committee, but I hope that he will receive reports and closely monitor what emerges. There is no doubt that the drop from £19.3 billion to £9.9 billion, at a time when national insurance contributions have just risen to 10 per cent., is a remarkably serious matter that is worth a thought and a pause for further reflection.

I am aware that the Government have not established a major reputation for keeping their promises, but they have kept one promise. This point will be especially important to the right hon. Member for Sutton Coldfield (Sir N. Fowler). When he halved the value of SERPS—to put it in shorthand—it was promised that there would be no further devaluation until the year 2000. The Government have kept their promise—the changes will come into effect on 6 April 2000. The Government have not hung around in the general task of dismantling and demolishing, although I stress that they have kept to the letter of their promise.

The Bill represents a major shift. The Secretary of State fairly said that we live in a pay-as-you-go system. That produces difficulties and burdens that have to be shouldered. However, I object to the fact that the Government are altering the inter-generational contract by stealth, in a way that I do not think is defensible. It represents a substantial shift, which is something that we must take into account.

I raise another case of a little local difficulty for the pension industry.

Mr. Bernard Jenkin (Colchester, North)

Does the hon. Gentleman accept that SERPS was originally established in the mid-1970s on a completely unsustainable basis, and that the changes that have been made in the 1980s by my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler), and subsequently in the Bill, put Government finances and pensions on a more sustainable basis? What robs pensioners is financial irresponsibility such as the high inflation that we had under the Labour Government.

Mr. Dewar

None of us enjoys inflation's impact on any fixed income or any savings—I concede that. I shall not fight the battles that were fought in the late 1980s with the right hon. Member for Sutton Coldfield—that is history. If, however, the hon. Member for Colchester, North (Mr. Jenkin) is saying that we must do this to SERPS because we cannot afford to provide for pensions, I would question that. I think he is saying—certainly the Government are saying—not only that we cannot afford to provide those pensions, but that we must provide for more. The question is how we do it. Should it be through SERPS or some other form of state-provided scheme, or should it be through personal pensions in particular? Admittedly, risks are involved in both solutions, but, given the history of recent years, no great confidence exists that private pensions are the obvious way forward.

The argument must be conducted in that way. It is fallacious and totally irresponsible to say that we must knock down SERPS because the community cannot afford to pay for decent retirement in old age. If we take that view, we will not provide for that in the private sector either, and we are all in trouble. Let us fight on the argument seriously, sensibly and on the grounds on which it must be contested. We should not put up bogey men in the way that is far too common.

Let me turn, because it is important, to the second level playing field argument. I was talking about private and public. Let us consider occupational pension schemes and private pension schemes—approved private pensions and private pensions themselves. In the time available to me, I cannot go into details—again, that will happen in Committee—but burdens exist on occupational pension schemes in terms of indexing, for example, and in terms of the pension level that they must provide, where no equivalent exists in the personal pension sector.

I see the hon. Member for Bournemouth, West (Mr. Butterfill) nodding at least in partial agreement. I do not want to pin him down too completely, but he recognises that point, and well he might as he is connected with the industry, and he knows that the National Association of Pension Fund Managers and a number of other organisations feel anxious and, in some ways, angry about what they regard as the further weighting of the balance against occupational pensions and in favour of personal pensions. Again, having considered the record, I ask: is this the right time and does any justification exist for a further weighting of that sort? Let me give an example.

I read the story—I think first in the Financial Times in an article by Norma Cohen—that, when the contracting-out settlement was made, and when the framework for contracting-out payments was redrawn, a heavy weighting would be introduced in favour of personal pensions, which would receive an administrative payment within the contracting-out payment three or four times greater than that given to occupational pension schemes. The Government were saying that the taxpayer should pick up the tab for the charges and the commissions of selling private pension schemes. I did not believe the story. I did not think that that would happen because it seemed such a preposterous proposition, but it has happened.

I protest that we are picking up the tab for charges that I think most of us believe should be minimised—not feather-bedded—in the interests of the public. It is another example of the lack of a respective and level playing field. It has been tilted on the basis of prejudice. We have a duty to examine it and it justifies the reasoned amendment that I and my right hon. and hon. Friends have tabled today.

Mr. Butterfill

I know from having shared platforms with the hon. Gentleman that he recognises the importance of occupational pension schemes. I hope, however, that he will not be tempted to go down the road that some trade union colleagues are urging him to go down in terms of imposing additional burdens on occupational schemes through the Bill, and then damaging them in the way that has occurred in the United States of America, where they have virtually disappeared.

Mr. Dewar

The hon. Gentleman and I have shared platforms at what I might call trade gatherings, if those people who were at them do not mind the term. I said then and I will say now that I recognise that there is a trade-off, a balance to be struck. Of course, I do not want to frighten employers out of, for example, the provision of defined benefit schemes. I am clear, in my own mind at least, about that and I will perhaps say a word or two about it when we discuss the difficult matter of the minimum funding level, in respect of which that trade-off is peculiarly painful and difficult to adjust.

I do not believe that we should again artificially encourage private pension provision, but not because I believe that there is no market for it. I believe that there is a market for it and I hope those who would benefit from it will use it. However, the advertising campaign in the late 1980s, and the 2 per cent. premium that was offered, showed how it was possible to stampede many, many people, who were rather uncritical in their enthusiasm, into buying pensions that were totally unsuited to their needs and which those people imagined were building up an entitlement for their retirement when they were not.

I was interested in the exchange between my hon. Friend the Member for Southampton, Itchen (Mr. Denham) and the Secretary of State. I presume that the right hon. Gentleman misunderstood my hon. Friend, although that would have been difficult, but it is not, I fear, true that the Securities and Investments Board, the Personal Investment Authority, the Investment Management Regulatory Organisation or any other regulatory body has given a guarantee in the cases of many hundreds of thousands, perhaps millions, of people who are buying personal pension plans, sometimes in disregard of the opportunity to enter an occupational pension scheme, and who are contributing the minimum contracting-out payment and building up almost no reasonable entitlement. I would be delighted if the sort of guarantee that is being offered on the mis-selling of transfers and opt-outs was being offered on that wider basis, but it is not. I ask the House to bear those matters very much in mind.

I do not have time to say anything about the guaranteed minimum pension but I mention it at this point simply because it is another matter that was not covered by the Goode report.

Mr. Brandreth

Earlier, the hon. Gentleman set himself, rightly, against opacity. Now that he has mentioned the guaranteed minimum pension, perhaps he could clarify this point, which was raised with me at the weekend by a constituent who understood that the Labour party's Commission on Social Justice favoured a guaranteed minimum pension and that that has been endorsed—I did not know this—by the Leader of the Opposition. Is that the case and, if so, would the hon. Gentleman, in the interests of setting himself against opacity, make clear the level of the guaranteed minimum pension?

Mr. Dewar

I have to say to the hon. Gentleman, in no hostile sense, that his question shows a misunderstanding. We have, of course, been considering a scheme for a minimum guaranteed pension, but I am talking about the guaranteed minimum pension in the present legislation. I am sure that the hon. Gentleman understands that distinction. The importance of the guaranteed minimum pension is that it gives protection.

When the Maxwell crash happened, the Government made a great virtue—and perhaps I would have done the same—of the fact that they were giving the pensioners a guaranteed minimum pension. That was a statutory need. It is, therefore, a protection in hard times.

Even with the compensation fund in place, there may be examples where there has not been theft, fraud or misappropriation and, in those circumstances, the guaranteed minimum pension, together with its indexing, may be an important safeguard. That is why we believe that the guaranteed minimum pension should be retained. However, if the hon. Gentleman is volunteering for the Committee, he will have lots of time to discuss that with me and many of my hon. Friends in the weeks ahead.

May I now move on—

Sir Norman Fowler (Sutton Coldfield)

Swiftly.

Mr. Dewar

Not at all swiftly. I am not usually accused of being swift when I am on my feet. However, I will do my best to push on at this stage.

I now turn to the Goode agenda which is enormously important. Many people have congratulated Professor Goode and his colleagues; perhaps it is now time for sober thanks. To be fair, they must take some satisfaction from seeing many of their recommendations being implemented. There is much to endorse without reservation, but there are some gaps and difficulties and I hope that the House will not forget our general endorsement if I move on to talk about some of them.

The hon. Member for Wantage (Mr. Jackson), who has now left us, made the fair point that there were anxieties—he instanced the Consumers Association—about the role of the regulator. Some are the fault of the Secretary of State. I notice—I have referred to this before in his presence and I shall do so again—that he uses in the White Paper, presumably with much thought, the word "long-stop" as a description of the regulator's role. Coming from Scotland, I have little experience of cricket although I occasionally tried to play it. I used to be sent to field at long-stop on the ground that that was out of sight and out of mind. I later rose to be scorer, which showed a certain political aptitude, and got myself out of those embarrassments. The very idea of the regulator as a long-stop has reinforced a number of fears.

We have had reassuring noises from, for example, the hon. Member for Wanstead and Woodford (Mr. Arbuthnot), the Under-Secretary of State. I cannot think of anyone better qualified to make reassuring noises than him; his manner is custom built for it. I am sure that, in a sense, his comments are well meant.

There is, however, a case for looking at what is not there. The Secretary of State said that the Government had implemented Goode. I think that we were all meant to sit back relieved and to cast away our worried frowns. One has only to look at the role of the regulator to see that there are gaps. I take one example, albeit not a dramatic one. Goode recommended in paragraph 83 that the annual certificate of solvency should go not only to the pension fund concerned, but to the regulator. The Government said that that was not necessary. Clearly, they do not think that the regulator should be bothered with that.

There was an important point about surpluses in which Goode recommended a role for the regulator. The committee said that he should have to give permission if there was to be a transfer of funds in strictly defined circumstances. That is gone and scored out; it is not now the business of the regulator.

There is also a great argument about whether the expenses should be met by the state or by a levy on the industry. The House will remember that Goode said: most fundamentally, we believe that the protection of individual rights is properly the function of government and that the disinterested status of the Regulator will be best protected through government funding. The industry feels strongly about that and, to be fair, its concern goes beyond merely wanting to avoid a £10 million levy for the regulator's expenses. The recommendation was rejected despite the tremendous weight that Goode put on it.

Obviously, we shall have to probe these matters in Committee. However, I point out to the Secretary of State that there are reasons for worry. The regulator is seen as someone who waits for trouble—an ambulance party sent in to pick up the casualties—rather than someone who is trying to prevent the trouble at source. It is important that we get the matter straightened out to the best of our ability and we shall look for suitable amendments to achieve that.

My next point concerns the number of trustees. The Government have accepted the recommendation that one third should be selected by the active members. Strangely, they have not accepted Goode's point about money purchase schemes where two thirds of the trustees should be selected by the active members. Again, that is something for the Committee to think about. We have consistently taken the view—it was the Goode committee's declared intention—that the Government should put best practice into legislative form. We shall try to persuade the Committee, and ultimately the House, that the one third figure should increase to 50 per cent. It is a figure that is used widely by some of the best blue-chip companies in Britain, which tell me that it works to their total satisfaction. To use the 50 per cent. figure would also be an important symbolic reflection of the fact that, as European courts consistently maintain, a pension is a form of deferred pay. We shall also look at the possibility of a pensioner trustee as well.

Hon. Members may say—I would understand it—that this is all rather foolhardy optimism because the Government are unlikely to concede anything in this area. However, I turn with hope to the Minister of State, who will serve on the Committee. I read with great interest his remarks in the August 1994 edition of Pensions World when he was interviewed by the editor, Stephanie Hawthorne. He was asked: Why did you settle for one third only of member trustees? The answer was interesting and the Minister will remember it. He said: "To avoid additional complexity." Obviously, a third is easily understood, but 50 per cent. gives rise to additional complexity. All that, no doubt, can be explained when we come to it. The Minister went on to say: The main point about trustees is that some should not be appointed by the employer. The precise proportion doesn't probably matter that much. If that is the Minister's view, I hope that he will listen to those who believe that the proportion matters quite a bit and that he will give way on that issue. We look forward to later comments.

Mr. Alan Howarth

May I put to the hon. Gentleman an admittedly somewhat tangential point about trustees? Does he agree that many trustees of pension funds are in one capacity industrialists, who routinely complain about City short-termism, and in another capacity are for ever applying pressure on pension fund managers to deliver short-term performance? Will he say something about how the Labour party would ensure that the massive resources of pension funds—of the order of £500 billion—are invested not only in the best interests of pensioners, but in the best long-term interests of the economy as a whole?

Mr. Dewar

I have a great deal of sympathy for that point, and it would be a fascinating road down which to go, but I am already up against certain time constraints. It is important that trustees remember their legal duty and their role under trust law. That goes for those who are appointed by employers or those who may be selected by active members. In Committee, we should certainly look at the training arrangements and the need to give a sophisticated and balanced view on important matters of the kind to which the hon. Gentleman has referred, but I hope that he will spare me criticism if I say that it would make it impossible to deal with other points if I went down that road.

Mr. Jenkin

Will the hon. Gentleman give way?

Mr. Dewar

No. May I make a little progress, since I really am up against time?

I shall briefly consider another area: the famous minimum solvency requirement argument. I was at one time in the market for jokes about the Pensions Bill; it was a rather unrewarding market which produced very little despite the demand. It was an imperfect market, if I could put it that way. I went to a seminar just after the Barings collapse, at which a very learned actuary explained that if one wished to adjust one's portfolio to track the minimum solvency requirement profile, a little hedging in the derivatives market was recommended. That certainly raised a laugh. I heard a gentleman at another conference say that minimum solvency requirement meant what it said, but he has been upstaged by the fact that it has become minimum funding requirement, although nothing else has changed.

I referred to the matter in response to the hon. Member for Bournemouth, West and I mean it when I say that it is extremely difficult to get the balance right because there are clearly competing priorities. Security must be given a very high priority, but I recognise that there are dangers of putting burdens on employers which may persuade them to withdraw and simply to hand over to either group money purchase or individual contracted-out money purchase schemes. That is a genuine danger which we must keep in mind.

We must consider a compromise. The name of the hon. Member for Bournemouth, West has become—I suppose—a sort of shorthand. The Butterfill letter contains the present compromise arrangements. He has achieved a sort of passing immortality thanks to the Minister. We must consider very carefully whether that formula, with its assumption that 25 per cent. of the pension liability should be calculated on the basis of equity returns, is right or whether we can do better.

There was some debate in the House of Lords, which I take seriously and perhaps more so today having talked to a number of parties about it, about the possibility of a contributions approach; the idea of trying to obviate the possibility of a gap appearing with a comfortable thought that at some future date there could be an injection of capital. If something goes wrong and there is a gap, everyone is in trouble. That gap may be able to be obviated by a contributions schedule, actuarially calculated, which would ensure that the gap was minimal, if gap there be at all. We should consider that in Committee, as well as looking at the possibility of a discontinuance fund of the kind practised, I understand, in some Scandinavian countries and in America.

I am not so arrogant as to imagine that I know the right answer. I am consoled by the fact that, having attended several actuaries conferences which have discussed the subject at length and with learning, I came to the conclusion that they were not very sure about it either. I hope that, in that spirit, the Minister will be prepared to consider matters in Committee.

Mr. Lilley

rose—

Mr. Dewar

May I say a word or two about the retirement age, unless the Secretary of State wants to intervene?

Mr. Lilley

My point was not relevant to that.

Mr. Dewar

The right hon. Gentleman says that his point was not relevant to what I was saying, but it has never stopped him before.

Mr. Lilley

It was relevant to the clock. The hon. Member has now been speaking for 31 minutes. I am not sure, although he has made some interesting observations and promised to look at some things and to examine some others, that he has yet told us a single policy on anything which is attributable to the Labour party. We are dealing, among other things, with the biggest expenditure decision that any Government will take this century. We have a right to demand that the hon. Gentleman tell us the Labour party's position.

Mr. Dewar

First, I had just started a sentence in which I was turning to the retirement age when I unwisely gave way to the right hon. Gentleman; and, secondly, I was—I hope—addressing my remarks to the Bill that he has produced, which I think is the point of the debate. I know that a certain amount of leeway is allowed, but basically one is supposed to be discussing the Bill, which seems to be important. I am aware of the fact that the Government have picked 65 as a retirement age. The Secretary of State will know that the Labour party has long and consistently argued for a flexible decade of retirement.

No doubt the Secretary of State is about to read to me a passage from the report by the Commission on Social Justice. May I say—I hope that it will get through this time—that that report runs to 400 pages. The commission was an independent body, separate from the Labour party. Many of the things in the report will have influence and will have to be taken into account in formulating policy, but there is nothing more childish than the right hon. Gentleman taking a report, which says that it is a report over several Parliaments and not necessarily for one party, and assuming that its suggestions would be implemented in the first two years of a Labour Government and that it is therefore a public spending commitment. That does not do anything for the standard of public debate.

Mr. Lilley

I was not going to do that at all. I was merely going to cite the comment of the Commission on Social Justice on the hon. Gentleman's proposal that we should advance the retirement age. It says, "It does not make sense."

Mr. Dewar

That is—[Laughter]. The laughter of jackasses. All that I can say is that I have read the report, I am well aware of it and I shall deal with what it says in a minute or two and be delighted to do so. The right hon. Gentleman cited an incomplete sentence, but never mind. Let us move on.

The Labour party has consistently and over a period of time been in favour of a flexible decade of retirement. It seems to us that the emphasis should be on choice. It seems to us sensible that people should be able to take a pension, which will have to be actuarially adjusted in exactly the same way as that after 65, as the Secretary of State is proposing, with some, not necessarily the same, actuarial adjustments. That is important because choice matters. It seems strange that I should have to preach that point to the Conservatives. It matters.

As more and more pensioners are looking forward to their state pension and feeling as if they are looking through the wrong end of a telescope, the state pension is only one and often not the dominating factor in determining when retirement should start. The idea that we should have a retirement age at which everyone is expected to shuffle obligingly off into the shadows and disappear from sight is strangely old-fashioned and seems to be totally inflexible. I have no doubt that a flexible decade makes sense and is sensible.

In that context—I know that the Secretary of State will come at me if I do not mention it—we still have to have a pivotal age. Such an age is a little less central in that context, but always a matter a importance. I have made it clear that we think that there is a case for the age of 63 because it is cost neutral, or rather better than cost neutral, based on figures in both the Government's White Papers on the matter. It would save more than would be possible were the present system to continue. There is also an element of equity in the proposal, which all hon. Members will be able to appreciate. It is therefore a sensible suggestion, but I am honest enough to say that I do not have access to the actuarial resources that are available to the Government and we shall obviously review the matter when we get into office.

The flexible decade of retirement seems to be an extremely reasonable approach to the problem which will command widespread support. I am sure that the Secretary of State will be aware that such a decade is, for example, a policy of Age Concern. I do not know how much that will impress him because he does not like those who look after particular interest groups which are concerned with pensions, although I do. It is the policy of the National Association of Pension Funds although, to be fair, it feels that the matter has to some extent been closed by the Government's decision. It remains the association's preferred option. It is the preferred option of the Confederation of British Industry. So it is not some oddity dreamt up by the Labour party for its own ends. I commend it to the House.

Mr. Churchill

Will the hon. Gentleman give way?

Mr. Dewar

I wish to finish this passage. Of course, several organisations—the Minister is right to draw them to my attention because they have to be taken seriously—including the Commission on Social Justice, the Social Security Advisory Committee and the Third Age Enquiry all came out in favour of 65. I recognise that. It is not an easy balance to strike. However, all of them said that if the Government insisted on going with 65, some of the so-called savings that the Minister hoped to achieve should be routed back into the pensions system to help those who were not properly covered. That was the point of the House of Lords amendment, which the Secretary of State, not to my surprise, says that he intends to reverse.

The amendment was moved in the context of the Government's insistence on 65. It said, "Let us do something by providing a right to drop the five weakest years of one's working career to help women in particular and low-paid men." I accept that there is an argument about the measure. The Minister says that it is poorly targeted. Perhaps something can be done that is better targeted, but the principle is important and we support it.

I recognise that many hon. Members want to speak, but may I say a word or two about pensions and divorce. It is important.

Mr. Churchill

Will the hon. Gentleman give way?

Mr. Dewar

No. I must go on. I have been generous in giving way. I will abuse the House if I run on for more than another two or three minutes.

The Government have made a volte-face on pensions. I make no complaint about that. I like volte-faces by Government. The Under-Secretary of State for Social Security, the hon. Member for Wanstead and Woodford, will remember that on 20 February, when he was answering questions in the House at about 3 o'clock in the afternoon, he explained that it was impossible to do anything. He said that he could not possibly tackle the problem until major research had been carried out, the results of which would not be available until the end of the year.

At the same time, Lord Mackay of Ardbrecknish was in full and confused retreat in the House of Lords. I make no complaint. As I have not yet congratulated Lord Mackay on his appearance as a Minister of State at the Department of Social Security, I do so now. It gives me great pleasure. He was a very competent Minister at the Scottish Office and a great friend of mine when he was chairman of Glasgow university Liberal club many years ago. The impossible has become possible.

We will pursue the issue of pensions and divorce more fully at a later stage. Earmarking is a difficulty. It is a form of deferred maintenance. A divorce takes place. There is a clean-break settlement between the parties. Any children that there might have been have grown up. Some 15 or 20 years have passed and suddenly the parties have to come together again for the purpose of splitting the pension in payment. That is not an absence that will make the heart grow fonder. I am relieved that at least the Secretary of State has accepted the amendment moved by Baroness Hollis from the Labour Front Bench in the other place to put the duty of paying on the provider so that we do not have sheriffs' officers in Scotland and bailiffs, or whatever is the equivalent, in England pursuing non-payment.

Under the amendment, if a couple split, a capital sum will be removed from the original pension fund to start a new pension for the divorcing spouse. That is an important safeguard. Let us leave aside the problems of the future career of the spouse, whether he stays in employment, how his fund does and so on. Let us assume that he dies before he can enjoy his pension. Normally, his widow would receive the survivor's benefits. If he has remarried, they will presumably go to the wife of the second marriage. Not only will the divorced spouse not receive provision for her pension at the time of the founding package but she will receive no share in her ex-husband's provision if he dies.

I presume that the position is as I have described. Otherwise, we will have a notional widow and a real widow dividing the widow's rights between them. That is a prospect which most of us would not like. I use that as one example. I suspect that many more will be forthcoming when we reach Committee stage and given as reasons for believing that the Government have taken too narrow a view.

I agree entirely with my hon. Friend the Member for Leyton (Mr. Cohen), whose private Member's Bill was so relevant to the argument about pensions and divorce. Let us turn one of the qualifications of the Bill to advantage. Everyone has said that it empowers, enables and allows regulations to be made in the future, but that it tells us nothing now. Let us on this subject give the courts an enabling power. Then, if it takes time to work through, provision can be made before the regulations emerge. There is genuine merit in that. I hope that the Government will give it some thought.

There is much to support in the Bill. I apologise for the fact that I have talked about very little of it. It is in the nature of a speech that one talks about areas in which there is disagreement. Measures which we support include the compensation scheme and indexation from 1997—although there are many technical arguments, I approve of it. Protection of accrued rights is enormously important. Of course we are behind it.

There is much to probe in the Bill. I have not even mentioned part-time workers—the European Court cases, the impact of the provisions in the Bill and whether, in preserving a right, they are in fact restricting it. I agree with the hon. Member for Stratford-on-Avon (Mr. Howarth) on independent custodianship, even though I fear that we may not be allowed to have the pleasure of his company on the Committee. He is right about the tragic cases in which a spouse is driven on to income support because the other half—usually the husband, although that will vary later—is in residential care and the entire pension is taken to pay the charges. There are many such areas to which we shall return, but at the end of the day, the one thing that we have in common is that we all want to banish the nightmare that enveloped the Maxwell pensioners. There are answers in the Bill. There is still work to be done.

Where there is a measure of agreement, we will try to improve, consolidate and strengthen, but always support. Where the Government have gone wrong, we will press our case. The end product must be a better framework so that people have security and peace of mind. On other issues, we may have to wait for another approach and another Government.

4.56 pm

Sir Norman Fowler (Sutton Coldfield)

I welcome what my right hon. Friend the Secretary of State said about war widows; the whole House will do so. It is entirely right that the Government should have devoted resources in that way. It is entirely right that we should devote resources now to present need rather than always to make promises for the future. I welcome the move and I believe that the whole country will do so, too.

I do not complain that the hon. Member for Glasgow, Garscadden (Mr. Dewar) was party political. Having spent five or six years being opposed by the hon. Member for Oldham, West (Mr. Meacher), I think that what the hon. Gentleman had to say was relatively mild. However, at the end of 45 minutes, rather like my right hon. Friend the Secretary of State, I am not a great deal clearer about the broad strategy of Labour policy than I was when we started.

The hon. Member for Garscadden made a great deal of the Government's omissions—what they did and what they did not do. The House should be reminded that the reason why we are discussing this long, detailed and important Bill is not the acts of Ministers but the fraudulent actions of Robert Maxwell. That is what lies behind it. The Bill is certainly about the deliberate and dishonest action that he took to defraud Daily Mirror pensioners. It is further about preventing members of other occupational schemes being threatened and defrauded in the same way. That is the evil which the Bill tackles.

I, for one, welcome the provisions on the new occupational pensions authority and the provisions on pension trustees, as I am a pension trustee on the Bardon scheme.

I find the Opposition's attitude to the debate rather curious. I should have thought that the message that the House wanted to send out this afternoon was a united message that people such as Maxwell would not be able to raid pension funds in future. Instead, the amendment contrasts with the end of the speech by the hon. Member for Garscadden, when he grudgingly acknowledged the action that the Government are taking, but moved swiftly on to other ground as if embarrassed by it.

Mr. Miller

Does the right hon. Gentleman include in his list of people who should not raid pension funds those companies engaged in taking over other companies? Does he agree that surplus assets in funds should not be the subject of takeover warfare?

Sir Norman Fowler

I have much sympathy with what the hon. Gentleman is saying and I know that my hon. Friend the Minister will deal with that in his reply.

Mr. Jenkin

rose—

Sir Norman Fowler

May I make some progress, otherwise I will end up making a 45-minute speech when I want to speak for only 10 minutes?

In their amendment, the Opposition are arguing that the Bill does not fully reflect the importance of pensions as a form of deferred pay". Frankly, that is an extraordinary argument. The Bill is about ensuring that pay that is deferred is paid out in pensions at the end and that the money is not stolen or misappropriated.

We must also remember the other changes that the Government have made to protect and improve the rights of occupational pensioners. The hon. Member for Garscadden was lecturing the Government, but let me remind him of the position that we inherited from the Labour party. The state earnings-related pension scheme was the limit of Labour ambition. The party did nothing to improve the position or the rights of people whose pensions were frozen—people who were forced to leave their pension entitlement frozen in value with a previous employer.

The Labour party did nothing to make it possible for members of occupational schemes to transfer their rights. Those changes—that revolution—were carried out by the Government. As a result, people in occupational schemes get a better and a fairer deal today. That was not a measure that was forced on us by eager pension funds or, frankly, by the official Opposition. It was this Government putting the interests of members of occupational schemes first and ensuring, to use the words of the Opposition amendment, that the importance of pensions as a form of deferred pay was recognised.

We also sought to give the public more options on pensions. Occupational pensions had made an enormous contribution and there is no question about that, but in the mid-1980s they had ceased to expand and were stuck in the mud. The attitudes of some funds to the rights of their members were stuck in exactly the same way—there is no doubt about that. That is why the scandalous problem of frozen pensions endured for such a long time. We tried to introduce reforms, to give more people the opportunity to have a pension that was separate from state provision. Every opinion poll showed that that was what people wanted and so the extra option of personal pensions was introduced.

I do not for one moment defend the actions of those insurance companies that mis-sold policies. Ironically, several of the companies that were prominent in their opposition to the introduction of personal pensions were guilty. It is not part of my brief to defend wrong advice given in that way.

We should distinguish, however, between the personal pension product and the methods that some companies used to sell their products. At the end of last year, Andrew Large, the chairman of the Securities and Investments Board, said: I want to emphasise from the outset that our concern is not with personal pension products themselves, but with how they were sold. I would add that, because of the action that regulators and the industry have already taken, people can now have greater confidence that personal pension products are being properly sold. They do offer an efficient and flexible way of saving for retirement for many people, provided they are marketed, advised on and sold properly. That is very much my view of the position.

Mrs. Jane Kennedy (Liverpool, Broadgreen)

Does the right hon. Gentleman accept that the problem is not necessarily the fact that inappropriate pension products are sold, but that there has been a growth in the number of tied agents? As a result, the agents selling financial packages do not have the full range of products available and are limited to those of one company. When I had the honour to be a member of the Select Committee on Social Security, we heard that the number of independent agents had shrunk to only 20 per cent. of those acting in the field.

Sir Norman Fowler

A major problem exists with the giving of advice and with where people can get independent and impartial advice on what they should buy and what is in their best interests. Clearly, in some cases people have been badly advised and I will come to that in a moment.

I welcome the fact that the hon. Member for Garscadden made it clear that the Opposition see a place for personal pensions in the range of pension provision. He also made that clear last March in a debate in the House. That view is a million miles away from the view of the hon. Member for Oldham, West when we started the pensions debate. Then, the Labour party saw no place for personal pensions and opposed them, not on merit, but because they were private provision and the hon. Gentleman did not want them. I therefore welcome the fact that the hon. Member for Garscadden is leading the Labour party on to much wiser ground.

My right hon. Friend the Secretary of State referred to the action being taken to put matters right where companies and advisers have given wrong advice and I obviously welcome that. I must make some additional points, however. First, we must make it clear to the public that personal pensions are a sensible option for many people. The idea that everyone who has taken out a personal pension has been wrongly advised is ludicrous. Some exceptionally good and reputable companies are providing such pensions.

Secondly, we must review and improve the independent advice that is available to the public. Usually, it is wrong for someone to decide to come out of an occupational, funded scheme for a personal pension. If the employer's contribution does not remain the same, which it almost invariably does not, but is reduced, there is little or no chance that the return will be comparable.

Thirdly, we must reconsider employers' contributions. I left the Department of Health and Social Security in 1987 and I tried to re-enter the debate a little later, when I was at the Department of Employment. I suggested that public sector schemes should set an example by making a contribution that was above the minimum to any of their members who wanted to move to a personal pension scheme. The suggestion was resisted fiercely by the public sector schemes—again, it was partly the curse of asking schemes to pay now when the option is to pay tomorrow and later.

The hon. Member for Garscadden proposes that the National Savings scheme should provide such personal pensions—I do not think that I am misquoting him—and I agree. I have always thought that to be a sensible course and a sensible extension of its business. During my review of pensions in the mid-1980s I proposed that, but I regret to say that it was rejected out of hand by the National Savings authorities at the time. Now that Marks and Spencer is entering the personal pensions business, perhaps it is an opportunity for the National Savings scheme to reconsider the position.

Finally, I shall try to follow the important remarks by my right hon. Friend the Secretary of State about where we are in the pensions debate—a debate that is taking place not only in this country, but in every other country in western Europe.

As people live longer, there is no question but that there will be a greater demand for taxpayers' resources, devoted to health, social services and pensions. That is why Governments everywhere are looking at ways of providing options for people to save for their own retirement. That is why the Government, who deserve credit, started that process about 12 years ago. That is partly why we are better placed today than most other countries, because we have massive funds that have been built up for occupational and personal pensions.

That review of pensions involves looking at the type of debt that we are leaving for future generations of taxpayers. By creating SERPS, the Labour party did not launch a funded scheme but a "pay-as-you-go" one. No funds or investments back it up. It relies entirely upon the willingness and ability of future generations of taxpayers to finance the second-tier pensions that are now being promised. That unfunded scheme comes on top of the unfunded basic pension. It is therefore entirely sensible for any Government to consider what can be afforded. If hon Members want any proof of that, they need only look at the report of the Labour party's so-called social justice commission.

Mr. Dewar

So-called?

Sir Norman Fowler

I believe that the commission is a pretentious means of setting out a pretty ordinary set of recommendations, but obviously the hon. Gentleman thinks otherwise. In due course, we will try to probe him about what recommendations he will or will not accept.

I have a specific question for the hon. Member for Garscadden. For years, the Labour party has argued that the basic pension should be uprated by earnings and not by prices. That was the basis of the Opposition's appeal to the nation. As the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), the Liberal spokesman, remembers only too well, the hon. Member for Oldham, West—the Opposition spokesman—always argued that the Labour party would uprate the basic pension according to earnings.

Dame Elaine Kellett-Bowman (Lancaster)

Will my right hon. Friend give way?

Sir Norman Fowler

No, unless my hon. Friend wants to speak for the Labour party.

I should like to know from the hon. Member for Garscadden whether the Labour party remains committed to the policy that the basic pension should be uprated by earnings, because that is not the meaning of the proposal by the Commission on Social Justice. I should be happy to give way to the hon. Gentleman on that. I am surprised that he has not sought to intervene.

As my right hon. Friend the Secretary of State said earlier, pensions are a fundamental issue, because there is hardly anything that costs more in present or future spending than pensions. The Labour party has gone to the country in election after election claiming that it would uprate pensions according to earnings. That has always been the great distinction between the Conservative party's policy and that of the Labour party. We have been attacked constantly by the Labour party on that very issue, but now the hon. Member for Garscadden is unable to say whether the promise to uprate the basic pension according to earnings remains a policy of the Labour party. The public will draw their own conclusions. It is clear that the Labour party is scuttling that particular policy—yet one more policy is going down.

Dame Elaine Kellett-Bowman

Will my right hon. Friend give way?

Sir Norman Fowler

As I failed to get a reply from the Opposition Front-Bench spokesman, I am happy to give way to my hon. Friend.

Dame Elaine Kellett-Bowman

May I remind my right hon. Friend that when the Labour Government first introduced that pension provision, they did so at a time when prices were rising faster than wages? They therefore cheated the pensioners.

Sir Norman Fowler

I agree with the force of my hon. Friend's point. The Labour spokesman, however, remains quiet on the fundamental issue of uprating pensions.

There is one reason why the public sensibly want to rely on something more than just state provision. The hon. Member for Garscadden may talk about the security of the state, but let me remind him that, in recent years, the people who lost out most were state pensioners under the Labour Government when Barbara Castle changed the uprating system midstream. As a result, pensioners lost out by more than £1 billion according to the value of current money. That happened because Barbara Castle changed the entire uprating system with the effect that the Labour Government went from following the historic system of validating past inflation to forecasting inflation when the inflation rate was dropping. That is why it is so important that we should have good private and occupational schemes, which is the purpose of the Bill.

It is the first duty of any Government to ensure that present pension provision is adequate. That is why I strongly welcome what my right hon. Friend said about war widows. We obviously owe them a particular debt. It is right that the Government should devote extra resources to them now, but the issue goes wider than that.

It is good news that about 60 per cent. of retired people now have some form of additional provision, but we should recognise that some of that additional provision is modest and that, in any event, some 40 per cent. of retired people have no such additional provision. The problem is that some people now living in retirement have been unable to build up an occupational pension through no fault of their own. There are a variety of reasons for that. For example, their firm may not have had an occupational pension scheme at that time, or they may have been members of a scheme, but, because of the scandalous early leaver rules and frozen pension rules, were prevented from receiving the full value of their pension. They may have been caught by a number of historic employment practices. Whatever the reason, those people now depend absolutely on the basic pension with little or nothing more.

We introduced family credit because we accepted that we were unable to help the families we wanted to help through the general child benefit. It is open to us to help those pensioners we consider most in need by introducing a pension credit system. In other words, we should add to the basic pension of those whose income most urgently needs supplementing.

Mr. Dewar

indicated assent.

Sir Norman Fowler

I am glad to note that the hon. Member for Garscadden agrees with me.

Mr. Dewar

rose—

Sir Norman Fowler

I have no intention of allowing the hon. Gentleman to intervene when he failed to do so at my earlier request.

Rather than relying upon general increases in the basic pension, we should direct resources to where they are needed. The basic pension would remain price-protected and would continue as now, but to those who do not have the benefit of other retirement income or have only a limited income, the pension credit would be given as an additional weekly payment. It would operate in the same way as family credit, which the Government introduced and which has been widely welcomed.

I welcome the Bill. The Government have taken the action needed to combat the Maxwell scandal and other similar scandals. The Bill builds on the new rights that we have already awarded to occupational pensioners and assures the public of the security for their investment. Most of all, I congratulate the Government on continuing to encourage occupational schemes and personal pensions. I hope that the Government will now consider the position of those living on the basic pension, or close to it, and take further action because I profoundly believe that such action is also necessary.

5.18 pm

Mr. Alfred Morris (Manchester, Wythenshawe)

The Bill, as it has emerged from another place, is widely felt to be in need of some very important further amendments. One of them is the amendment so ably moved by my noble Friend Baroness Hollis, which would allow a carer to keep 50 per cent. of his or her occupational pension if the spouse enters long-term residential care. The Secretary of State will know how very important that amendment is to the Alzheimer's Disease Society, of which I have the honour to hold office as vice-president, and to the very deserving people the society exists to help. The amendment, on which doubtless there will be an opportunity soon to vote in this House, has my total support.

I am anxious also to see an early opportunity to revise the decision taken in another place in regard to the exclusion of British pensioners in Commonwealth countries from pension upratings that are paid to all who live in the UK, as well as to expatriates in the European Union, the United States and some 30 other countries. I need hardly emphasise again today how badly that decision was taken in Australia and Canada, among many other Commonwealth countries.

The House will not be surprised, however, that I rise mainly to speak in this debate about the widows of men who gave the best years of their lives in the armed forces of this country. In this 50th anniversary year of victory in the second world war, their claim to our attention is one of very high importance. They live with a deep sense of grievance and their unhappiness about the unfairness to which they have been subjected is visible to all of us who meet them. As Major-General Sir Laurence New, who is held in special regard on both sides of the House, said in a letter published by The Sunday Times yesterday, they are widows who feel "forgotten, neglected and wronged." While millions of people will be celebrating the end of the war against Germany on 8 May, for them it will be another day of mourning for men who fought and died that we might live.

Of course, I applaud the indication given by the Leader of the House last Thursday—and confirmed by the Secretary of State today—that the Government will not now attempt to overturn the new clause added to the Bill in the House of Lords which automatically restores the Department of Society Security war widows pension on second bereavement or divorce. That improvement to the Bill was secured by the young Lord Freyberg who, although he is a Cross-Bencher, I am delighted to call my noble Friend. He was strongly supported by peers of all parties and of none, and they, too, have my gratitude for achieving one of the four purposes of my early-day motion 186 in support of war and service widows' claims.

I am sure that the Government's most praiseworthy change of heart towards the new clause will be welcomed on both sides of the House, but it would be helpful if it could be made clear, as the debate proceeds, that the concession has no provisos. I say that because I did not hear the word "automatic" in what the Secretary of State said this afternoon; nor does it appear in the DSS press release, which, hot from the press, I have been given by hand.

If the Minister can clarify the position now, I am sure that it will be very warmly appreciated by the War Widows Association of Great Britain, the Officers Pensions Society, the Royal Air Force Widows Association, Help the Aged and the many other organisations that have been campaigning for the change.

"Automatic" is a word the war widows will certainly want to hear, just as they will want to hear that there is to be no question of means-testing.

Mr. Clifford Forsythe (Antrim, South)

The right hon. Gentleman is chairman of the managing trustees of the parliamentary contributory pension scheme. Are the changes that he seeks for the war widows in that scheme?

Mr. Morris

Yes, they are; so, the Members of Parliament who are supporting the war and service widows' claims this afternoon are not saying that they want other people to "do as we say" but saying "do as we do".

But welcome as the concession the Minister has announced is, he will be unwise not to realise that he has addressed but one of the rightful claims of our war and service widows. If he stops there, he will be seen as having taken this one step merely to counter mounting criticism of the Government's response to the widows' claims as a whole.

The Minister will know that those claims are not new. The 1989 campaign to make life better for war and service widows was directed at achieving their purpose. This Bill affords us a further opportunity to correct the injustices to which they relate.

My early-day motion now has 245 signatories from all parts of the House, and 42 other Members have written to the Officers Pensions Society expressing their unequivocal support, at the same time making it clear that, were it not for the conventions that prevent their signing early-day motions, they would have done so. The spread of support for the motion is comprehensively all-party and includes 72 Conservative signatories.

Mr. Deputy Speaker, war and service widows are presently being discriminated against—I choose my words carefully—in each of the three still outstanding areas of concern dealt with by my early-day motion. Make no mistake, they are asking not for special treatment but for an end to discrimination, for, by comparison with other similar schemes provided by our allies, and by comparison with commercial pension provision in this country, Britain's war and service widows are uniquely disadvantaged.

As General Sir Peter de la Billiére said in his letter to The Sunday Times yesterday:

Neither our Allies nor our former enemies treat their widows in such a penny-pinching way. He went on to

urge the Prime Minister to look beyond the well-crafted defensive briefs emanating from his Ministers … and to see to it that the widows of those servicemen who served our country are able to live out their lives with dignity and some small financial security. I remind the House that, whereas a war widow's husband died attributably and a service widow's husband died naturally, both sets of widows had to watch their husbands go off to war. Some never came back, some came back broken in body or in mind, some came back apparently unharmed but died soon thereafter. All these widows are our "victory widows". They are our inheritance, our legacy of war. Far from discriminating against them, we should be seeking to repay in full the very special debt we owe them. They are mostly over 75 and many of them live on some form of income benefit. So it could hardly be described as expensive or open-ended to provide for them financial assistance that the war and service widows of our allies and former enemies already enjoy as of right.

What are the remaining three problem areas? First, there are the service widows who married their husbands after they had left the services and then, invariably, nursed them to the end of their lives. Because they married after retirement, they get no pension at all, in spite of the fact that their husbands contributed fully towards a pension. The armed forces pension scheme is almost completely isolated in not offering an unabated pension to the widow who married a service man after he retired. That is not the case in any other comparable scheme studied by the Officers Pensions Society.

It is true that post-retirement marriage pensions were introduced in the armed forces in 1978, but only service after that date counts towards a pension. That does not help the older service widow who receives nothing. All that is being asked for now is that, where the post-retirement marriage took place before the service man was 65—the end of his recall liability—and provided it lasted for at least three years, there should be a pension for his widow. As ever, the Treasury pleads cost, but we should remember that these service men effectively contributed towards their pensions, initially at 11 per cent. From 1988, their contribution was one of 10 per cent., and from 1991 it was 9 per cent.

The second remaining area of concern affects the younger war widow. Today she loses both her DSS war widows pension and her occupational attributable war widows pension on remarriage. Her DSS war widows pension can never be restored and her occupational attributable pension can be restored only after a second bereavement or divorce if she fails a means test. Yet 83 per cent. of all commercial widows pension schemes of which the National Association of Pension Funds has evidence are paid for life. That applies to almost all the equivalent allied schemes. The Bett independent review, in its report, recommends that all war and service widows pensions should be for life.

While the Treasury again pleads cost, we should remember that these women are the widows of men who paid for their pensions. The right hon. Member for Bridgwater (Mr. King), then the Secretary of State for Defence, said so in the House on 11 December 1989.

Moreover, the Government pay anyway because 99 out of 100 younger war widows are not remarrying. They thus remain a full charge to Government for both Ministry of Defence and DSS pensions. If our proposals were accepted and if younger, post-1973 war widows were paid for life and therefore encouraged to remarry, the DSS war widows pension would cease so long as the war widow remained married, and there would thereby he a saving to the DSS budget.

Our third and last concern is for the older war widow. Military service before April 1973 earned only a one third rate pension for widows, while service after that date earned a half-rate pension. Those still serving on 1 April 1973 were allowed to buy in their previous service at the half-rate and almost everyone did so. But those who had already retired, even by a day, were not allowed to buy in. The result is severe hardship.

A study by the Officers Pension Society of 14 other countries shows that provision in the United Kingdom is the meanest. It may come as a shock to many hon. Members that Britain is now alone among all the countries with which it can be compared in paying any service widow who is entitled to a pension less than a half-rate pension. In the United States the minimum figure is 55 per cent., in Germany it is 60 per cent., in Australia and Belgium it is up to 67 per cent. and in the Netherlands it is 71 per cent. All we seek now is that widows on the one third rate should be lifted to the half-rate pension. By definition, most of them are at least 75 and in the evening of their lives.

The case of Mrs. Margaret Woods exemplifies the severity of treatment that such women receive. She is the widow of a Fleet Air Arm pilot. He flew throughout the war and took part—flying a Swordfish—in the famous raid on the Tirpitz in Alten fjord. He died at 37 of a massive heart attack while still serving as a pilot in the Fleet Air Arm, but his death was said not to be attributable to service. After tax, his widow's current Ministry of Defence pension is £29.06 a week; hardly enough, it may be thought, for a main course fit to put before a regional gas company chairman.

To show how pushed Mrs. Woods is on her income, I quote a comment she made in a recent television interview. She said:

a half-rate pension would give me another £800 a year—which would revolutionise my life. I have briefly stated our still outstanding proposals. Their implementation is long overdue. This is not a matter for party animus, but one of honour for the House and the nation as a whole.

5.34 pm

Sir Andrew Bowden (Brighton, Kemptown)

We have just heard a moving speech from the right hon. Member for Manchester, Wythenshawe (Mr. Morris) and I should like to associate myself with his comments.

The House welcomes the changes in benefits to war widows announced by the Government, and endorsed and confirmed by my right hon. Friend the Secretary of State. The war widows have made enormous sacrifices. But for their menfolk and many others, the House would not be meeting here today in peace and freedom.

I say with great regret that I believe that all Governments since the end of the second world war should hang their heads in shame at the way in which we have treated our war widows. I say, again with great regret because he is a man I respect, that I disagree with my right hon. Friend the Secretary of State when he says that we treat our war widows well. We have not done so and we do not do so today. I hope that in this 50th anniversary year the Government will look again and give more help to war widows.

I emphasise just one of the points made by the right hon. Member for Wythenshawe in relation to older war widows. The fact that they have to exist on just a one third rate is disgraceful; it should be a minimum of 50 per cent. I think that it should be 60 per cent. It would be a declining commitment from the budget and, even at present, it would be a figure of only £27 million to £30 million per year—what a tiny price to pay for those who have sacrificed so much.

I welcome the Bill; I think that it is overdue. I should like to pay my compliments to the Ministers, who, with their Department officials, have clearly carried out an enormous amount of hard work. But I am deeply concerned about parts of the Bill. I must, inevitably, concentrate my comments on those parts, but I do not want not to pay tribute to the work that has been done and to many of the proposals contained in the Bill.

I believe that the Bill should include provisions dealing with British pensioners living abroad. I shall touch on that subject only briefly because my hon. Friend the Member for Davyhulme (Mr. Churchill) will be going into the subject in greater detail. I accept that it is not possible to carry out an immediate uprating for all those pensioners, but they include one group, some of whom suffer hardship because their pensions will be only £4 or £5 a week. I hope that the Government will look at the possibility of implementing a discretionary scheme to look at each case to see whether some of those people can be helped. I understand that immediate full uprating would not be possible as it would be extremely expensive, but perhaps the Government will think hard about making a commitment to future years' uprating, thus going some way towards reducing the unfairness of the position of those living in many Commonwealth countries.

I refer now to some specific proposals in the Bill, particularly the balance between the number of employee and employer representatives on trustee boards. I have no doubt that the balance of one third to two thirds is not fair. The employers' representatives must clearly be in the majority, but that could be achieved by having a 50:50 representation with a chairman appointed by the employers.

Millions of pensioners are very concerned about their representation on trustee boards. There is deep unrest about the matter and I ask the Government not to underestimate the strength of that feeling. I believe that at least one elected representative who is also a beneficiary should serve on a trustee board. There are a number of reasons for that, not least that that person would understand very clearly the position that he or she faced and would reflect that position during board meetings.

When there is a substantial majority of employer representatives on a trustee board, it is inevitable that they will often be high-ranking officials, such as the chief executive, managing director or chairman of a company. Those representatives will certainly have a great influence over the career and the future of the employee representatives who also sit on the board. Human nature being what it is—I am sure that all hon. Members would feel exactly the same—we could not really expect the employee representatives serving on those boards to stick out their necks too far on behalf of the employees.

However, a completely independent, elected trustee who is also a beneficiary would have no personal axe to grind, other than representing the beneficiaries, would have no fears about his or her future prospects or job, and thus could speak very freely and bluntly. There is a very strong case for electing a beneficiary pensioner to sit on trustee boards.

Some thought should be given to arriving at a clear definition of the purpose of pension funds. In essence, they are part of the contract of employment. People join companies that have established pension fund arrangements, often having already studied the terms and conditions of those pension funds. They may be aware of their obligations and those of their employers in financing the scheme. One could argue—I would not take it right to the line—that money paid into company pension schemes is deferred salary or wages. Therefore, one could also argue that only in the most exceptional circumstances—I believe that there would be some cases—should that money be used for any purpose apart from safeguarding the pension scheme in the interests of current and future beneficiaries. We must think through that definition very carefully.

I ask my hon. Friend the Minister for Social Security and Disabled People to examine clause 17(1)(a). It should be scrapped completely because it would enable employers to avoid their responsibilities under clause 16. That would have a real effect upon some of the Bill's excellent aims and intentions. I cannot understand the argument—perhaps my hon. Friend will address the matter in summing up the debate—for including that paragraph in clause 17. There is a strong argument for increasing the strength and the powers of the occupational pensions regulatory authority. It should not only deal with emergencies and problems but have some powers—although perhaps not as wide as some right hon. and hon. Members would wish—to try to prevent disasters. That could be achieved by ensuring that there was proper funding, and that could be assured only through payment from the state.

My right hon. Friend the Secretary of State asked why people who are not involved in the funds should contribute, through their taxes, to the cost of state funding. However, about 20 million people either are or will be beneficiaries. If we also take their families into account, that is a substantial proportion of the total population. There is a real case in favour of state funding and for giving the occupational pensions regulatory authority much sharper teeth.

The Maxwell disaster occurred partly because there is no real control over the custody of pension scheme assets. Surely there is a case for ensuring that in most circumstances—I am not saying in all cases—there could be a custodian of a scheme's assets who is independent of the employer. I suspect that a large number of employers would welcome an independent custodian as it would remove a lot of worry and concern from their shoulders.

Clause 36 also concerns me. The Bill states that regulations may require the provision of documents to scheme members. It is absolutely vital that members receive such documents if they are to know what is going on in the scheme. My hon. Friend the Minister should eliminate the word "may" and insert instead the word "must". People who contribute to the scheme over many years have a right to know what is happening in the scheme. They should know how the money is being used and they should receive a proper statement of accounts.

I am particularly concerned that the word "must" should replace the word "may" because other parts of the Bill clearly state that the employer's representatives can agree at trustee meetings that all decisions should be decided only on a majority vote. I am not saying that many employers would abuse that provision—I believe that only a minority would. However, under the present wording of clause 36, a minority could abuse it by not providing information to members, which should legitimately be made available. I hope that my hon. Friend will examine the situation carefully in Committee.

As to the balance between employer and employee representatives and the importance of trustees, there is a case for arguing that all trustees should receive some compulsory training. After all, the duties of trustees are becoming increasingly complex and demanding and trustees should benefit from the help and support that some fundamental training would provide.

My last point, which was touched on by the right hon. Member for Wythenshawe, is about a matter of deep concern to me and my fellow officers on the all-party parliamentary group on pensioners. I refer to an elderly married couple, one of whom must enter permanent residential or nursing home care. We must establish without a shadow of doubt the right to keep 50 per cent. of a spouse's occupational pension when such a situation arises. If that is not done, in many cases the spouse left behind will be unable to support himself or herself in the property where the couple live. They may have alternatives. They may have a right to income support, but that is robbing Peter to pay Paul. They may have to sell their property and move to an entirely different area. Such problems should not confront elderly people in our country today.

Mr. Mark Wolfson (Sevenoaks)

If a person was eligible for income support, that would be psychologically the wrong way to do it. Sometimes, we do not pay enough attention to the need of people to feel that they can support themselves, rather than have to call on statutory money.

Sir Andrew Bowden

I fully endorse my hon. Friend's point. I hope that I shall not stretch your tolerance too far, Mr. Deputy Speaker, in reminding the House that 750,000 pensioners who could claim income support do not, because they look on it as charity or are not prepared to ask for that money.

A 50 per cent. guarantee would ease the worries of a large number of people. I remind my hon. Friend the Minister that as more and more people each year retire with—thanks largely to this Government—a good pension, such a provision would assist a growing number of people.

Mr. Frank Field (Birkenhead)

Did not the Secretary of State's remarks about dividing capital at the point of divorce add force to the hon. Gentleman's argument?

Otherwise, elderly couples may have to divorce in the last years of their lives, so that the spouse remaining at home can keep part of the pension.

Sir Andrew Bowden

The hon. Gentleman pinpoints a problem that has confronted Governments for some years—creating situations that damage the family. Because of the way in which some laws have operated over the past 20 or 30 years, in some circumstances people are better off divorced or living together unmarried than being married. The hon. Gentleman is absolutely right.

My right hon. Friend the Secretary of State touched on the discretionary powers of local authorities to help in cases where a spouse is taken into permanent care. I do not share his confidence that local authorities will be as fair and balanced as they should. There is already evidence of discretionary powers being used in widely different ways, varying from authority to authority. When local authorities had powers in relation to transport schemes, sometimes people living on one side of a road enjoyed totally free public transport whereas those living on the other side did not. People felt a great sense of unfairness. If we rely on local authorities in this instance, the same will happen.

The Bill has a remarkable number of things going for it, and Ministers deserve to be warmly congratulated. However, deep concern is widespread among the 20 million people who are or will be recipients of pension scheme benefits—and there will be more and more of them in future. I say to my right hon. and hon. Friends in all sincerity that they must not ignore those concerns but meet them. If they fail to do so, it will be at their peril.

5.54 pm

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I commend the speech by the hon. Member for Brighton, Kemptown (Sir A. Bowden), who has for many years been a champion of pensioners as co-chairman of the all-party pensions group. I pay tribute to his work. He made a compassionate and powerful speech, with much of which I agreed. I hope that members of the Treasury Bench will study with care the hon. Gentleman's speech in Hansard tomorrow. The hon. Gentleman is also a distinguished colleague on the Committee of Selection, so I shall be twisting his arm to serve on the Committee as a result of his erudite contribution to the debate. He certainly staked a powerful claim.

I agree wholeheartedly with the hon. Gentleman's final, powerful point about the Government's argument that local authorities have discretion not to use all of a pension for the upkeep of a partner in residential care. All the evidence from Age Concern and the Alzheimer's Disease Society is that that is not happening. The hon. Member for Birkenhead (Mr. Field), in an intervention, mentioned that spouses would almost be obliged to consider divorce to protect 50 per cent. of their pension.

Age Concern estimates that only 10,000 men and 5,000 women are in that situation, so it would not cost a tremendous amount of money to remedy. We will return to that matter in Committee. I hope that the Government Front-Bench team will carefully study the information about the costs, justification and consequences of allowing such a situation to survive consideration of the Bill.

The hon. Member for Stratford-on-Avon (Mr. Howarth) pointed out that huge macro-economic consequences must be kept in mind, in terms of the money under the control of pension funds and the effect of their use on the country's economic future and prosperity. Although the hon. Member for Glasgow, Garscadden (Mr. Dewar) did not have time to deal with that point in detail, I hope that such wider questions will be considered in Committee.

The Bill's long title states that its purpose is to amend the law about pensions and for connected purposes. That offers extensive prospects of amendment and discussion. When the Standing Committee is set the task of examining the Bill in detail, I hope that it will take full advantage of that latitude to scrutinise and cross-examine the totality of Government pensions policy. Although I welcome the Bill as far as it goes, it does not add up to a coherent pensions policy.

I listened to the good speech made by the right hon. Member for Sutton Coldfield (Sir N. Fowler). I will argue for that right hon. Gentleman also to have a place on the Committee, because there was a strong sense of déjá vu of the debates that he and I endured at the hands of the hon. Member for Oldham, West (Mr. Meacher). I could not resist chuckling when the right hon. Gentleman compared Labour's current and much better Front-Bench team with its predecessors in the 1985 and 1986 debates.

The right hon. Member for Sutton Coldfield made a timeous escape in 1987, just before the personal pensions bribes scandal started to take hold—but he is a master of timing, and timing is important in politics. He made a powerful point, to the effect that we need to target help via the state retirement pension at those who need it most. My party is beginning to look responsibly into such a change. The lowest 10 per cent. in terms of income—the 1 million or so people who rely exclusively on the state pension—definitely receive inadequate help. Evidence for that is to be found in the fact that they usually require immediate means-tested support to meet their assessed needs, as defined under current DSS rules. Much more needs to be done, therefore, but I accept the principles behind the right hon. Gentleman's point.

This debate finds me in a bit of dilemma as regards the Labour party's reasoned amendment. The hon. Member for Garscadden made a good speech. Although I share his anxiety that the Bill does not go far enough, I would add that we desperately need to reach a consensus on pensions policy. This Bill may come into effect in 1997; but by some happenstance there may be another Government by then. Putting aside all our usual political divisions we should remember that the last thing that the industry, pensioners or trustees—those who try to look after pensioners—want is another upheaval in policy. Hence we must make the best of the Bill that we have. I am prepared to do that, but it will require some work and some concessions on the part of the Government to guarantee the sort of cross-party agreement that could be reached with good faith on all sides. It is certainly well worth trying to achieve it.

The Government really had no option but to introduce the Bill. It has its provenance in a combination of the Maxwell scandal and the Barber judgment in the European Court. I may be a lone voice when I say—this is not an argument that I intend to pursue, and in any case the time to pursue it has probably passed—that I do not believe that trust law is the best framework for occupational and personal pensions policy. I was attracted by some of the arguments made by the Select Committee in 1991–92. The Committee decided that it would be better to start with a clean sheet and to put pensions policy immediately on a statutory footing.

In a previous incarnation I was a humble Scots solicitor; speaking as one, I do not think that it will be easy to reconcile the terms of the regulations—we have not yet seen them—with differing English and Scots trust law. Trust law was never designed to deal with £600 billion worth of assets, and it may not be easy comfortably to interpret trust law north and south of the border under the statutory framework for which this Bill legislates. Beginning with a clean sheet and aiming at purely statutory provision might have taken longer, but it would have been worth attempting.

I regularly complain about the extensive use of enabling legislation in such key areas of law. The Government should have taken a little longer to draft their Bill. It is not particularly well drafted, judging by the amendments that the Government had to table in the House of Lords. This is largely a piece of enabling legislation, and the devil might easily arrive in the detail—as happened with the Child Support Agency legislation. I freely confess that I did not spot some of the mistakes in that, in my capacity as spokesman at the time. Subsequent problems exploded in an unanticipated way. It is therefore with some misgivings that we contemplate the arrival of another piece of enabling legislation.

I agree with the hon. Member for Garscadden about the Government's retreat from the Goode report. Thanks have been proffered to its chairman and his committee team, but I add my congratulations to the Chairman of the Select Committee, whose reports have brought to this subject an illumination that I for one would not otherwise have found. I am sure that the same applies to other hon. Members. There is evidence to show that the Government have significantly diluted and distorted Goode's proposals—no doubt because the Government were subjected to extensive lobbying by interest groups. That is politics, I guess, but I regret it. The Standing Committee should carefully scrutinise this Bill and try to strike the right balance. Liberal Democrats are very good at striking balances.

I am especially concerned to find that the regulatory authority will be neither regulatory nor an authority, a view shared by Help the Aged. Sue Ward, a distinguished member of the Goode committee said, no doubt referring to Maxwell: Given the costs of a major investigation, and of court proceedings to put right what has gone wrong, this seems a very distorted set of priorities". I agree. I am not sure that I share the Government's optimism about the protection afforded by the Bill.

I expect, as did the hon. Member for Garscadden—he is not one to miss a trick when it comes to the odd £4 billion here or there—that some of the changes being made to the schemes for contracting out of SERPS, in the course of this reform, will have to be very carefully looked at. Moreover, we shall have to take a close look at pensioners' possible future losses owing to the requirement to index-link pensions, under SERPS, by up to 5 per cent. If inflation increases—it has happened in the past—pensioners could lose out heavily.

In 1985–86 I was a lone voice in arguing that personal pensions have a part to play, so I am not in the same position as the Labour party in that regard. I am, however, worried about some of these age-related rebates, which might cost up to £300 million a year. Certainly, we must try to improve the choice and availability of personal pension schemes, but we should not allow that to prejudice occupational schemes. To do so would be a grave mistake.

Rightly, the Bill includes a proposal to deal with the state pension age. I have some real concerns about the effects on women, however. A recent report by the Equal Opportunities Commission stated that the equalisation of retirement ages will make it much more difficult for retired women to be financially secure, because women's lifetime earnings would be averaged over an additional five years. EOC researchers say that women will end up with lower state pensions in real terms unless they can secure well-paid work between the ages of 60 and 65. But only a fifth of women of that age are in paid work.

My party has looked into the homogenisation of retirement ages and we have come to the conclusion that a pivotal retirement age of 65 would make it possible for the state pension to be significantly more generous. But the qualification is that some of the savings are routed back, as the hon. Member for Garscadden said, in some way, so that the present entitlements can be improved.

Mr. Dafydd Wigley (Caernarfon)

I have been following what the hon. Gentleman has said with considerable interest; he referred to the retirement age. Does he accept that there is one group for whom there is considerable difficulty: the agricultural fraternity, the members of which very often do not have any personal plans of their own or an occupational pension? Often, because of their circumstances in earlier life, they do not have the full benefits of a state pension, either. As a result, they work beyond normal retirement age, which leads to an industry with an age structure that is detrimental to its future. Given the broad long title of the Bill, might there be a possibility in Committee to examine that to see what can be done to help them?

Mr. Kirkwood

The hon. Gentleman is another volunteer for the Standing Committee. I am picking them up rather well. The Committee of Selection will be a lot easier than it usually is. The hon. Gentleman raises an important point. Coming from an agricultural constituency myself, I am sure that that matter is something to which the Committee will want to give its consideration.

As a party, the Liberal Democrats have looked at the possibility of redeploying some of the savings that would be made by using 65 as a pivotal age, to enhance the pension that would come into play at 75 and 80, so that as people become older and lose the ability to go into part-time work or deal with their own personal circumstances they could pick up some extra support. The hon. Member for Garscadden made the point well and I am sure that it has been taken by hon. Members on both sides of the House.

On pension splitting, will the Minister look carefully at the differences in the law on pension rights north and south of the border because, in the matrimonial context, Scots courts are entitled to regard pensions as part of the matrimonial property to be split? There are difficulties about that.

Mr. Lilley

indicated dissent.

Mr. Kirkwood

The Secretary of State shakes his head. I am quoting the Lord of Ardbrecknish—

Hon. Members

Lord Mackay.

Mr. Kirkwood

He was chairman of the Liberal committee so long ago that I had forgotten his name.

Mr. Lilley

I was shaking my head at the use of the word "split". In Scottish law, there is not the power to split the assets. There is an explicit duty to take into account the value of pensions north of the border, and a long-standing implicit duty south of the border. We made it explicit south of the border in the Bill and gave the enabling right, but splitting is a different matter.

Mr. Kirkwood

I withdraw. The Secretary of State is quite right. The use of the word "split" is wrong. There are still significant differences, which I urge the Minister to look at carefully. We shall return to it in the Standing Committee, but there are lessons to be learnt—as there always are—from the Scots legal system, when looking at amending laws in the rest of the United Kingdom.

My final point is about British pensioners living abroad. We as a party have looked at that carefully. We have listened to all the arguments. I think that the time has come. I know that £200 million is involved, and I do not think that that is a mere bagatelle. It is a lot of money, but I think that it is a duty that we should shape up to. If we are not to go straight for indexation, we should look at reciprocal arrangements with the countries to which such arrangements do not apply. The Liberal Democrats have decided to make that a commitment that we would seek to introduce if we have the opportunity. The Government would be well advised to look carefully again at the arguments.

The Bill, I am sure, can be improved in Committee, but it will be improved in Committee only if the Government act in good faith. It is my concluding plea that if the Government really are attached to the idea of establishing consensus in the framework of pensions policy that will survive a change of Government, it is incumbent on them to listen carefully to the suggestions that will be made—responsibly, as far as I am concerned—for effective changes that can and would improve the content of the Bill.

6.13 pm

Mr. Winston Churchill (Davyhulme)

It is a pleasure to follow the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). I am grateful to him for the support that he expresses for the campaign that I and others have waged in the House to secure justice for expatriate pensioners.

There is much that is good in the Bill, both in the way in which it strengthens the regulatory framework for occupational pensions, in the wake of the Maxwell scandal—clearly, that was something that was long overdue—and in the way in which it takes steps to equalise the retirement ages of men and women. I warmly welcome the Government's acceptance of Lord Freyberg's amendment in another place, which will be of great assistance to the nation's war widows. As sponsor of early-day motion 279, which calls for an end to discrimination against British state pensioners living abroad, I should like to devote my remarks to their plight.

My early-day motion, which, in the past Session, secured the support of no fewer than 288 colleagues on both sides of the House, has been signed thus far by some 248 in the current Session. It expresses the House's grave concern at the discrimination … against British State pensioners depending on the hazard of where they choose to make their place of retirement.

I and my colleagues, from both sides of the House, who support this measure are not seeking handouts for people who have not paid their proper contributions, although one sees day by day the Department of Social Security standing ever ready to give a vast number of people who have never contributed a penny to the national insurance scheme lavish handouts, including foreign citizens who enter our country illegally, because there are no effective measures in place to establish the true identity or nationality of those who claim benefits.

In a recent case, which was so notorious that it attracted the headlines, some 15 citizens of Nigeria arrived here and chartered a stretch limousine and two apartments in an up-market area of Knightsbridge, in order systematically to defraud the social security system by taking on the identities of more than 2,000 individuals. Thanks to the assiduity of my right hon. Friend the Secretary of State, they were eventually uncovered, but one wonders how many such scams are in operation. The sooner that we have effective steps in place to stop the monstrous fraud that is being perpetrated on the social security fund, the better.

I was particularly intrigued by a statement that was made by my right hon. Friend the Secretary of State for Employment, on 8 February 1993, when speaking in the public expenditure review. He stated:

We must adhere to our important manifesto commitments to pensioners. People make provision years in advance for their retirement. I do not wish to be deprived of any contribution that I have made to my pension—so these are important issues. I think that we would all endorse that sentiment. But the fact is that the very same Secretary of State is a member of a Government who are effectively depriving some 381,000 British overseas pensioners of the pension to which they have contributed throughout a lifetime's work. I and my colleagues are seeking justice and equal treatment for those who have paid those national insurance contributions throughout their working lives. Because of where they have chosen to spend their retirement, 3 per cent. of British pensioners are deprived of their full pension. Of 676,000 British retirement pensioners living abroad, more than half—about 381,000—have their pensions frozen.

The selection of countries where British pensioners have their pensions frozen is, to say the least, bizarre—indeed, insane would not be too strong a word. Those who choose to retire to one of the old dominions—which played such a key role in the very victory which, a fortnight today, the Government will be rightly spending significant sums to celebrate—have their pensions frozen.

However, those who retire to the land of our former enemies—Germany or Italy—naturally get their pension payments and all upratings paid in full.

I invite Ministers to ponder that point as we approach the 50th anniversary of VE day. Where is the justice? Why is the full pension payable to someone who retires to Detroit, but not to someone who lives just across the water in Ontario, Canada? Why should those who retire to Jamaica or Barbados receive a full pension, but not those who retire to Trinidad or Tobago? Why should those who retire to Iceland receive the full pension, but not those who retire to India or Pakistan? Why are pensions frozen for the 14 remaining British pensioners in the Falkland Islands, when billions of pounds of taxpayers' money were spent reclaiming those islands from Argentina?

Where is the justice; where is the logic? I should be grateful if my hon. Friend the Minister, when replying to the debate, would, for once, deal with the question of justice. Where is the justice in these arrangements? I am bound to say that successive Ministers have ducked that question because they have never dared defend such discriminatory, unfair arrangements on the ground of justice. It is about time that they did so and I look forward to hearing what my hon. Friend the Minister has to say.

I recently received representations from the Canadian high commissioner in London. He pointed out that the average pension of the 118,000 British pensioners in Canada is currently £20.36 per week—barely one third of its full value. As he poignantly said—and I have passed his remarks on to my right hon. Friend the Prime Minister:

The unfairness of the issue is very striking in Canada where for instance a British pensioner in Windsor, Ontario does not receive an indexed pension, but just across the river in Detroit a fellow British pensioner does. I want to quote one or two excerpts from some of the many thousands of letters I have received, in particular from pensioners living in the old dominions. One letter from Fort Saskatchewan, Alberta, Canada states:

Living in Canada, as I do, and having left the UK in 1968, my pension is frozen at the princely sum of £4.50 per week. If I had moved to the country of one of our former enemies, such as Germany, I would receive the full current pension … twelve and a half times as much … I urge your Prime Minister, the Right Hon. John Major to press for this reform and not to let Britons abroad suffer any longer. Of course, the most poignant cases come from South Africa, where there is no effective net of social security, unlike in the other old dominions. Edna Thompson wrote to me from Victoria embankment, Durban, saying:

I am an 86 year old widow living alone along with many of my peers, I am almost destitute. Please try to get the British Government to do what is right by us regarding equality of pensions for us overseas oldies—we would come back to the UK to claim a living but haven't the fare. My pension is £24.30 every 28 days, that is … R 100. I dread the winter as I cannot afford to use any heat. Please help us. How is it possible that this Government, who in so many ways are caring and compassionate towards so many in our society, can turn their back on those who have served our country so well? They are the very hero generation whose victory we shall be celebrating in a fortnight's time, yet the Government are turning their back on them.

Another letter from Noordhoek, South Africa, states: My wife and I have lived here since 1951. I am now 85 and she 77. We receive £6.75 for Self and £4.15 a week frozen. Intriguingly, in a recent Adjournment debate that I initiated, my hon. Friend the Under-Secretary said that retirement pension upratings are not generally payable abroad. That has been the position since 1955 … It is fair to point out that, since 1955, people affected would have known, or could have found out, that that would be the position".—[Official Report, 6 July 1994; Vol. 246, c. 431.] However, I have received comments on that statement from Mr. James Rogers in Victoria, British Columbia. He writes that he received a communication from the Ministry of Pensions and National Insurance dated 6 December 1956—a whole year after the year to which the Under-Secretary referred—stating clearly: Your title to British National Insurance benefits, providing, of course, that contributions are maintained, will not be affected in the event of your becoming a citizen of Canada, or the United States of America. That has been proved to be a direct lie. I call on my right hon. Friend the Secretary of State and the Government to honour the promises that were made.

During the late 1940s, after the war, and the 1950s, many thousands of people consulted Government agencies about the effect on their pensions if they lived abroad, and time and again they were told, "Provided you maintain your contributions to the age of 65"—or 60 for women—"you will get your pension." There was no mention of a devalued or frozen pension.

Great play has rightly been made about how monstrous it is that occupational pensioners should have been defrauded in the Maxwell scandal. However, I regard it to be a monstrous fraud that many thousands of British ex-service personnel and others have gone abroad, having been misled by the then Ministry of Pensions and National Insurance into believing that by making extra payments they would receive their full pension entitlement. It cannot be right to treat those who have served this country so well in our hour of need in such a shabby and unfair way. I know that the standard reply, which I am sure will be trotted out this evening, is that the cost is exorbitant. Amazingly, the cost seems to have come down by almost a third as a result of a rejigging of the figures in the Secretary of State's Department. I am glad that they are coming down the right way. According to the latest reply that I have received, they have come down from more than £350 million to some £235 million.

Madam Deputy Speaker, to you and I, £235 million might seem a large sum of money, but it is no more than one third of 1 per cent. of the social security budget. In this 50th anniversary year of VE day, I call on my right hon. Friend the Secretary of State and, above all, on my right hon. Friend the Prime Minister, to do the right thing by this hero generation, who should not be deprived and required to live in circumstances of great destitution and misery.

I look forward, therefore, to bearing that the Government will at least come to an arrangement. If they cannot pay the full amount, how about going for a scheme whereby people aged over 75 would at least have their pension restored to what it should be? According to the Minister for Social Security and Disabled People in his written reply to me on 12 July last year, the cost of that would be £138 million—little more than half the figure that I quoted. That would give enormous help to people who need it most. People who have been retired for 10, 15, 20 or even 25 years are suffering most. It is my earnest hope that my plea will not fall on deaf ears.

6.31 pm

Mr. Frank Field (Birkenhead)

I am pleased to follow the hon. Member for Davyhulme (Mr. Churchill). Earlier, we were reminded that the Bill has an omnibus long title, which offers hon. Members an enormous opportunity to table amendments on Report. About 240 hon. Members have already signed his early-day motion—

Mr. Churchill

It has been signed by 248 Members.

Mr. Field

With 248 Members signing the motion, if a suitable amendment is tabled and supported we hope that the Chair will select it. We will then find out whether hon. Members vote as they sign early-day motions; one hopes that they will.

In opening today's proceedings, the Secretary of State for Social Security rightly reminded us that the Bill results directly from Robert Maxwell's theft of what were euphemistically called, here and elsewhere, the Maxwell pension funds. Merely to call them that raises in an acute form the point made by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) in relation to whether trust law is a suitable framework to safeguard pensions. As he and I say, that, sadly, is water under the bridge; we must deal with the Bill as it is.

In reminding us of the Bill's genesis, the Secretary of State was in order formally to give his thanks for the work of Sir John Cuckney in securing funds to safeguard what are still called the Maxwell pension funds. I shall go further: I want to compliment him on his stand. The position was difficult for the Maxwell pensioners, given the uncertainty that they faced, but Sir John was 100 per cent. right to resist calls made not only in the Chamber but outside that taxpayers should cough up the money immediately. The result of the way in which he has played his hand is that companies have returned funds on which, presumably, they thought other people had claims.

Taxpayers are not being asked to make a substantial contribution to pension funds and all pensions will be paid, but the mechanism by which that success was achieved was Sir John Cuckney. I hope that, at some suitable stage, the Government will not only thank him in the House but reward him suitably for the skills that he has deployed on behalf of pensioners.

The Secretary of State rightly reminded us that half a dozen measures will be put in place to protect funds in a way that the Maxwell pension funds were not protected. He did not say, although I am sure that it was in his script, that, no matter what we do, we cannot give a cast-iron guarantee on the safety of pension funds, or of any other funds, come to that. It is proper, therefore, for us to consider whether the six measures should be strengthened, and proceedings in Committee and on Report will give an opportunity to make suitable amendments.

The Secretary of State said that he would introduce the Goode committee report. The right hon. Gentleman and I spoke at a conference that was organised by Sir Roy Goode, who said that he was disappointed that the regulator was not more carefully defined on the face of the Bill rather than in regulations. He also envisaged that the regulator's role would be more proactive than the one proposed in the Bill.

The Secretary of State may reassure us that we are wrong on that, but it is wrong for him to put up straw figures and to say that somehow the Government propose to have a regulator who is really a glorified filing clerk receiving all pension fund accounts. We want a proactive agency whose staff are streetwise, who know where problems occur or are likely to occur and who will act to prevent fraudulent actions from taking place, rather than, as my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, manning an ambulance afterwards. We shall return to that issue.

An issue to which we will not return after the Bill has been passed is the equalisation of pension ages. When the measure hits the statute book, I shall be surprised if anyone campaigns in the election to change that commitment. Although it is right for groups to represent their concerns about the issue, it is of much greater import to consider the use of the funds that will be saved for the national insurance fund when the pension age is equalised at 65.

I wish to emphasise my belief that 65 will not be the end of the story. In saying that, I wish to remind hon. Members of the beginnings of pension schemes. When the first pension scheme was introduced in 1908, the average of life expectancy was 45, and pensions were not drawn until 70. It seems extraordinary that we think in set terms of when pension ages should be set, and that it is not a moveable feast as the population becomes more healthy and lives longer.

The Old Age Pensions Act 1908 was enacted because of pressure from the friendly societies, which found that their pension requirements were a substitute for sick pay and that people had to withdraw from the labour market because they could no longer work. I hope therefore that, before the general election, we will have clear plans about the benefits structure before what is called retirement age, because the more we get that structure right, the less pressure will exist to seize on retirement pension as a form of income.

At the end of my speech I shall talk not about the flexibility that will result from our making all sorts of funny definitions about when we think people should retire but about the real flexibility that will come from people owning capital on the basis of which they can decide when to retire.

In debating the raising of the pension age to 65 in all cases, I hope that we shall give some thought to how the substantial sums of money that will be saved should be spent. I know that the Government have taken their decision in the context of trying to contain the social security budget. Indeed, for 15 years the Government have been saying that they will cut that budget but even the current Secretary of State finds it difficult to slow the pace of its increase, let alone cut it. The Secretary of State raised various important issues around this theme.

The hon. Member for Brighton, Kemptown (Sir A. Bowden) talked about people moving into residential care. He allowed me to intervene to say that, if we do not make some changes to allow people to keep part of their occupational pension schemes when their partner moves into residential care, we shall be creating the farcical situation in which people will be divorcing their elderly spouse so that they can keep part of their pension when the spouse moves into residential care.

Under the social security system, we must not have the forms of provision pitted against human nature. The Government rightly tell people about the importance of saving but woe betide anyone who becomes frail and ill at the end of his life because the Government will take away his savings. One cannot expect people to respond rationally in those circumstances, so many grannies lie about their assets and get help fraudulently.

The proper approach is to consider the need for a care pension, which should be part of the national insurance fund and which would be partially paid for by the savings made from the raising of the retirement age. The rest would be paid for by contributions from workers and employers, but it is immensely important that, if we are trying to encourage people to build up their pensions and to buy assets and houses, they know that they will not lose everything if they tell the truth at that point in their life when they most need help, when they are frail and elderly and need residential care.

I believe that the debate that we have had for 15 years about the level at which the retirement age for the state pension should be set will be closed by the Bill. A new chapter will begin and the debate will not be about whether it should be overthrown by a future Government but about how the age itself will have to reflect the increasing health and length of life of the pensioner population.

My final point fits in with other themes that have been raised and certainly touches on the contribution of the right hon. Member for Sutton Coldfield (Sir N. Fowler) which was, as always, interesting. He mentioned how the Bill fits into the future pattern of pension provision. Less than two and a half years ago, a colleague, Matthew Owen, and I wrote a pamphlet about what we saw as the future of pension provision. We said that it was to guarantee that everyone should have two forms of pension—a state pension and a private pension, whether it be a company or personal private pension.

It is amazing how the debate has moved on in the past two and a half years. Not only are organisations such as the National Association of Pension Funds backing that dual approach—even the Commission on Social Justice almost backed it. It dressed it up with some ideas to the effect that perhaps the state earnings-related pension scheme was an alternative but, if we are honest, we all admit that SERPS is dead in the water and can now play a part only for those currently in it or perhaps, as the right hon. Member for Sutton Coldfield said, as a way of making special additions for the poorest pensioners so that their entitlement dies with them and does not live on for the rest of us to draw.

The only question, therefore, in this part of the jigsaw puzzle is whether the approach should, as Ministers maintain, be exhortation to get people to enter a second pension scheme or compulsion. Should we legislate so that everyone working a certain number of hours a week must be covered by a second pension and so that the compulsion would extend to contributions from employers and employees? In those circumstances, thought would clearly need to be given to the form of pensioner savings.

The right hon. Member for Sutton Coldfield mentioned his plan some years ago to try to get the Post Office to sell private pensions. All good ideas presented to the House have long roots, and I have news for the right hon. Gentleman. Mr. Gladstone tried to introduce such a reform, but the Pru and other organisations realised that they would have great difficulty competing with such a scheme and, needless to say, that reform did not see the light of day—nor did the right hon. Gentleman's.

I hope that there will be a real divide between the parties. Ministers will hope that everyone is covered and perhaps leave it to the taxpayer at a later stage to pick up the bill. I hope that our position will be one of compulsion so that everyone is in the state and a private scheme. I hope that that will be one of the big issues that we debate in the general election, but I end as I began.

The Bill contains many important and worthwhile clauses but no doubt many will be improved by debate. It will close one chapter while opening many others. It is the result of the wicked theft by Maxwell of the Maxwell pension funds. Although the Secretary of State set up the framework whereby those funds were to be regained, the hero of the hour was Sir John Cuckney to whom I, too, extend my thanks.

6.46 pm

Mr. Douglas French (Gloucester)

I begin by declaring an interest. I am chairman of the management company of the Pension Trustee Forum; adviser to the consulting actuaries, Alexander Clay and Partners; and chairman of the seminar company, Westminster and City Programmes. All those interests are relevant to the aspect of the debate on which I shall concentrate.

This is a far-reaching, sound and much-needed Bill. I congratulate my right hon. Friend the Secretary of State in particular on the care that he and his Department have taken to consult all interested parties at each stage of the debate. The Bill embraces most of the important recommendations made by the Goode committee, and my right hon. Friend has undertaken a separate consultation exercise on the equalisation of pension ages. In my view, he has responded effectively to the reports of the Select Committee on Social Security.

In that context, I pay tribute to the hon. Member for Birkenhead (Mr. Field) for his work on the subject as a whole but especially for his contribution through the Select Committee. I am bound to say, however, that I do not agree with the view that he apparently shares with the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) that trust law was not necessarily the right basis on which such legislation should have been framed. I believe that it is the right way to proceed.

I am relieved that the legislation was not rushed. In the aftermath of the Maxwell saga, it would have been all too easy to rush through proposals which, inevitably in such circumstances, would have been ill considered. The fact that the Government have taken the time and trouble to prepare the legislation as they have is to be commended.

As we have heard, a key aim was to put in place measures to provide additional security for pension fund assets and, as far as possible, to reduce to negligible proportions any risk that those who made contributions in the expectation of enjoying benefits later should have them snatched away by negligent or criminal activity.

The Secretary of State spoke about six lines of defence to ensure security of those assets. Underlying what he said was the desire to achieve additional security without undue additional regulation and without avoidable cost. One must always bear in mind the possibility that if the additional burdens put on employers are too great, it is open to them to disengage themselves from pension provision altogether. A fine balance must be struck.

The White Paper fully acknowledged the important role of trustees, alongside the role of the occupational pensions regulatory authority and the role of professional advisers—the three key figures of the regulatory framework. It is clear that the role of the trustees will be greater than it has been. Trustees will have increased duties and increased responsibilities, and their effectiveness will be crucial to the safety and security of the schemes. The trustees will be legally responsible when something goes wrong. The Bill sets out a range of penalties to which trustees will be liable, ranging from suspension or removal from office to fines or, in the worst cases, imprisonment. A key component is that the occupational pensions regulatory authority will be able to impose some of those penalties.

The fines regime in particular presupposes that penalties are likely to be necessary. I consider it rather more important that the need and occasion for the imposition of fines should be reduced to an absolute minimum. In that sense, I associate myself with the views expressed by my hon. Friend the Member for Brighton. Kemptown (Sir A. Bowden) about the need to train trustees thoroughly to enable them to fulfil the responsibilities that they take on. We are talking about lay trustees who act in a voluntary capacity. They will, of course, have professional advisers such as solicitors, accountants and scheme actuaries.

By their very nature, the trustees should be people who try to act in the best interests of the scheme; that is what should be and, no doubt, will be uppermost in their minds. They will bring to the task the appropriate, sound common sense that lay trustees have always tried to bring to bear in the past. It would, however, appear from the Bill that the trustees will not necessarily have had the benefit of any form of training. I fear that that is a mistake and to that extent, I fully endorse the views that my hon. Friend the Member for Kemptown expressed.

There is a parallel with the position of school governors. With the introduction of local management of schools and grant-maintained schools, the task of school governors was made much more complex and the consequences of doing the job less than competently were made much more serious. One result has been a reluctance among people who would otherwise be well qualified to act as school governors. I fear that the same may happen with pension fund trustees.

Mr. Jenkin

We on the Select Committee on Social Security carefully considered what training should be apposite or, indeed, required by law. We took evidence from a wide variety of sources, including from trustees of schemes in which members were already represented. The conclusion that I firmly reached was that the less interference we stipulated by law the better, as the best schemes would naturally wish to train member trustees. I felt that to burden good schemes with too much regulation could be counter-productive.

Mr. French

I am grateful to my hon. Friend for that contribution. I have read the Select Committee report and I was extremely interested in how the Committee arrived at its conclusion; there is no clear explanation. I shall say a little more about that in a moment.

My fear is that some people who would otherwise be willing to be trustees will be less willing and that some able people will, therefore, be lost to that important responsibility. Trustees will, after all, be accountable, as they are at the moment, but more so under the Bill, for billions of pounds of funds and for the future well-being of millions of people, but they will not necessarily have had any special training. I am puzzled why that should have happened because the importance of training has been emphasised at each stage of the consultation. All the reports emphasise how important training is yet everyone, whether the Select Committee, the Goode committee or whoever, then comes to the conclusion that it would be wrong to impose any training requirements.

Mr. Gerry Sutcliffe (Bradford, South)

Training is vital. If the regulator is to rely on whistle blowers, we need people who fully understand their responsibilities and duties. I echo the point that training is a must.

Mr. French

I entirely accept the hon. Gentleman's point. The conclusion on training is to be found in other forms, such as in the Goode report, which says: We do not consider it would be practicable to require all trustees to complete even a preparatory training course, but we strongly recommend schemes arrange this as a matter of good practice". It is not explained why the Goode committee regards a requirement for training as impracticable, yet goes on to say that training should be a component of good practice. That seems inherently contradictory.

Much the same appears in the Select Committee report. The Committee said that it believed in a policy of comprehensive training for trustees which should ideally commence before they take up their role and should continue throughout their time in post … training should consist of both an introductory training course as well as regular updates. We would also support the proposal that trustees should be strongly encouraged to obtain a certificate of qualification in trusteeship. We reluctantly accept it is not possible to make such training a compulsory requirement". That is an inherently contradictory position.

The closest that the Bill gets to requiring training is to require employers to permit trustees who are employees of the company to take paid time off work for training. It is, of course, entirely optional for the trustee. Why—I continue to search for the answer—has it been felt that it is better to leave the trustees' knowledge to chance? It has been suggested that it is a matter of cost. If it is, it is a short-sighted point of view because costs are extremely small compared with the entire value of the assets of the pension fund that one is trying to keep safe.

On 13 March, amendment No. 89 was tabled in the other place. It stated: Every person appointed as a trustee shall undertake a short course of training approved by the Authority"— OPRA— (unless he has already undergone such a course or holds a relevant professional qualification). The other part of the amendment said:

The appointment as trustee of any person who fails to undertake such an approved course within six months of his appointment shall lapse and may not be renewed without the approval of the Authority". The amendment was seeking the right approach, although I regard that formula as more prescriptive than it needs to be. That point was reflected in the response of Lord Mackay of Ardbrecknish when he said: The Government do not dispute for a moment that trustees should be properly trained but we believe there are very sound reasons why such training should not be made compulsory. He went on to explain those reasons, which I found extremely unconvincing. He said that the amendment proposed did not take account of different training needs and that trustees will have varying experience, knowledge and abilities and need different amounts of training. He regarded that as an insuperable practical objection to the proposal of requiring training. I find that unconvincing, especially since he later said: Training for trustees is essential. It is vitally important that trustees boards should contain properly trained and informed trustees".—[Official Report, House of Lords, 13 March 1995; Vol. 562, c. 670–72.] It is apparently not so vital that any requirement is to be placed on trustees.

The training requirement does not have to be as mechanical or prescriptive as the amendment proposed. It is perfectly possible to establish a requirement for training without specifying exactly what courses or how much training should be undertaken. A requirement could be placed on the board of trustees to ensure that all trustees have had appropriate training. That leaves the responsibility to the trustees but makes it mandatory for them to have had the required training to fulfil their responsibilities. That is a halfway house between the Government's view and the amendment proposed in another place and it should be examined with great care.

It is very much more important to have training in place than it is to argue about the proportion of trustees who come from different sources. There is some argument about whether the requirement for member trustees should be one third or 50 per cent. That seems to be rather irrelevant. The key is how qualified, competent and well trained are the people who are selected to be trustees. The percentage argument presupposes that whenever conflicts arise people will take the view of the party that they allegedly represent and that therefore a member trustee will always take the view of the members. That is quite contrary to the spirit and role of a trustee, which is to be an independent person. I would much prefer the stress to be put on training rather than percentages.

To that extent, I was interested in what my hon. Friend the Minister for Social Security and Disabled People was supposed to have said in an interview in Pensions World, which was the quoted by the hon. Member for Glasgow, Garscadden (Mr. Dewar). My hon. Friend was quoted as saying: The precise proportion doesn't probably matter". If that is a correct quotation, I totally agree with my hon. Friend; it does not matter at all. It is by no means the key issue.

I would like to ensure that provisions are put in place so that one may be confident that trustees know when to be on their guard and when to ask the right questions and know if something is amiss with the advice that professional advisers are giving. A reasonable amount of formal training is absolutely essential in that case.

The arrangements made for each fund in relation to custody—who holds the assets—are a key consideration. Custody was a vital ingredient in the Maxwell saga, when the rules were not sufficiently spelt out, and they are not sufficiently spelt out in this Bill either. The trustees should be required to ensure that proper custody arrangements are made. That could be done through the professional advisers to the fund, but trustees need to know enough to ensure that the custody arrangements in place are safe and appropriate to the fund.

I also believe—I very much agreed with the point made by the hon. Member for Birkenhead—that the new regulator should have a proactive role. He has to ensure that custody arrangements are correct and he should not have to wait until a trustee comes along—albeit at the moment an untrained trustee—and says that he is not sure that everything is quite right before acting. By that time, it would be almost certainly too late. If we are determined to ensure that trustees are able to fulfil their role—that is what the Maxwell-related part of the Bill is all about—training is absolutely essential.

I would like to comment on many other aspects of the Bill, but I shall refrain from doing so in the interests of other hon. Members who wish to speak. I would simply like to endorse the emphasis which my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) placed on the difficulty of the long-term arithmetic for pension provision. We have begun to face that difficulty in the Bill, but there is much more work to be done because the arithmetic simply does not add up. One would not have to get very far into the future before that message came home in a striking way.

I endorse the formula that has been adopted for the equalisation of the state pension age. I also very much welcome the announcement that my right hon. Friend the Secretary of State made this afternoon on war widows. That will be greatly welcomed by people up and down the country.

7.6 pm

Mr. Harry Cohen (Leyton)

I agree with the comments of the hon. Member for Gloucester (Mr. French) about the need to improve the training of trustees. I have enjoyed listening to a number of erudite speeches on this complex subject. The Bill is also complex. It had, at the last count, 162 clauses and seven detailed schedules.

As has been said, the Bill derives from the Maxwell scandal. I noted that the Secretary of State made his usual gibe about Robert Maxwell being a socialist. Some of us who are socialist would very much refute that definition of Mr. Maxwell. He was, in fact, a private sector potentate who stole his workers' pension money. I emphasise that he was a private sector employer. The Government are increasingly putting emphasis on the private sector. They spent £9 billion of public money to bribe people to opt out of the state earnings-related pension scheme and buy private pensions, many of them often worse than their occupational pensions. There is a hint that there will be new contracting-out arrangements in this Bill, which could be matched by yet more taxpayers' money.

As has been said, the Goode report came out of the Maxwell debacle. It made significant recommendations, some of which are in the Bill. Many recommendations, however, have been watered down or even distorted. One concern, which has already been mentioned, is about the powers of the regulator. It seems that the Government may weaken whatever powers the regulator is given. There is a fear that, if the Government go down that route, standards of routine checking will fall below those that exist. We shall closely scrutinise the Government's decisions on the regulator's powers.

The Bill contains serious flaws and it could be a missed opportunity to provide real security in retirement for everyone. Pensions are deferred pay. Those to whom the pay belongs should have most of it in their stewardship, yet, under the Government's proposals, employer trustees will be able to outvote the member-nominated trustees. There is a strong case for the majority of trustees being member-nominated. The Minister says that that is not important. Well, I think that it is a matter of importance. Certainly, employees and their representatives think that it is a matter of importance and that they should have at least 50 per cent. of the votes on the board of trustees.

I agree with the point that pensioners should have representation on the board of trustees. The training point has been made. As other hon. Members have said, there should be no intimidation of member trustees. The hon. Member for Brighton, Kemptown (Sir A. Bowden) said that some member trustees could face intimidation or threats to their job or promotion prospects. We should write into the Bill that no intimidation of member trustees will be legal.

We should be far more restrictive of employer contributions holidays. Over the past few years, employers have taken millions of pounds out of pension funds in contributions holidays for their own benefit. As the Bill is drafted, it would enable that to continue. That could endanger a scheme's long-term ability to meet its commitments.

There is a case for better inflation-proofing than the Bill provides for. It provides for inflation-proofing to the retail prices index or 5 per cent., whichever is the lower. We live in relatively low inflation times, but that may not be the case in the future. An employer will have the power to allocate only 5 per cent. for inflation, so the actual value of the pension fund could diminish. That matter could be investigated in Committee.

Several hon. Members have mentioned representations made by Age Concern, the Alzheimer's Disease Society and various other organisations, about occupational pensions and state pensions when one partner of a couple goes into care. Age Concern's letter says: Age Concern also sponsored an amendment to improve the state pension of women separated rather than divorced. Age Concern's amendment would have allowed women who were separated, particularly those separated by their husband going into care, to claim the full pension. That was a sensible amendment, but it was not accepted by the Government. Age Concern says: Unless the government amends the pensions bill, some women will be financially more secure if they get divorced when their husband goes into long term care. We should not inflict that on those spouses. Such an amendment must be considered again closely in Committee. I hope that the Government will show some flexibility on such issues and that we can get a reasonable change.

There is a quietly spoken agreement that retirement at 65 for women is acceptable. I do not think that it is. It discriminates against women. It is unfair to women. Women under the age of 44 will lose about £15,000 at today's prices if their retirement age is raised. That is straight robbery of those women. It is unjust. It is indirect discrimination.

Far fewer women than men have occupational pensions, so a far greater proportion of them will have to work right up to 65, especially as many women take career breaks during their working life. Many men will not have to work up to 65. Perhaps twice as many women as men may have to work to 65. So I do not agree that the argument should be settled by a common retirement age of 65. I am in favour of lowering the retirement age to 60 for everyone—for men to join women. That could be phased in over a considerable period. The Government are phasing in the increase in the retirement age to the year 2020. We could phase in a reduced retirement age over an extended period. We could perhaps reduce the retirement age for men by one year each decade. That would at least take us towards equal retirement at 60. That is the direction in which we should go. It is not the direction in which the Government are going.

I wish to concentrate my remarks on pensions and divorce and the need to arrange for equitable distribution of pensions in the event of divorce. I have presented to the House two ten-minute Bills on the subject, one in the last Session of Parliament and one in January this year. My measures have been published, so there are Bills that show how pensions could be divided in law.

I pay tribute to Baroness Hollis and the others in the other House who pressed an amendment and had it carried. The Government were defeated by five votes. That is to be welcomed. I appreciate that the Government have accepted that amendment in principle today. There is a powerful case for equalising pensions in the event of divorce. I shall deal later with how that could be done.

I wish to read to the House two quotations. One is from Sallie Quin of the organisation Fairshares, to which I pay tribute for its campaign on the issue. In a paper which it submitted to the House of Commons Library, it says: The wife suffers a double betrayal, she is betrayed by her partner and then by the system which dashes her hopes and all too often condemns her to a life, if not of poverty, of very reduced circumstances. Even if she has pension entitlement in her own right it is below that of her husband's through career breaks and periods of part time work… The wife is treated like a chattel. She is totally at the mercy of her estranged husband. If he decides to continue working until the age of 75 she will not receive her entitlement until then, and while he has a comfortable salary on which to live she must survive on state benefit. If he dies before retirement she will receive nothing as she has no entitlement, as an ex-wife, to a widow's pension. If he dies after retirement her source of income will dry up for the same reason, you cannot be both his widow and his ex-wife. It is accepted that women live longer than men, therefore there will be many wives spending their last years thrown on to state benefit… We believe that it is possible to divide pensions on divorce. It will not be easy, but with conviction it can be achieved. In every other country in the EU to a greater or lesser degree it is law… There is over £600 billion accrued in occupational pensions alone, over 25 per cent. of the privately held wealth in this country. 90 per cent. of payments of occupational pensions are to men. 1.14 million retired women are dependent solely on income support. It is time for better treatment of the wives and mothers, the carers, of this country". I agree with her on that.

On the same issue, the Equal Opportunities Commission says in its briefing paper to Members of Parliament: In research carried out for the DSS, women aged 55–69 who were divorced and not remarried at the time of retirement were the poorest group of all pensioners… As women still shoulder the main responsibility for the care of the family, they can miss out on pension rights in years when they do not have paid work, or combine caring with part-time work. Many of them expect to share in their husbands' pensions when they retire, but divorce takes away this prospect and leaves them facing very low post-retirement incomes. For women who are older when divorce happens, even though a Court may order an ex-husband to pay maintenance, when he dies they are not entitled to a widow's pension and so become dependent on the State. The report continues: the problem remains that the Court cannot make an Order requiring an occupational pension scheme to split the pension rights between the two spouses. This is unsatisfactory and in some cases prevents an equitable distribution of matrimonial assets. The EOC sums up:

Divorce can devastate some women's pension expectations and leave them financially insecure in retirement. The Courts should be able to divide pension rights in the same way that they now have power to allocate other matrimonial property on divorce. The EOC makes a powerful case and the Government have not gone far enough. By accepting the principle of dividing pensions in the event of divorce, they have gone most of the way down the route that Fairshares, the EOC and others want, but they have not gone the whole way and given courts the power to split pension fund money between the fund member and his or her spouse.

The Secretary of State said that such a split would be complex. I am sure that a probing amendment on this subject will be tabled in Committee—I hope to table it—and we shall find out just how complex it would be. I do not believe that it is complex to give the courts such a general power. The Pensions Management Institute said that it need not be complex and that the costs could be allocated equally to the two parties and need not fall on the pensions fund. All those issues will have to be explored during the passage of the Bill.

On a more general point, between 1979 and 1992, the poorest tenth of the population suffered a 20 per cent. fall in real incomes, while the richest tenth enjoyed an increase of more than 60 per cent. That disparity is reflected in the disparity of pensions. There is a massive case for an improvement in the basic state pension. About 1.4 million single pensioners and 250,000 elderly couples have to rely on income support to top up their basic pension, and one in four old-age pensioners—about 570,000 people—who are entitled to income support do not claim it because of their dignity, or for some other reason. They need an increase in the basic pension.

In 1977–78, the basic pension was worth 20 per cent. of average male earnings. By the early 1990s, it had dropped to 15 per cent. and, on current trends, by the year 2020 it will be worth less than 9 per cent. Under the previous Labour Government, the link was between prices and earnings. If that link had been maintained, a married pensioner couple would be £30 a week better off and a single pensioner £20 a week better off. Pensioners are kept poor because the Government stopped that link.

Beyond what we have done with private pensions, there is a case for an increase in the basic state pension. I have asked to be a member of the Standing Committee. I look forward to the debates there and to trying to get the Government to change some of the clauses in the Bill. I hope that they will listen to hon. Members on both sides of the House and that they will make some of these changes so that we get a better Bill.

Several hon. Members

rose—

Madam Deputy Speaker (Dame Janet Fookes)

Order. Before I call the next hon. Member, I must point out that there is clearly great interest in the debate and that, unless speeches are shorter during the next two hours, I am afraid there will be some disappointed Members at the conclusion of the debate.

7.24 pm

Sir Jim Spicer (Dorset, West)

I apologise to you, Madam Deputy Speaker, and to my right hon. Friend the Secretary of State, as I was unable to be here for the opening speeches. I followed my right hon. Friend's speech closely, however, and was delighted with its content.

I was fortunate enough to come into the Chamber just before my hon. Friend the Member for Davyhulme (Mr. Churchill) spoke so movingly about overseas pensioners, or non-pensioners, and the difficult situation in which they find themselves.

I became chairman of Conservatives Abroad in 1985 and for the next eight or nine years received the sort of letters that my hon. Friend the Member for Davyhulme has received from people suffering very great hardship. It is an exceptionally difficult problem for any Government and I hope that this Government, our Ministers and those speaking for the Opposition will tread very carefully indeed before making promises in advance of a general election that they might not be prepared to keep. I say that because, before the last election, the Opposition made promises to overseas pensioners, saying that their case would be heard and that something would be done to rectify the problem, and I know that they would not have lived up to their promises.

It is not easy for any Government to fulfil in total the commitments for which my hon. Friend the Member for Davyhulme asked, but he made it clear that we could at least make a start and many others have pressed for the same thing. For example, we could look after the over-80s rather than the over-70s because that is where the real hardship lies. We could and should make some small move towards recognising that hardship.

I have to declare an interest as I am the honorary adviser to the Royal British Legion and I am proud to hold that office here. I am delighted that my right hon. Friend the Secretary of State accepted, in very broad terms, early-day motion 186 on the 50th anniversary of victory on behalf of war and service widows. I shall not read it out in full as we all know what it called for—better and special treatment for war widows.

The fact that an amendment was carried in the House of Lords—moved very ably by the noble Lord Freyberg—with a good majority shows that there is recognition across the board that we are not creating a precedent by dealing differently with war and service widows. I am certain that no other groups of widows will try to follow through on that front—this is recognition for war and service widows.

My right hon. Friend the Secretary of State is not here at the moment. The decision to accept clause 117 was taken by the Cabinet, and none of us knows what goes on in Cabinet. However, I am sure that no one did more to support the case for accepting clause 117 at the Cabinet meeting than my right hon. Friend the Prime Minister. I know where his sympathy has lain all the way through and I am delighted that he will receive the recognition and thanks that he deserves from war widows and all ex-service men.

May I query the cost of clause 117? It has been said that it will cost £40 million a year, but my understanding is that this is not an annual cost but a capital sum, part of which would be held back or returned as the numbers who claimed under the clause decreased. I would like some clear information about that.

I am delighted that my right hon. Friend the Secretary of State is back in the Chamber because, as I have already said, we are grateful for what the Government have done, but it is only the beginning. A little more tidying up to the Bill should be done in Committee to make it absolutely clear that all war widows and service widows will receive just treatment. I know that Treasury Ministers will say that £40 million is a lot of money and that special cases always exist. However, other amendments with minor financial implications could be introduced in Committee. We are talking not about sums of between £10 million and £40 million but of between £1 million and £5 million to redress the injustices suffered by under 2,000 widows. Treasury Ministers should be happy to know that it is an absolute certainty that the sums involved will decrease with the years.

I should like to quote a letter that illustrates the difficulties that need to be tidied up: Dear Sir, I am writing to you, hoping you can help me to understand the problem I have. My dear husband died on 13 November 1994. It was our second marriage, he lost his wife the same time I lost my dear husband, but knowing him 46 years ago, we met and married in Sherborne Abbey in May 1993. He made the Army his career for 30 years and came out a Warrant Officer. Before he died, he always said there would be part of his pension for me when anything happened to him. He was such a sticker for things to be right, everything was left in order, that when I found out that I am not entitled to anything I just can't believe it. I am his wife, and dependant, and this dear man has gone still thinking I am being looked after. Surely 30 years mean something. How many more people get married as we did and rely on their pensions. I get my widow's pension—but it's very hard. Is there anywhere I can go to? I think you are my last hope. What does it matter if I am his second or third wife, I am still his dependant and he gave 30 years to the Army knowing"— or thinking— that his wife would be looked after. I am not asking for much, just a little help from what we thought was mine. I await your reply". I cannot reply to that letter at the moment to say that all will be well, but I hope that those serving on the Committee considering the Bill will take up such cases.

I hope that everyone will agree that in this 50th anniversary year, those who served their country—many of them died for it—deserve the recognition that we can give them. They are a special case and should be treated as such. They do not create a precedent.

7.32 pm

Mr. Gerry Sutcliffe (Bradford, South)

I am happy to take part in the debate. The thoughtful contributions from hon. Members on both sides of the Chamber show that we accept that the Bill has a long way to go. If I am successful in my application, I look forward to serving on the Committee, so that I can go through the Bill in more detail.

The Secretary of State said that the Maxwell pension scheme fraud was the inspiration for the Bill. I should like to declare an interest as I am sponsored by the Graphical, Paper and Media Union, formerly known as SOGAT and the NGA. That union represented many Maxwell pensioners who successfully fought for compensation. If accolades are to be given, the union deserves some of them because of the support that it gave to its members. The Maxwell pensioners also deserve congratulation, particularly Mrs. Ivy Needham, who led them. Had she not fought so diligently, their case for compensation would not have been recognised.

Before I came to the House, I served as a full-time union officer for 14 years. I had first-hand experience of employers who abused pension schemes. In many cases, that abuse was unintentional, because they did not understand the framework of the legislation. Those employers did not have the necessary knowledge and training that they required not only as employers but as trustees. I agree with other hon. Members that it is imperative that adequate training is given to trustees because they have a great responsibility.

The impact of pensions on our society is not immediately significant to the vast majority of our constituents. People may not have thought about them until the Maxwell fraud and the equalisation of state retirement age received media attention or until they faced their impending retirement. They then delved into the pensions arena, where they need an aptitude for mathematics and a good understanding of a language all of its own, which is bewildering to mere mortals.

The simple principle of pension provision is based on the need to provide adequate resources through pension contribution and investment, so that there is a reasonable income for an individual at and beyond the age of retirement, whatever that age may be. Pensions and their impact on individuals mean much more than that simple principle.

The Goode report offered an opportunity to overhaul pensions in such a way as to re-establish faith in the integrity of pension provision, which has been undermined by the failure of personal plan selling, the failure of regulation and the failure to provide adequate funding and to offer a simple explanation of pension schemes.

Great play has been made of the changes made by the Labour party. There appears to be a Tory identity crisis, because Tory Members consistently ask us for our view of the future when we are discussing their Bills and they are in government. I am sure that they will not have to wait much longer to find out what we will do in government as the election is just around the corner.

The country survives on a mix of provision, which allows flexibility and for the increasing pension burden to be shared. It is important that we have the backdrop of an appropriate state fund. It is essential that pension provision is controlled sensibly, so that huge gaps do not appear between assets and liabilities, which could lead to a pensions nightmare.

I have some concerns about agencies such as Marks and Spencer selling pension plans. I understand that Abbey National is looking to take over the National and Provincial building society. The Government need to study seriously pension provision and the financial sector in general because, in future, people may not understand which companies are providing pensions.

The great worry is that the Government's failure to provide a level playing field will increase future risks. Occupational pension schemes represent 20 million members, for whom, collectively, £550 billion is invested to provide pensions. Those members are not encouraged by a Bill that offers them less protection in the future. After Maxwell, the Government promised that more effective regulation would be introduced. Goode recommended an independent, state-funded regulator with adequate powers. Instead, we have been offered the occupational pensions regulatory authority, OPRA, with a meagre budget of £10 million—[Interruption.] It is a meagre budget when one considers the £550 billion available for investment. Help the Aged has described OPRA as neither a regulator nor an authority. Its powers will not be wide ranging, nor will it be well resourced.

Mr. Jenkin

May we take it that the hon. Gentleman is judging the effectiveness of the regulator by how much money it spends?

Mr. Sutcliffe

Money is a contributing factor, as are the powers of the regulator. According to the powers offered to OPRA, it will not require the same information as that currently requested by the Occupational Pensions Board. OPRA will rely on the whistle-blowing principle and will have the power to deal only with the statutory requirements set down in the Bill. That is why training is vital. Some hon. Members may argue that training is unnecessary, but it is vital that training is offered so that people know what whistle to blow and what problems exist in certain poor schemes.

Breaches of trust will not be covered by OPRA, but will be left to private enforcement through the courts. What will happen to individual pensioners who are unable to meet huge legal costs? The Government benefit from occupational pension schemes as the members of those schemes opt out of SERPS. There is therefore an unquestionable onus on the Government to ensure that those schemes are properly managed.

As other hon. Members have said, the Bill fails to address the make-up of the trustees of the schemes. The Bill is too wide and allows too great a flexibility to employers. Employees and retired pensioners should be allowed adequate entitlement to join the boards of trustees. There should be statutory requirements to allow time off with pay for training of trustee representatives, and that training should be mandatory. Retired pensioners must have a voice to express their worries and aspirations. The number of takeovers that have taken place mean that retired pensioners have not had the opportunity to follow through what has happened in individual companies. Machinery must also be introduced to enable reporting-back procedures to fund members.

The law remains uncertain, even with the Bill, as regards the transfer of schemes in mergers and takeovers. I worked at a company that was taken over by a Swedish company that had no occupational pension scheme. The Swedish company became interested only when it knew of the assets of the existing scheme. Fortunately, that company was taken over again and the pension scheme was sorted out, but no information was available to subscribers, and former employees were left completely in the dark. There should be tighter controls.

I also represented members who were in a scheme where the employer borrowed £150,000 from the fund, quite legally. That was agreed to by the trustees, some under the pressure of their jobs because they wanted the company to exist. The company went into liquidation and it became almost impossible to get the loan back.

We have been made aware of many aspects of the Bill that need to be considered in greater detail. I welcome, as do other hon. Members, the position on the war widows pension, but I wonder why the United Kingdom is the only country in Europe that does not pay a war veterans pension. If one compares our pension schemes, pound for pound, with similar schemes in Europe, the quality of ours is well below the standard that is acceptable in the rest of Europe.

We also need to consider pension fund investment policies, because they have a substantial effect on our economy. We need to ensure that we know where those pension funds are investing. I hope that, during the passage of the Bill, we shall have the opportunity to discuss that more fully.

The Secretary of State spoke—with some arrogance, in my opinion—about the way in which British pensioners have never had it so good. He should talk to some of the pensioners in my constituency, who feel aggrieved about the level of their state pension and about the amount of unemployment in my constituency, in the wider Bradford region and, I believe, in many other hon. Members' constituencies.

We need to examine state provision properly and to ensure that people receive an adequate pension. In this 50th anniversary year of the ending of the war, many of the pensioners of today who fought for this country feel aggrieved that they have not received the benefits to which they were entitled and that promises that were made to them, that they would live in a land fit for heroes, have not been kept.

If Robert Maxwell has done nothing else, he has inspired the Government to formulate a Pensions Bill, but as has been evident from the contributions that have been made by other hon. Members, it still has a long way to go. I look forward to the passage of the Bill to its next stage.

7.42 pm

Mr. Nigel Forman (Carshalton and Wallington)

I am grateful to have caught your eye, Madam Deputy Speaker, and I shall endeavour to be brief. I have sat through the whole of the debate, which has been interesting. The range of arguments made from both sides of the House reflects the breadth of the long title of the Bill and the fact that almost anything to do with pensions is in order while we are discussing the measure, but it is a matter for you, Madam Deputy Speaker, to decide whether that is true.

If I may say so to the hon. Member for East Kilbride (Mr. Ingram), who is on the Opposition Front Bench, it is a pity that the Labour party saw fit to oppose the Bill and then to table the reasoned amendment. Having listened carefully to the speech of the hon. Member for Glasgow, Garscadden (Mr. Dewar), which I thought was very good, I think that it would have been better if the Labour party had supported the Bill, in the ecumenical spirit that is necessary, in my opinion, to long-term pensions legislation, and had then argued, properly, for its suggested amendments or changes during the proceedings in Committee.

I was interested in what was said about the idea of a flexible decade of retirement, which appears to continue to be the policy of the Labour party, as far as one can tell. It appears to me sensible for the Government to maintain the opinion that there needs to be a set retirement age, and I am glad that, under the terms of the Bill, it is being equalised, over a future period, at 65 for men and women.

However, a distinction should be drawn. Although one has a set retirement age, and that is sensible from an actuarial and from a policy point of view, none the less, in policy, all Ministers should take account of the drive towards flexible pension arrangements, which are much more flexible these days than they have ever been, to take account of the growing variety of individual and family circumstances. I shall return briefly to that subject later.

Naturally, like other Conservative Members and indeed hon. Members on both sides of the House, I warmly welcome the concession made by my right hon. Friend the Secretary of State on war widows in clause 117. That can only do good in the broadest sense. I would advise him and his Front-Bench colleagues to consider carefully the question of the splitting of rights to pension assets on divorce. I think the best way forward would be to take the advice of the Institute of Actuaries, with which I had lunch last week. [HON. MEMBERS: "Oh."] That is the extent of my interest in the Institute of Actuaries—simply to take note of the argument that the Institute of Actuaries has made that, on balance, there is a strong argument, much of which has already been made, for the clean-break principle on divorce to be applied to the capital assets of a pension fund.

That issue having been, as it were, on the agenda for the past 10 years or so—the Lord Chancellor was talking about it a full 10 years ago—it might be sensible for the Government to take slightly more time over the matter and ensure that they get it right. The best formula would be to say to the House, either when replying to the debate tonight or subsequently, that, yes, in principle the Government accept this approach to the matter, but they wish to get it right and to spend slightly more time getting the detail right. It is a complicated issue, as our right hon. Friend the Secretary of State said earlier.

I shall now briefly discuss a couple of the things that the Secretary of State said. I was very struck by my right hon. Friend reminding the House that in 1979, 43 per cent. of the relevant population had occupational pensions, whereas the latest figure is approaching 70 per cent. I hold the opinion that this leaves—even at today's figures—30 per cent. or thereabouts who do not have the benefit of those very secure and, on the whole, desirable forms of income stream.

I hope very much that my right hon. Friend the Secretary of State will use an opportunity at an appropriate stage to urge our right hon. and learned Friend the Chancellor of the Exchequer to inquire whether it would be possible to have a carefully ring-fenced boost to the income of that dwindling minority of people who depend solely on the state pension. I believe that the way to do it is to relate any income boost to the age of the potential beneficiaries, rather than to their income, so that the problem, to put it crudely, solves itself with the passage of years as that generation fades from the scene.

One might do that elegantly by relating a special supplement for very elderly people to all those born, let us say, before 1920, which would effectively, in the year of grace 1995, link it to people aged 75 and over. That would be much appreciated, and it happens to be the part of the retired population in which the greatest poverty is concentrated. There might be objections. People would draw attention to the fact that Lord Hanson would qualify, but Lord Hanson pays quite a lot of tax, even if he orders his affairs well. It seems to me that the neatest way of dealing with the issue would be to make the supplement age-related in this way.

I also sympathise, in the same spirit, with the argument made by my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) when he spoke about a special pension credit for the super-elderly, as it were. I believe that he was seeking to hit much the same target as myself, and I hope that Ministers will consider it carefully.

On another subject that has been mentioned many times in the debate, I am very sympathetic to the idea that there should be some type of amendment, perhaps in the Bill, to allow spouses to retain as much as half of the occupational pension of the couple when the other spouse has to enter long-term health care or residential care. The suggestion has repeatedly been drawn to my attention by my constituents, and there appears to be a great deal of common sense and natural justice in the arguments that have been made.

The Bill deserves a Second Reading in the House because, first, in the light of the Maxwell scandal and the other scandals and disasters, it will make pensions more secure than they would otherwise have been, by introducing a clear framework of statutory obligations and the powerful new pensions regulator, together with the compensation scheme in the event of eventual insolvency.

Secondly, I hope and believe that the Bill will encourage greater flexibility and choice in pension provision, making money purchase or appropriate personal pension schemes more attractive across the age range. I hope that it will allow pension holders to draw down their funds between the ages of 60 and 75 without tax penalties. That is a good step and moves some way towards the American idea of an individual retirement account. As many hon. Members will know, such accounts can be used for a variety of different contingencies under American law.

Thirdly, the Bill will enable the House and Parliament to fulfil their obligations in European law to equalise pension rights for men and women in the light of the Barber judgment. It will also make legislative provision for the equalisation of the British state pension age at 65, phased in from 2010 to 2020. To my female constituents who are concerned about that change, may I place on record the fact that no woman born before 6 April 1950 need be affected by the change. There is ample opportunity for those born after 6 April 1950 to begin to make the sort of prudent provision for their old age that I would imagine any woman would wish to make.

Against this background there are three significant issues that need to be touched on: first, the question of how to strike the right balance between improving pension security for pension scheme members while avoiding excessive extra costs, both financial and regulatory, on employers and those, such as auditors, who have been given whistle-blowing duties. I do not know whether I shall be fortunate enough to be selected for the Committee, but I declare an interest as the parliamentary adviser to the Institute of Chartered Accountants. Clauses 90 to 95 cause considerable concern to the accountancy profession. I shall return to that issue if I am chosen to sit on the Committee.

It is important that we get the balance right between the benefits of security and the costs of regulation. The matter was expressed succinctly in the brief provided for the debate by the Association of Consulting Actuaries. It said: We are concerned that the right balance should be struck between improving security for scheme members and avoiding excessive extra costs on employers who, after all, provide occupational pensions on a voluntary basis. Any 'toughening up' of the Bill has to be seen against this backcloth and is likely to damage future occupational pensions at a time when Parliament should be doing everything it can to encourage private pensions. This issue should be taken seriously.

Secondly, the House must be clear that we should see how to avoid the selling of inappropriate pension schemes of a money purchase variety to people who, for their own interests, should remain in SERPS, while encouraging greater flexibility and choice in the pension market to reflect the significant changes in the labour market. I wonder how many hon. Members have caught up with the extent to which the labour market has been changing.

The House of Commons Library provided me with some interesting figures from the labour force survey that clearly demonstrate that in the period as recent as 1984–94, the proportion of all part-time employees has increased by about 27 per cent., and the proportion of all those who are self-employed has increased by 22 per cent. while, over the same period, the proportion of those in full-time employment—the traditional model—has increased by only 4 per cent. It is right and proper that the changing nature and pattern of the labour market should, after due delay, be reflected in the changing and more flexible nature of pension provision. With less permanent lifetime employment, more part-time and casual employment and much more self-employment, it is only logical that pension arrangements should broadly reflect those changes.

I welcome the tougher line recently taken by both the Securities and Investments Board and the Personal Investment Authority in trying to deal with the problems of mis-selling and bad advice. If there is to be a greater reliance on personal pensions and appropriate pensions and less reliance on SERPS or the state pension, it is vital that people should not be vulnerable to financial sharks who give them advice that they take in haste and repent at leisure. That will provide an important part of the answer to the problems.

Thirdly, we must consider how to address the demographic prospects of an aging population that is largely dependent for its income in retirement on saving enough during its working years and, in the case of the most elderly, on transfer payments from those in work at the time. We must do so without, at the same time, overreacting and damaging the engine of consumption or imposing an intolerable burden on inter-generational transfers.

An interesting article appeared in The Sunday Telegraph yesterday, quoting some research done by Ian Shepherdson of HSBC Markets. It said that, over a long period, until recently, the proportion of consumption in gross domestic product had been steadily increasing in this country and the proportion of investment and exports had been consequently declining. But now the long-term trend seems to be pointing in the reverse direction. The latest figures suggest that the proportion of consumption as a percentage of GDP is now falling—it is about 63 per cent. today and is likely to be well under 60 per cent. by the year 2000. This trend could continue. As consumption is the engine of the economy and as consumption helps to contribute to economic activity, which in turn enables a pay-as-you-go system to be funded to pay for pensions, it is important to attempt to achieve the right balance between savings and consumption in the interests of today's and tomorrow's pensioners.

In broad terms, the burdens of a pay-as-you-go system can be relieved by the change in the Bill to a uniform state pension age of 65. They can also be relieved by the growing build-up of occupational pension rights among new pensioners, notably the growing proportion of women who, I suspect, are and will be working full time rather than part time and over a longer period. They will build up more substantial pension rights.

My right hon. and hon. Friends the Ministers are to be commended on introducing the Bill as it is probably the most significant measure in this Session of Parliament. It is a long-term measure that shows a due sense of prudence and responsibility towards the future. If the policy turns out to have been too cautious—if we err too much on the side of the Treasury phobia about public expenditure—it can always be relaxed in future if we can afford to do so.

We shall need to keep the closest watch to minimise the risks of regulatory overload on personal and private pension providers because, in terms of occupational pensions, regulation will fall disproportionately on employers, scheme members and the professionals involved. We must remember that, ultimately, the price has to be paid by someone. That may mean greater contributions if the regulatory overload is too great or lower benefits than would otherwise have been the case.

Having expressed my broad reservations, may I say that it is a good Bill and definitely deserves the support of the House.

7.57 pm

Mr. Clifford Forsythe (Antrim, South)

As the Ulster Unionist spokesman on the subject may I say that my party gives the Bill a general welcome, but aspects of it should be changed to make it more effective. Unfortunately, due to the lateness of the hour and the time available, I shall have to keep my remarks short and the House must forgive me if my speech sounds a little disjointed.

When we examine the Bill we must bear in mind the events surrounding the Maxwell fraud, and the despair and heartbreak felt by many of the pensioners involved. We must also take into account the fears of other pensioners and deferred pensioners who are not directly involved, but who are worried that their pension scheme may not be as secure as they thought it would be. Having had the honour to serve on the Select Committee on Social Security which investigated the Maxwell scam in detail, I can fully understand their concern, and I share it.

While listening to and reading the evidence given to the Committee over many sittings, my most worrying impression was that, of all those who were officially connected to the Maxwell schemes in one way or another, no one was responsible for the shambles discovered when Robert Maxwell went overboard from his yacht and drowned. No one else—not the trustees, auditors, accountants, actuaries, solicitors, managers or directors— had seen, heard or had their attention drawn to any sign of trouble or to any hint that things were not as they should have been. I also thank the Secretary of State, Sir John Cuckney, the Maxwell Pensioners Trust and the civil servants involved for their great work in recovering the funds that had disappeared.

Perhaps the House will forgive me for taking a rather jaundiced view of those parts of the Bill that I do not believe will remedy problems, such as the Maxwell fiasco, which may arise in the future. I draw the attention of the House to the law which governs the present pension schemes—and I disagree with other hon. Members on this point. Trust law, with modifications, will continue to guide the proposals in the Bill. I firmly believe that we have lost an excellent opportunity to replace trust law with a new, specific statutory trust regime for the administration of occupational pension fund schemes.

I have listened to many opinions about the matter and I believe that the legal framework of trust law is inadequate to deal with pension fund schemes. After all, trust law was developed in the middle ages as a means of preventing the dispersal of large estates and protecting the interests of children and widows who were thought to be unable to administer their own assets. Like clause IV, surely the time has come to bring such laws up to date and into the modern world.

I am very disappointed that the Bill does not contain a new legal framework. Even with the new modifications, employers are still largely unrestricted in the way in which they decide to set up schemes. Accepting for the moment that trust law may continue, I turn to the Bill's proposals for trustees.

My party disagrees with the proposal for only one third employee representation on trustee boards. We strongly support 50 per cent. employer and 50 per cent. employee representation by right, coupled with the undertaking that one of the employee places should be allocated to a pensioner trustee who is democratically elected by secret ballot from all of the scheme's pensioners. That arrangement would be widely accepted outside Government, particularly as the one third representation arrangement carries with it the possibility of an opt-out.

Personally, I also support identifying one existing trustee who would look after the interests of deferred pensioners. We support the view that all trustees should be trained properly and should possess a final certificate testifying to their competence to carry out their duty to the scheme. That would be in the best interests of everyone, including the employer. That training should be in the hands of the occupational pensions regulatory authority.

We welcome the establishment of that authority, but we believe that it should have stronger powers. Although the Bill makes modifications to the existing trust law, the authority's rights and duties appear to be fragmented. It also appears to have little jurisdiction over those areas which continue to rely on trust law. Perhaps the new authority will convince Government that the best way to encourage scheme members to monitor the performance of their schemes is to insist upon their being sent an annual report by right.

Perhaps the Government will consider funding the authority by way of 50 per cent. state funding matched by 50 per cent. industry funding. I think that that would ensure greater independence for the authority, while at the same time preventing the full cost falling on the taxpayers. As other hon. Members have said, we would like the authority to be more proactive and thus be in a position to monitor pension schemes. That would be better than depending on the whistle-blowing abilities of actuaries and auditors—an arrangement that I believe will create a great deal of difficulty and resentment in the future.

The authority is expected to act, even in a whistle-blowing circumstance, only if the assets have been reduced by illegal acts. I remind right hon. and hon. Members that assets can be reduced drastically without illegal acts—the Church of England can testify to that fact. I contend that a more proactive authority could pick up such things at an earlier stage and perhaps prevent honest, well-meaning people from being their own worst enemy. We welcome the arrangement which will allow OPRA to co-operate and share information with the Department of Social Security, the Inland Revenue and other regulators. However, we are disappointed that the Bill does not propose independent custodians for pension fund investment assets. We are also puzzled that the suggestion that the ownership of all such assets should be clearly designated has not been included in the Bill. Bearing in mind the difficulties experienced in tracing assets belonging to the various Maxwell pension schemes, it is an even more surprising omission from the Bill. Anyone who heard or read the evidence presented to the Social Security Select Committee about Maxwell's missing assets would have thought that the stable door would be closed at the earliest opportunity.

Changing the minimum solvency requirement to a minimum funding requirement has considerably weakened the reason for its inclusion in the Bill. Watering it down in that way means that what was once regarded as a key safeguard no longer offers very much for scheme members. The compensation scheme established by the Bill is very welcome, although its effectiveness will become apparent only when the regulations relating to the list of prescribed offences are published. We welcome the arrangements whereby scheme members will be given notice of the trustees' intention to return a surplus to an employer and such members' right to refer decisions taken about such a surplus to OPRA.

We believe that it would have been useful to consider amending the Inland Revenue surplus regulations at this time in view of the Pension Law Review Committee's recommendation. We hope that some consideration will be given to the position of early leavers when the regulations are published. We look forward with interest to hearing what the prescribed period will be where due payment has not been met.

As to raising the pension age for women to 65 years, we support a decade of retirement between 60 and 70 years of age for everyone. Of course, that raises the question of finance, as it could be argued—it was mentioned in the House—that it would be an invitation for everyone to retire at 60. That need not necessarily be the case as many men and women are anxious to work to 70 years and beyond. Surely the law of averages would even out retirement in a way that would benefit most people and the country as a whole. I welcome the Secretary of State's acceptance of the amendment regarding war widows but draw attention to other aspects of that category, which I hope will also be considered. We also support pensioners residing overseas and trust that their position will be speedily addressed.

Perhaps the Minister can say why the Bill does not extend to Northern Ireland. It would be most unfortunate if all its safeguards were introduced in Great Britain but pension funds such as that of Harland and Wolff—about which we took evidence—were omitted. They will probably be included by order, but I wonder why Northern Ireland has been left off the face of the Bill.

As the Bill progresses in Committee, I hope that the clear message will be sent that it supports pension schemes already known for their good practices, but that it will come down hard on schemes that indulge in bad or illegal practices. Above all, I hope the pensioners will feel that their future benefits will be much safer because the House has passed the measure. The Bill may not be all that we want, but it is all that we have. We will support the Bill and amendments that seek to improve it.

8.10 pm

Mr. David Shaw (Dover)

I welcome this necessary Bill. Having served on the Social Security Select Committee and been involved in eight reports over the past few years, it is clear to me that not all was well in the pensions industry. Maxwell accounted for much of our work, but that inquiry identified many problems that were repeated elsewhere. The hon. Member for Antrim, South (Mr. Forsythe) took us to Northern Ireland to study the Harland and Wolff pension fund and we were shocked at the way in which some members of that fund were treated. We took evidence also in relation to Belling and other pension funds.

The hon. Member for Antrim, South mentioned the recent report on the Church Commissioners, which showed that even the Church has not had a full understanding of pension arrangements to ensure that people enjoy the benefits that they expect. The big problem is that too many people in pension funds have not enjoyed the benefits that they were expecting and should have received in justice. We as constituency Members of Parliament have to deal with smaller-scale problems than that of Maxwell.

I congratulate the Government on the way in which they dealt with Maxwell. Interest was shown by more than 100 Back Benchers. Apart from the Social Security Select Committee, an all-party committee was established to monitor the general situation. As a result of much lobbying and activity, the Government made a good response. The Maxwell pensioners unit was also formed, resulting in £400 million being obtained from a variety of sources, including some recoveries. Much of that money came from extra-statutory contributions from a number of financial institutions in the City. It was rumoured that one particular institution made a contribution of £100 million. I called for that some years ago, and I was pleased that Sir John Cuckney, by whatever method, managed to make certain that such contributions were obtained. Members of Maxwell pension schemes have not lost out, as was originally expected, but have seen a full recovery. One wonders whether they will enjoy the growth that they might otherwise have enjoyed. It is certainly to be regretted that Maxwell happened at all.

Maxwell gave rise to too many concerns for us not to pay attention to the lessons to be learnt from that case. I hope that the Bill reflects many of those lessons—not least the provisions dealing with whistle-blowing. Several people had knowledge that something was wrong at Maxwell. No one had the complete picture—probably only Robert Maxwell and one or two other individuals, whom we cannot mention because of sub judice laws, had an overall understanding—but a number of people had an inkling of what was going wrong. Quite a few knew that there had been minor breaches of the law. A lot of legal and accounting advice was being taken and there should have been some whistle-blowing much earlier.

It is gratifying that this country has the best pension system in Europe. We know that we can probably meet the country's liabilities. I say "probably" because there is no certainty that even the British pension system and SERPS can meet their liabilities because many more people in the next century will be claiming pensions on the state. Other countries in Europe are facing the reality that their pensions commitments are greater than their assets—whether they are tax revenues from pay-as-you-go systems or funded, they are still insufficient to meet the liabilities. Europe has hundreds of billions of pounds of unfunded pension liabilities. They are so great that it is unlikely that there could be a single currency before the year 2000 at the earliest. Not many people have made that their cause celebre or understand it.

I hope that the Treasury will calculate in the not-too-distant future Europe's unfunded pension liabilities; people may then begin to understand that a single currency is not a simple concept that can be implemented in the next few years but something far more complex. Because Britain has a much more sensibly funded pension system and is in a stronger position, France is desperate to enter a single currency—if possible, next year. If it were not for Italy and Sweden, France would have the worst-funded pension system in Europe. Sweden's system is so had that the foreign currency bond markets do not want to buy its debt, which is being rapidly downgraded.

In considering the strength of the German economy, I hope that people will bear it in mind that although that country's pension system is just about able to pay its way now, in 2005 a greater proportion of Germany's population will be elderly and of retirement age. Germany will then have immense difficulties meeting its pension liabilities. If it wants to enter a single currency, it must do so by 2005, when Germany's liabilities will hit. One may ask who will pick up those liabilities in the next century, if a single currency exists.

Mr. John Greenway (Ryedale)

We will.

Mr. Shaw

My hon. Friend is absolutely right. Britain will have to pay for the liabilities of Italy, France, Sweden and Germany because they have not properly funded their pension systems. The Bill is about making sure that Britain can meet its commitments. I want to make sure that we do not end up meeting the commitments of other countries, which a single currency would bring about.

Many people argue that 50 per cent. of trustees should be pension fund members, rather than one third. I remind the House that 50 per cent. of Maxwell's trustees were fund members. The issue is not numbers or quantity but quality. That is not to say that Maxwell trustees—pensioners or members—lacked quality; they simply lacked the ability to do the job. It was not a question of their personal abilities; it was a question of their access to information, and of their training. I know that the Opposition have some sympathy with this point. We must ensure that trustees are properly trained and are given proper information. We must also ensure that there are people to whom they can go with that information.

It is at this point that the regulator's interaction with pension trustees will be critical. It is not an issue of quantity. Trustees must have the ability to question and they must have full access to information. If there is one part of the Bill that I want tightened up—even though it is a good Bill—it is the ways in which we can make sure that trustees have more access to information about how funds are invested and about the custodial arrangements for them.

There should be plenty of declarations of all such arrangements in the accounts and the annual report. Everyone should know that there is an annual report, filed somewhere. At one point I thought that it should be filed with the regulator; I then realised that such a large number of reports was involved that he or she would be wasting time on massive amounts of paperwork. Still, it is important that outsiders—journalists, if necessary—should be able to get hold of sets of accounts. There must always be a healthy debate whenever there is a legitimate public interest in how pension funds operate.

I suggest that the regulator should not be too bureaucratic. Yesterday, The Observer, not known as a right-wing newspaper, carried an article under the heading "Pensions Watchdog Too Costly", suggesting that the costs of regulation could be as high as £80 million a year. I do not want too much regulation. We discussed this in the Social Security Select Committee. Over-regulation could cause many pension funds to close and upset the balance between occupational, private and other pension funds. Such a move would be a major mistake.

I should like next to discuss minimum funding and solvency requirements. As soon as the Bill was published, I lobbied the junior Minister—not because I have a vested interest but because, when I did my sums on the back of an envelope to find out whether there would be any Government gilts in the next century, it became obvious to me that if Governments stick to this Government's anti-inflation policy, there will not be enough gilts around to meet the minimum solvency and funding requirements that were originally included.

Many of us are also worried that the Government will be forced to issue gilts to ensure that pension funds can meet their minimum solvency requirements. I could not support that; I want the Government to stop issuing debt and to start balancing their accounts. The fact is that the bond markets show no great enthusiasm for taking up Government debt these days. We should therefore not be issuing large amounts of it.

I am delighted that the Government have accepted the point about war widows. It is a great tribute to them that they are paying for something that no previous Government have managed to fund. [Interruption.] It occurs to me now that I need to truncate my speech, even though I was asked earlier to deliver a slightly longer one by those who dictate—or request—these things. I now find myself being asked to shorten comments that I took the trouble to write out at great length. That is one of the oddities of the operations of this place.

SERPS was based on commitments to be made today for the next century—commitments that no Government could sensibly make. With fewer children being born and fewer people available to pay the bills for the elderly in the next century, we were going to have a shrinking tax base with ever greater demands on it. The statistics in the Government Actuary's report are amazing. Sadly, I suspect that it will not prove to be a bestseller; it is called "Pensions Bill 1994: Report by the Government Actuary on the Financial Provisions of the Bill on the National Insurance Fund". Appendix E may prove to be even less widely read, but it informs us that, by the year 2040—without a change in the pension age—there would be 17.4 million pensioners. That compares with about 11 million pensioners today. Even with the proposed changes to the pension age, there will be 15.6 million pensioners. That is a serious problem that must be met and a heavy burden that will have to be borne by taxpayers of the next century. The problem can be dealt with only by the Government's proposed changes. The Opposition are wrong to propose a flexible decade of retirement. We simply cannot afford it.

It is a pity that the hon. Member for Leyton (Mr. Cohen) has had to leave the Chamber, because I welcomed his suggestion to have a probing amendment. If I am chosen to serve on the Committee, I shall join him in tabling such an amendment on divorce reform in this context. The present system is not fair, and something must be done about it. It will not be easy; there are plenty of problems associated with it. We already have a high divorce rate, and it could be argued that the current system encourages it. It encourages husbands to drop their wives and take their pensions with them. I should like to believe that that does not happen, but the fact is that many wives are not aware of their pension rights or of how much pension they are losing—

Dame Elaine Kellett-Bowman

Their solicitors should tell them.

Mr. Shaw

My hon. Friend, who is a lawyer herself, makes her own suggestion. Sad to say, my experience of the legal profession is that it has not always properly advised wives. The Child Support Agency has shown that wives have taken houses without realising that they have given up pensions. They have been badly advised.

I come finally to an important subject that needs dealing with—low-paid and part-time workers. Although I do not support some of the judgments emerging from Europe, I was rather pleased to learn that part-time workers are to be involved in pensions. Many more people should be brought into the private pension system. For that, we need low-cost private pensions. I am delighted to see that Marks and Spencer and Virgin are looking at this area. I suspect that they will cause a bigger shake-up than the Pensions Bill. I should like many more low-cost schemes for those on lower incomes, to enable them to get into private pensions. The friendly societies have a significant role to play. I hope that the Government will take steps to encourage an expansion of this facility.

I support the Bill's Second Reading. I believe that the Bill will result in better and safer private pensions, and that the public sector will have a much more realistic liability in the next century, so that we as a nation are able to afford it.

8.27 pm

Mrs. Jane Kennedy (Liverpool, Broadgreen)

I was planning to confine my remarks to the subject of trustees and how their role will change as a result of the Bill, but some of the comments by the hon. Member for Carshalton and Wallington (Mr. Forman) cause me to begin by discussing the equalisation of retirement age. What we are actually talking about is equalising entitlement to state pensions. For many people, the effective date of retirement comes much earlier than that.

It was my privilege to work with Liverpool city council social services staff during the 1980s, when I was an elected representative of the National Union of Public Employees. I spent a lot of time working with home helps. Women who work for local authorities, if lucky enough still to be fit and well and able to continue working, will often keep going until the age of 65. If they have been able to join an occupational pension scheme, they will not receive their benefits from it until they are 65, so many of them continue working, and find it in their financial interests to stay in work until they are 65. Many of those home helps in their 60s would say to me, "Is there nothing you can do about reducing the age of retirement of men to 60 so that I can get my occupational pension at 60, as well as my state pension?" As home helps, the people whom they looked after, for whom they did the shopping and the housework, were often younger than they were. The home helps pointed out the anomalies of that and said that it really was ridiculous.

Many hon. Members may feel that such people should, perhaps, value more the opportunity to work until that age. We talk about the flexible decade of retirement, of people being given the chance to choose when they can retire, but for many women occupational pension schemes have been irrelevant. The majority of women with whom I have had the chance to work have not been able to join such a scheme because they have not worked sufficient hours for it to be of any value to them. The supervisors, I am sad to say, of many women who worked for more than 20 hours a week in their local authority, did not regard them as being "proper" people entitled to join such a scheme. The benefits and value of their joining were never sold to them, and therefore they never joined. So there are many women who have been let down by occupational pension schemes.

The Bill was an opportunity—perhaps we could take this further in Standing Committee—to change the rules of occupational pension schemes to make it much more beneficial for women to join them. I am looking forward to discussing that in Committee, should I be selected for that role.

Mr. Alan Duncan (Rutland and Melton)

Does the hon. Lady accept that the best way to tackle the problem is to admit that her objective, which is shared on both sides of the House, should be to encourage more women to qualify for, or take up, a pension rather than join a campaign for the state pension age to be brought down to 60, which at the end of the day we all know is something that will not be delivered and is a complete con?

Mrs. Kennedy

I do not accept that it is a complete con to argue that the state retirement age should be reduced to 60. I accept that the cost factor involved must be taken into account, but when one takes into account the fact that the value of the state pension is being eroded over time anyway, the actual costs are perhaps not as great as stated. In fact, the hon. Member for Havant (Mr. Willetts) produced an interesting pamphlet on that, which discussed the much-vaunted demographic time-bomb that we were said to be facing. He said that many people now approaching retirement age are better off than they have ever been, particularly men, who have been able to enjoy a sustained period of employment in one job. They have been able to build up sufficient benefits in an occupational pension scheme, so, for them, the state pension is a small part of their income.

There will increasingly be, in my view, people who will not have the opportunity to work to that age, either because they cannot find employment or because their health breaks down. I see in my surgery many examples of men and women who are not fit to continue to work up to the age of their entitlement to state pension, and therefore I feel that the point made by my hon. Friend the Member for Birkenhead (Mr. Field) needs to be underlined. We need to develop a system of benefits that allows people to face their future with equanimity, not the fear of poverty, which I believe we will face unless we do something to deal with the reducing value of the state pension.

I now deal with trustees. The Select Committee, on which I was fortunate to serve for a short time, said, in response to the Goode report:

It is important to the well being of pension schemes that the Pensions Bill reserves such powers to the trustees as are necessary to ensure that the scheme is operated in the best interests of its members and is not open to manipulation by the employer. I accept that it is now established that there are a number of beneficiaries from an occupational pension scheme, including the employer, but the Bill waters down the suggestion in the White Paper that schemes could opt out of the one third requirement of member trustees if the members demonstrate by a referendum that they could do so. The White Paper watered down the Goode committee's suggestion of having a third of the members of trustee boards as elected or member trustees. I am not discussing here what happens to money purchase occupational pension schemes. The White Paper watered that down. The Bill takes it even further. Clause 17 relaxes the White Paper's suggestion further by allowing employers to continue with existing arrangements, and placing the onus on members to take an acting stance of opting in if they want member trustees.

Why is it so important that we have member trustees, or even pensioner trustees, on the boards of the occupational pension funds in Britain? We heard a lot of evidence in the Select Committee, from pensions groups in particular. I remember the pensioners who came to us from BT after it was privatised. The company wished to lose much of its work force, to shed labour. It had a vast surplus in its pension fund, and the employers and employees' representatives—the employee members—on the trustees board conspired to use the surplus to put together a very good package for its current employers, who were active members of the scheme, to take early retirement. For those individuals, it was a very good scheme indeed.

The pensioners from other companies—we heard this time and again—however, felt aggrieved that their assets, the funding that they were relying on to pay their benefits, were being manipulated in a way which they felt unable to influence. That is why I believe that it is important that a number of the trustees, or at least one, should be pensioner trustees.

I accept that there is a continuing inconsistency in the requirement to have members of the trustees board as representatives of a particular group. Once they become trustees, they have effectively to shed that responsibility. I echo the comments that were made by the hon. Member for Gloucester (Mr. French) on the need for properly trained trustees who are able to fulfil their function properly. They will be able to do that and to stop being delegates or representatives only if they have the required training. Failure to train them properly will leave them entirely dependent on the help and support of the group whom they represent.

8.36 pm

Mr. Tim Smith (Beaconsfield)

I listened with concern to what the hon. Member for Liverpool, Broadgreen (Mrs. Kennedy) had to say about the apparent failure of some local authority employers to encourage their women employees to join occupational pension schemes, because I am an enthusiastic supporter of such schemes and believe that all those who would benefit from them should be encouraged by their employers to join them.

Occupational pension schemes have been hugely successful over the years. The remarkable fact is, as my right hon. Friend the Secretary of State said at the outset of the debate, that today, 70 per cent. of those who retire do so with the security of an occupational pension. It is difficult to exaggerate the importance of that and the increased standard of living that comes with it. They have been hugely successful. I hope that they will continue to be so. They have also provided huge sums of money for investment in British industry, which is equally important. If one compares that with the situation in the rest of Europe, I hope that the whole House accepts just how successful those schemes are.

I support the Second Reading of the Bill because I think that the time has come for a comprehensive review of the legislation. It tended to be rather piecemeal previously. The Occupational Pensions Board was asked to look at this problem or that problem. The Maxwell affair prompted that comprehensive review. The Goode committee did an excellent job in looking at all aspects of schemes and has come up with something that represents a reasonable balance.

The most fundamental point—indeed, the only point—that I want to make in the course of my short remarks is about balance. It is a simple but important point. Different interests are involved in pension schemes. No pension scheme exists without the consent of an employer. They are all voluntary. They have to be funded by the employer, and clearly there is a balance between that and the interests of the members.

It is self-evident that whenever the House makes a regulatory change, that has an effect on the market. It is not possible to make a regulatory change that does not affect or influence market behaviour. What is happening in the market at the moment, even before the Bill has become law, is that most small employers setting up new schemes are choosing money purchase rather than final salary schemes. There are a number of reasons for that, one being low inflation. If there is low inflation, it is less important to give a guarantee of a final salary pension. Another reason is the sheer complexity of the present arrangements, especially the guaranteed minimum pension regulations, which are to be simplified.

It is clear that regulatory burdens and the costs associated with them are important. The cost of funding a final salary scheme is uncertain, compared with the cost of funding a money purchase scheme—and cost is important to employers. That argument arises in discussions about surpluses. It is always the employer who is expected to fund any deficit, but when there is a surplus the members think that they have a right to the whole of it. That is an important point and it is relevant to what is now called the minimum funding requirement. There is a real concern about the additional costs that that will bring for some large, mature, closed schemes. We must consider that point in Committee.

I am also concerned about the effect that the requirement will have on the equity market. One reason—indeed, the main reason—why schemes were so hugely successful in the 1980s was that success was achieved on the back of a rising equity market. If there are regulations that push trustees into investing in gilts, that will be bad for the schemes because they will not be able to achieve the same growth in income, and it will also be bad for British industry, which will be deprived of funds. Therefore, it is important to achieve a sensible balance between the interests.

We all want to achieve the same thing—good occupational pension schemes for as many people as possible. However, we must be sure that in the process of trying to improve the benefits, we do not discourage employers from setting up schemes.

8.42 pm

Mr. Andrew Miller (Ellesmere Port and Neston)

All sorts of people take risks with other people's money and we are dealing with one aspect of that today. Mention has been made of the Church Commissioners. The most recent report of the Social Security Select Committee uses strong language about one particular investment. It says that the best interpretation that it can put on the Church Commissioners' activities is that they displayed unbelievable naivety. That is very worrying. The spectrum goes from the seemingly responsible Church Commissioners, to the complex trust arrangements that exist in pension schemes, through to the great scandals such as Maxwell.

I do not think that Maxwell is a solitary case. I actually sailed down the river with Mr. Maxwell today, in the company of the Campaign for Pension Fund Democracy. Today's version of Mr. Maxwell was somewhat more inflated than the original and one journalist suggested that we should symbolically throw him over the side. However, as the Port of London authority was present, that was not thought to be a good idea.

I am concerned about some of the issues surrounding Maxwell, which I believe have been entirely missed in the Bill. On several previous occasions, as well as when I introduced a Bill in 1992, I made a point about the importance of takeovers. I understand that within the complexities of the Maxwell empire, the works pension fund represented dozens of companies that merged. The complexities of the merger process actually created an environment in which it was possible for Maxwell to slide off with some of the share certificates. Some of the detail of that is still before the courts.

The process of takeover and the management of funds are remarkably important, but thus far they have been ignored in the Bill. In many cases, concern has been expressed about that issue. The most important case was Hanson v. Imperial Tobacco trustees a few years ago. There has been a series of similar court cases. The most significant one in which I was involved was the GEC takeover of Plessey. Some 14 firms of lawyers were appointed, representing all the various interested parties. Enormously large sums of money were spent on issues that should have been determined in statute—something that could have been tackled within the framework of this Bill. There have been many similar cases.

In the first attempted takeover of Plessey by GEC, I was responsible for negotiating on behalf of the staff side of the pension fund. I found myself in the most extraordinary position of receiving a phone call from the then company secretary—now long since deceased—the day before the Monopolies and Mergers Commission report was due to be published. He asked me to come urgently to a meeting because he wanted to settle all the outstanding issues stemming from the last claim submitted by the trade union side in respect of the triennial review.

Of course, from the point of view of the members that was a wonderful arrangement—but it could not be said to be the rational and constructive expenditure of the assets of the pension fund. It should have been dealt with in a much more carefully thought-out way. The whole mechanism revolved around how best to manipulate each side's benefit in the context of the takeover. That cannot be right. I could list nine different cases—but I will not—where the interests of members during the process of takeover have been disadvantaged by the manipulation of one party or another.

Thus in 1992, when I sought to introduce a private Member's Bill, the then Under-Secretary of State for Social Security wrote to me saying: I recognise and sympathise with the focus of your Bill to protect the rights of members of occupational pension schemes where a company undergoes a change of ownership. Coming as it does in the wake of the Maxwell affair it addresses the concern shared by us all that within the Maxwell group of companies ownership was changed, and pension scheme members were moved from one scheme to another, without regard to their long term pension security. The Under-Secretary was exactly right in that paragraph and it is a great pity that that point has not been dealt with in the Bill. I hope that tonight the Government will say that they will take cognisance of that letter and that they will support any relevant amendments tabled in Committee. The relevance to all the schemes with which we are dealing is absolutely clear. It is not simply the Maxwell-type arrangement; it is necessary to protect sums of money in a more positive way.

At the time of my Bill the Government invited me to submit documentation to Goode, which I did. Goode referred to the takeover issue in one small paragraph. However, if we analyse the matter politically we must recognise that many of the issues of the Maxwell scandal could have been avoided. I urge the Government to rethink the matter.

The Government need to reconsider the whole question of member trustees. I accept that it is right for trustees to have a clear responsibility, not simply to the part of the population that elected them, but to the scheme in its entirety. There can be no doubt about that. It is difficult to explain to fund members that that is so. They say, "But I elected Mr. So-and-So; why can't I expect him to do as I say?" They cannot expect him to do so as he simply has responsibilities that are set out in the trust deed. That relationship is difficult to explain to the ordinary fund member.

What makes it more difficult, however, is that fund members say, "But this collective sum of money is defined by the trust deed, broadly speaking, and that pot of money is ours"—notwithstanding the quirks that give rise to circumstances where employers can partly be the beneficiaries of schemes. They say that European legislation or European Court decisions have decided that the money is part of pay. They ask why they cannot take broad control of that money within the constraints of the trust deed.

The arguments have been set out both by proponents of the 50 per cent. or more proposal tonight, and by supporters of the Government's position. If the numbers do not make any difference because the responsibilities are set out in the trust deed, the answer is that it is symbolic; something that the Government should concede. We should give members a feeling of a great deal more control over investment of the portfolio by increasing that number. It will provide a better basis for trust in schemes.

I could say a lot more, and I hope that some of the points are taken on board by the Government in the spirit that they are intended. We have gone a long way with the Bill. It is not good enough yet. I have set out one of the reasons for that in the context of my 1992 Bill. With some amendments, the Pensions Bill could potentially become an important piece of legislation that could develop support from hon. Members on both sides of the House. It could return us to the position in the early 1970s when the pension legislation was developed on a bipartisan basis. I hope that, in the long term, the House achieves that.

8.51 pm

Mr. John Greenway (Ryedale)

I begin by declaring my interest of having worked in the insurance and pensions industry for 25 years. Most people tend to associate me with having been a former policeman, but it is 25 years since I left the police. Had I stayed, I could have retired next Wednesday, 3 May, and I would have received a police pension that no one would have funded by creating a pension fund. I can see that my right hon. Friend the Secretary of State for Social Security is amused that one so young could possibly be a pensioner as early as next Wednesday. That probably says more about the police pension age than anything else, but it is a fact.

I want to make some serious points. Unfunded public sector schemes are a problem with which we must deal. The Committee will have to consider them when it debates the Bill's provisions on divorce.

I should declare my interest in the industry. I sit on the Insurance Brokers Registration Council, which is one of the industry's regulatory bodies, and I am a salaried employee of the Institute of Insurance Brokers. None of those interests reflects greatly on what I want to say tonight, but, for good order, I mention them.

In 10 minutes or so, one cannot do justice to a Bill of about 150 clauses. It is probably the most far-reaching Bill affecting pensions for a decade or more. It has been warmly welcomed, both in the House and outside, but the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who I am glad is in his place, pinched my line because he prayed in aid the Child Support Agency. As I approached the Bill, the one thing that worried me slightly was my recollection of the universal acclaim for the Child Support Act 1991. I am therefore slightly reassured by the fact that the Labour party will vote against the Bill tonight, so we hear, although not for particularly sound reasons.

An important point has been made: that, in the euphoria of the dreadful events surrounding the Maxwell scandal, which has rocked many occupational pension scheme members to the core, and of the Bill, which attempts to deal with those problems, we will not keep a careful and detailed eye on all the issues in the Bill. The Bill's intentions are undoubtedly laudable but the eventual judgment will be based not on its universal acclaim but on whether and to what extent our objectives are realised.

Conflicts exist that we cannot ignore. We want to improve the security and the trusteeship of occupational schemes. I greatly welcome that. We want to secure benefits for pensioners, but the rules must not be so onerous as to discourage either occupational schemes or, if there is an occupational scheme, the choice of the right scheme. Defined benefit or final salary schemes have great advantages, but they require the voluntary agreement of the employer; otherwise, people will go for money purchase, which is less attractive, or more people will go into personal pensions and will not have an occupational scheme.

I carefully followed the Bill's passage in the other place. I warmly welcome the Government's response to it. Some of the changes that have already been made are clear evidence that they are listening to the genuine concerns, and I welcome their aim of getting the measure right.

I want to make two points about occupational schemes, the first of which involves compensation. When my right hon. Friend the Secretary of State made one of his statements about the Goode report—I think that it was the one about the Maxwell scandal—I said that we should not lose sight of the fact that more than half of all occupational pensions are funded not through a self-administered arrangement but are insured schemes. Insured pension schemes have the benefit of the Policyholders Protection Act 1975. We must be careful not to penalise insurance companies that are subject to the provisions of the Act. They should not have to finance a significant part of any levy to fund compensation.

The Government have not adequately responded to the genuine concerns of insurers, particularly those expressed by the Association of British Insurers on behalf of life offices, but that is something for the Committee to consider.

Reference has been made to the vexed issue of the minimum funding requirement. I pay particular tribute to my hon. Friend the Minister for Social Security and Disabled People, who has worked tirelessly on the matter, but I want to disappoint him as well as praise him because we have not got it quite right yet. He will know that a number of major employers with big schemes remain concerned about their commitments if the Bill, as drafted, is passed. British Airways is one of the companies that has expressed those concerns.

A number of big companies' schemes are or are about to become closed schemes. They may suddenly find that if the solvency or minimum funding test is wrong on a particular day, they will be required to put more cash into a closed scheme with no facility to get the money out when, at some future date, it becomes clear that the extra money was not needed.

A number of suggestions have been made and, as usual, people go for the belt-and-braces approach whereas what we need is one or the other. Rather than having to invest more cash in such schemes, which have never had any difficulty meeting their obligations, I rather like the idea of either a bank guarantee or some form of subordinated loan. No doubt we shall discuss the matter in detail in Committee, but I nevertheless flag it as one of the issues that still needs some thought.

It has become obvious from the debate that there is a philosophical divide between the Government and the Opposition about how much we should rely on the state to fund pensions well into the next century and how much we can and should rely on the private sector. As the hon. Member for Glasgow, Garscadden (Mr. Dewar) said in his interesting speech, he has grave concerns about the ability of private pensions, especially personal pensions, to deliver what is required. I have no such doubts but I share his concern about mis-selling, which is my final point.

The Bill undoubtedly increases the trend towards personal pensions rather than the state earnings-related pension scheme. I have often said on public platforms that the Government should have been bolder with regard to SERPS five or six years ago. We have ended up with the feeling that SERPS will continue for a number of people, and we did not send a strong enough message as to what we had in mind.

The point is that the work force of the future—I am looking 30 or 50 years hence—cannot afford to fund the commitments being entered into by this generation for future pensioners who have all the time in the world to make their own provision. We have to face the serious problem of the mis-selling of personal pensions that occurred when people transferred from an occupational scheme or, indeed, opted out of an occupational scheme or failed to join when they could have done so. I want to make it clear, as I have done a number of times—most notably at the Chartered Insurance Institute's annual conference in Aberdeen last September—that it is a scandal that we have to put right.

I cannot understand why some of the transfers and opt-outs were ever accepted by life offices. They, of course, would argue that they did not know in every case that there was such an opt-out or that there were a number of non-joiners. However, I am not convinced that we are going about resolving the difficulty in entirely the right way. I should like the issue to be explored in Committee because the Bill endeavours to put right mistakes that have been made on a number of fronts, and this is one issue that we cannot ignore.

The Personal Investment Authority has now set up its pensions unit. It will be run by Miss Joanne Hindle, who is well known to the industry and greatly respected. She faces the formidable difficulty of transfer values. What disturbs me and fellow members of the all-party insurance and financial services group—two of my most able supporters, my hon. Friends the Members for Colchester, North (Mr. Jenkin) and for Gloucester (Mr. French), are here tonight—is how we calculate transfer values.

Some of the evidence given to us concerned a teacher who was given a transfer value of £22,000 on leaving the teachers' scheme but 15 months later the reinstatement cost was £84,000. A staff nurse who was given a transfer value of £5,000 was two years later quoted a reinstatement cost of £53,000. As long as such a problem exists—as long as there is such a difference between the transfer value on leaving a scheme and what it costs to rejoin—there is no doubt that elements within the insurance and pension industry will resist what the Securities and Investments Board and the PIA wish to achieve. That will not help to clear up the matter once and for all, which is what is needed if we are to restore the confidence of ordinary people in private pension provision.

I cannot do other than agree wholly with my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler)—personal pensions are a very good thing. What we have to be sure about is that the right people buy them in the right circumstances, which is something that we should consider before the Bill passes all its stages.

9.4 pm

Mrs. Helen Liddell (Monklands, East)

I am grateful for the opportunity to speak in this debate; I regret that I missed the opening speeches. I have waited four and a half years for this debate because I am a Maxwell pensioner. There is a sense in which hon. Members on both sides of the House say, "Oh well, at last a lot of the loopholes are about to be closed. We can put the Maxwell experience behind us and a chapter is being closed." For the many people who have been affected by the Maxwell scandal, the chapter will never be closed.

There is an assumption that because of the good efforts of Sir John Cuckney many people have now had their pensions restored and everything is hunky-dory. That is not so. The members of the Maxwell works scheme, to which my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) referred, had only 80 per cent. of their pensions paid to them for a long period. Elderly people who had to count the pennies to work out what they would have for the extras in life will not get that money back. Indeed, many pensioners in the Maxwell scheme have not lived to see today.

I make that point with some feeling because one of my misfortunes was that on 2 December 1991, the day that the frauds were discovered, I was taken from the Daily Record and Sunday Mail subsidiary and seconded to Mirror Group Newspapers for the crisis period. I lived through the Maxwell crisis, so hon. Members should believe me when I say that there are those who still suffer psychologically and financially as a result of what happened.

I regret that many aspects of the Bill do not meet the needs that the crisis revealed. I hope that the Committee of Selection will consider me to serve on the Standing Committee because there are a number of matters that I should like to address.

It is not often that I find an opportunity to agree with the hon. Member for Dover (Mr. Shaw). However, one key point he made this evening was about the need for information for pension fund members. One of the reasons why few people managed to spot that something was going wrong in the Maxwell scheme was that the pensions department was permanently in chaos. In the four years during which I was a member of the scheme before the frauds were discovered, I received not one item of correspondence from the pensions department telling me either of the state of my pension or of the state of the fund. I was not alone; many thousands of people in the scheme were in exactly the same position.

Much was said earlier about the need for training for trustee members. Training is absolutely crucial, but that lesson has not, I fear, been learnt. An awful lot of people assume that the Maxwell frauds took place because of the strength of Robert Maxwell's personality, but that was only a fraction of the issue. In reality, many pension fund trustees were bamboozled by the fact that Maxwell had set up a network of organisations, not least of which was the Maxwell-owned fund management company. Many distinguished economists and actuaries appeared to give advice to pension fund members, but they were repeatedly bamboozled and had the wool pulled over their eyes. They were not weak or stupid people, but they were not given the opportunity to get the information that they needed.

I pay tribute to the Maxwell pensioners because before the fraud was discovered they were agitating, although not because they felt that there was a fraud. Indeed, it is interesting that they believed that there was not a fraud. The first public evidence that there was a hole in the Maxwell pension funds came when Lord Stevens of Ludgate said to a reporter at a cocktail party that there was a hole in them. The pensioners' representatives were phoned up and their reaction was shared by most people—that it could not be true because it was such an absurd suggestion.

Some weeks later it was found that the suggestion was not absurd and that there was a massive hole in the funds. The pensioners' representatives—elderly people, some of whom were very frail—rallied round and managed to put a strong and convincing case that kept those who could take decisions to protect pensioners very much on their toes.

The Maxwell affair convinces me that there is a strong case for pensioners' representatives serving on the board of trustees. The role of auditors is also relevant. Lay members of pension funds seek the comfort of an audit. With the audit of the Maxwell fund, the auditors—I do not suggest that there was any irregularity—were the auditors to the network of Maxwell companies. Only a few months earlier, they had been the auditors to the verification of the flotation of Mirror Group Newspapers, the detail of which was approved by the stock exchange. To give comfort to pension fund members, we must ensure that auditors are independent of the operation of the company. I would wish to pursue that in Standing Committee should the opportunity arise.

We must also consider the role of the regulator. I noticed the Secretary of State shaking his head when it was suggested that the regulator was under-resourced and underpowered. Believe me, the sums put aside for the regulator pale into insignificance when compared with the fees that have been paid to blue-chip City firms to help untangle the dreadful scam perpetrated by Robert Maxwell. A considerable amount of money has gone to the City. To stop that happening again, we must ensure that the regulator is adequately funded and has the powers to be proactive. A proactive regulator would have stopped the debacle of the Maxwell scheme.

Compensation must be addressed in some detail. If it had been available in the right way and speedily enough, much of the anxiety of pensioners would have been overcome. Indeed, many people would have been able to face the future with much more confidence.

I am glad that we are debating this Bill, but I greatly regret the fact that many of the lessons that should have been learned from the Maxwell debacle have not been learned. I hope that in Committee some of that may be put right.

9.11 pm

Mr. Bernard Jenkin (Colchester, North)

Obviously the hon. Member for Monklands, East (Mrs. Liddell) has been a doughty fighter on behalf of the Maxwell pensioners. I would that she had been in the House for earlier speeches because she would have heard tributes being paid to the Secretary of State and to Lord Cuckney for their role in the affair in making sure—[Interruption.] I beg your pardon, Mr. Deputy Speaker, Sir John Cuckney. Well, it was a suggestion from the Opposition. Hon. Members have paid tribute to their role in bringing about a much more satisfactory resolution to the Maxwell affair than was envisaged at the outset. It would be apposite if the hon. Lady joined in paying those tributes.

I must declare an interest as an adviser to the Legal and General Group plc. Naturally, I am tempted to comment at length on mis-selling, but I guess that the House would think that anything that I said would be coloured by that interest, so I shall refrain from doing so. I shall do no more than endorse thoroughly the comments made by hon. Members of all parties, especially those of my hon. Friend the Member for Ryedale (Mr. Greenway), that, whatever the benefits of personal pensions, mis-selling must be rooted out. Indeed, the entire industry is committed to rooting out mis-selling. If that is not believed by the general public, more must be done by the industry to ensure that that is so.

I very much welcome the Bill. It represents a balanced approach and a balanced response to the Maxwell affair, which started the process. I endorse very much the measured pace at which the Government have proceeded towards the Bill. There was an extensive period of consultation following the Goode inquiry and, of course, a long period during which we have been able to consider the White Paper "Security, Equality, Choice: The Future for Pensions". The riskier form of consultation of sending the Bill to the House of Lords first ensures that, by the time the Bill comes to this House, we are well versed in many of the issues and in a position to decide finally on them.

It would be a great mistake to regard the Bill as the final word on pensions, as a variety of hon. Members have said, especially my hon. Friend the Member for Carshalton and Wallington (Mr. Forman). Indeed, I dare say that the chapter will never be closed on the Maxwell affair, as the hon. Member for Monklands, East said. It would be wrong to think that we could ever close that chapter. It would be wrong to think that any Bill could provide a totally comprehensive answer to every possible fraud that could be committed in any occupational pension scheme. That would be the sledgehammer that completely cracked the nut. We would see a diminution in what employers could provide in terms of benefits for their employees. There is a necessary balance to be struck. There is an inevitable temptation to trammel the possible consequence of every wrongdoing possible. That would be a mistake. To that extent, there is a shared understanding across the House of the issues which face occupational pensions, although naturally we have to find our areas of disagreement as well.

The watchwords for the Bill are maintaining choice and ensuring security and sustainability. Sustainability is one of the most important aspects. We must sustain the commitment to the public sector and make sure that it is sustainable over the long term. We must ensure that the dramatic and fantastic contribution that the private sector makes to pensions in Britain is also sustained. The success of private provision in Britain must remain a key consideration when we formulate policy. It was the key consideration of the report of the Select Committee, of which I am a member.

We must remember that the vast majority of occupational pension schemes are extremely well run. To tar all occupational schemes with the Maxwell brush is a great mistake. We need to recognise that the vast majority of pension schemes do not require any tighter regulation. The only reason we are regulating in a heavier way than previously is to ensure that we catch the tiny minority of pension schemes that might not obey all the rules.

I hope that the hon. Member for Monklands, East and others who have spoken about the dangers of a recurrence of Maxwell will bear it in mind that what they perceive as weakness in the powers of the regulator might be a weakness if the establishment of the regulator were the only measure that the Bill introduced to improve the regulation of occupational pension schemes. We are creating a plethora of trip wires.

For example, on the points raised about takeovers, any trustee, member trustee, actuary or accountant who gets an uneasy feeling about the complex and opaque structure of a company and overlapping pension arrangements will naturally be the first person to blow the whistle. The hon. Member for Monklands, East failed to receive information as a Maxwell pensioner. Under the new arrangements, she would be able to blow the whistle. In the Maxwell circumstances, one imagines whistles blowing all over the place and the new pensions regulator having a very busy time.

One must remember that the fantastic contribution to the retirement costs of old people in Britain has largely grown out of voluntary arrangements. There is no obligation on companies to provide large occupational pension schemes, as they have been provided. If it becomes too much of a major burden, more and more companies will retire from the fray and go for the simpler schemes outlined by my hon. Friend the Member for Ryedale.

My last point is a criticism of the Opposition amendment. We are told that the Government fail to recognise the importance of pensions as a form of deferred pay". Yet the thrust of other Opposition criticisms, for example, on trustees, fails to recognise pension funds as an asset already owned by the employees. There is a danger that European, less adequate pension schemes will colour the regulation of pension schemes in Britain, to the detriment of pension schemes.

My right hon. Friend the Secretary of State rightly mentioned the judgments of the European courts on the matter with some warnings. I warn him that I doubt whether the European Court of Justice has had its last word on equal treatment, pensions, part-time workers and all the issues involved in article 119.

I hope that we will protect pension and financial schemes from the uncertainties created by litigation in the European Court and from the threat of over-regulation and interference from European Court judgments that will ultimately cost the people in occupational pension schemes, whose benefits will not be so good in the long term.

9.19 pm

Mr. Adam Ingram (East Kilbride)

The debate has been wide ranging and informative. Most contributions have added to the sum of knowledge on the issue, and it is significant that every contributor expressed reservations about many aspects of the Bill—apart from the Secretary of State, who was without criticism for his own measure. Every other Conservative Member pointed to where improvements could be achieved.

I must comment on the contribution of the hon. Member for Brighton, Kemptown (Sir A. Bowden) and his criticisms of the Bill. It would be good to see him in the Standing Committee, but I suspect that his independence of mind and spirit would preclude that. If he does serve, he will get a warm welcome for many of his comments today.

As we heard from many of the speeches, the Bill is far removed from the events that caused the Government, somewhat reluctantly, to consider the weaknesses in the regulation, monitoring and operation of occupational pension schemes. The Goode report on pension law reform was produced in the wake of the Maxwell scandal. It was undoubtedly a definitive piece of work—not without flaws, but none the less a powerful examination of the key issues arising from the Maxwell scandal, with possible solutions to avoid such events in the future. If the House had been debating the conclusions of the Goode report today, I hazard a guess that not much would be dividing us on the key issues in it.

Of course, the Government had another agenda. As with everything else that the Government do, the presentation belies the reality. We are asked to believe the promotional promise of the Government's White Paper in response to the Goode report—that the justification for the Bill is improving security, equality and choice across a range of pension provision now and in the decades ahead.

Nothing could be further from the truth. Where is the security in a regulatory system that has limited investigative powers and is forced to operate reactively and not proactively? Where is the equality, when the Government are proposing a levelling down of standards and benefits, with both men and women losing out? Where is the choice, when the Government are proposing to create an unlevel playing field in favour of personal pension schemes and against defined benefit schemes, which will provide only minimal protection to the low-paid and other at-risk employees, through reductions in the state earnings-related pension scheme?

The Bill fails to deliver properly on those promises of security, equality and choice. In many ways, the Government are like those personal pension salesmen who have been mis-selling pension schemes to millions of vulnerable people for the past eight years or so and, in effect, saying, "What we promise you, you won't get." In our consideration and scrutiny of the Bill, it is important that we deal with the reality of the measures involved and that we are not deflected by the Government hype.

We must welcome the good news that the Government have announced on war widows. Although many Conservative Members and the Secretary of State seem to take the credit, it is worth bearing in mind the fact that the measure was vigorously opposed in the Lords and was introduced as a result of a Government defeat. We are grateful that the Government have now accepted that defeat, and I am sure that the measure will be warmly welcomed throughout the country.

As we know from today's debate, the Bill is an amalgamation of three separate issues, all of which are important in their own right and will have major, long-term effects on pension provision. The Bill sets out to modify the law on occupational pensions, although in a much watered-down version of what Goode proposed. It will provide less protection than was set out in the Government's White Paper. It introduces a further reduction in the value of SERPS and will give an additional boost to personal pensions, while failing to tackle the mis-selling of such schemes. The Bill will diminish the pension entitlement of women by raising their retirement age to 65 without providing any worthwhile compensating benefits in return.

Much has been made in the debate of the operation and regulation of occupational pension schemes. Since 48 per cent. of all employees are members of those schemes, it is right that such emphasis has been given to that aspect of the Bill. Despite the Government's encouragement to draw employees away from employer-based schemes to personal pension schemes, the National Association of Pension Funds has revealed that 81 per cent. of new employees eligible to do so join occupational schemes. They make that choice despite the many attractive offers put before them.

Although the numbers in occupational pension schemes are declining, they account for a significant proportion of the British work force and have combined assets of about £500 billion. We therefore welcome the establishment of a framework to oversee the operation of occupational pension schemes, although we significantly differ from the Government on the way in which the new regulatory regime should work in practice. That difference was graphically highlighted by my hon. Friend the Member for Monklands, East (Mrs. Liddell) in her description of her experience of the Maxwell fund.

In Committee, we will try to convince the Government that the provisions laid down for member trustees need to be extended beyond the one third employee-two third employer principle set out in the Bill. It is important that a proper balance is struck between those to whom the scheme belongs—the contributors—and those who act as trustees. The proposal for one third nominated trustees is too cautious and we will push for a 50:50 split between employer and active members.

We also believe that there is a strong case for pensioners to be allowed to have direct trustee representation. That would obviously depend on the overall number of trustees on a particular scheme and the number of pensioners in it. It would be wrong simply to argue that the concept of pensioner trustees should be accepted as a matter of course for a scheme that had just three trustees and represented a small number of pensioners.

Mr. Forman

Is the hon. Gentleman not in danger of misunderstanding slightly the concept of a trustee in English law? Does he accept that a trustee is not supposed to be a delegate of any group of people, but is meant to act in the best interests of the whole?

Mr. Ingram

Other hon. Members have made a strong argument for pensioner trustees, but no one raised the issue of trustees looking after the interests of deferred pensioners. I accept the hon. Gentleman's point that trustees are not direct delegates and that they should consider the wider interest. Those of us who have been in consultation in recent months with those involved in the pension sector know that a large constituency of pensioners feel that they can offer particular expertise to the management of particular schemes. Many of them are former senior managers of particular companies. The case for pensioner trustees can be made, but it must be set against a number of other factors relating to the way in which particular schemes are established. For example, the number of trustees on a particular scheme and the number of retired members within it should be taken into account.

Mr. Duncan

So the hon. Gentleman is against them.

Mr. Ingram

If the hon. Gentleman wants to intervene, I would be happy to give way. I have said that the proposal is one for debate in Committee.

Mr. Duncan

In the hon. Gentleman's long answer to my hon. Friend the Member for Carshalton and Wallington (Mr. Forman), it struck me that he was equivocal about whether he wants 50 per cent. of pensioner trustees on pension funds. It strikes me that he is halfway between admitting their trustee role and saying that he wants pensioner democracy in the way that a fund is managed.

Mr. Ingram

I am sorry that it was a long answer, but I got a nod of agreement from the hon. Member for Carshalton and Wallington (Mr. Forman) as I tried to explain some of the issues involved. There is nothing clear cut in many of the matters involved, which is why the Committee stage is of such benefit. It will help those of us who are trying to better the structure of pension schemes. Obviously the hon. Member for Rutland and Melton (Mr. Duncan) has no interest in achieving that and is simply a yes man for the Government and the Treasury Bench.

It is important that a proper balance exists between the contributors and the trustees. Member trustees must be able to operate in an unfettered way, free from employer pressure. We shall therefore propose amendments to protect member trustees and to promote a better system of training provision for trustees than the system that is set out in the Bill.

As other hon. Members have said, the new occupational pensions regulatory authority falls far short of what is required to ensure complete confidence in the regulation of occupational schemes. In its proposed form, OPRA will have nothing to do with issues of indexation, equal treatment or compensation. As the organisation will be reactive, not proactive, it may prove to be wholly ineffective in preventing illegal plundering of funds. It is not sufficient to leave the whistle-blowing role to fund actuaries and auditors. We shall propose amendments to tighten the functions of the new regulatory body and those of the pension regulator. Conservative Members and others made that argument during the debate in relation to the suggestion that auditors and actuaries might be left to carry out their functions without proper protection.

It is equally the case that, to ensure confidence in an occupational scheme, the funds of such schemes must satisfy certain minimum standards of solvency. The Government have now partly recognised that the original proposal in the Bill was misleading and required a different definition. However, the changing of the minimum solvency requirement to the minimum funding requirement provides no comfort; if anything, it exposed the weaknesses of the Bill's provisions in that respect.

We shall therefore explore in Committee the alternative means of ensuring the security of the funds and the solvency guarantees of those funds. The alternative concept, proposed by the Trades Union Congress and others, of a minimum contributions requirement, discussed at length during the Lords stage of the Bill by Lord Eatwell, has strong support in sections of the pension industry. One hopes that the Government are prepared to consider that proposal constructively.

It is known that many contributors to the debate outside the House—experts in the field—strongly criticise what was called a minimum solvency requirement and is now known as a minimum funding requirement. That issue needs further examination and greater consideration.

As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said in his opening remarks, the issue of what the role of the state should be in pension provision is central to the Bill. It is obvious that the current Government want to disengage from supplementary pension provision in its entirety. We contend that that is the wrong approach.

It is equally wrong that billions of pounds of taxpayers' money—more than £9 billion paid in 1992–93 alone—should be used to bribe people to opt out of the state earnings-related pension scheme and to buy into personal pensions. Experience has shown that those bribes will prove disastrous for 1.5 million people who switched from an occupational pension scheme to a personal pension or chose a personal pension in preference to their company-based scheme. That has proved equally disastrous for the 3 million people who have taken out personal pensions on a SERPS rebate-only basis.

To satisfy the demands of the Treasury in achieving reductions in the public sector borrowing requirement, millions of our fellow citizens are now effectively in receipt of worthless personal pensions. When they retire, they will join the 1.5 million pensioners who currently have to depend on income support to supplement their basic state pension.

The overall changes in SERPS provision are not a small technical change, as Lord Mackay said during consideration of the Bill in the other place. How right he was. As the Government Actuary details in his report relating to the Bill, the effects of the changes to SERPS will effectively halve spending from £19.3 billion in 2050 to £9.9 billion at current prices. That cannot be achieved without losers.

That is one of the most unsatisfactory features of the Bill. It has received little attention to date and it obviously was the Government's intention to seek to obscure what they were up to. It means that, in effect, many people who currently pay into SERPS will receive much smaller benefits for their contributions than they had expected. Women especially will lose out as a result of those changes, as they will lose out as a result of many other aspects of the Bill.

It is an undisputed fact that women receive a raw deal in pensions, primarily as a result of their small and intermittent earnings and their child care and caring responsibilities. Only one woman in four receives income from SERPS; only one woman in five receives some occupational pension and only one woman in six receives a state old-age pension in her own right. That is why the state has to retain an active role in the provision of pensions at all levels. If the state does not do so, pensioner poverty will escalate because those at the bottom of the economic pile will suffer from the Government's intention as set out in the Bill, which will prove disastrous for them in their old age.

The debate has also dealt with the equalisation—

Sir Norman Fowler

Before the hon. Gentleman leaves the subject of state provision, will he answer the following question? Over the past decade, the Labour party's policy has been to uprate the basic pension by earnings—is that still the Labour party's policy?

Mr. Ingram

I know that my answer will not please the right hon. Gentleman, but he should wait for the general election. I am glad that he intervened, because I had intended in my introductory remarks to mention his contribution to the Bill. It is worth while bearing it in mind that he was Secretary of State when many of the changes relating to SERPS were laid down. They led to the mis-selling of private pensions. The right hon. Gentleman did not apologise to the House about the 4.5 million to 5 million people who have lost out as a result. I think that I have answered the question although the right hon. Gentleman may not like the answer. It is as good as the right hon. Gentleman is going to get.

Mr. Lilley

Would the hon. Gentleman advise anyone to buy a personal pension on the sort of information that he proposes to give the electorate?

Mr. Ingram

The Secretary of State should talk to the right hon. Member for Sutton Coldfield (Sir N. Fowler) and ask about his responsibility for the 4.5 million to 5 million people who are suffering as a result of the mis-selling of personal pensions. The guilt and responsibility lie on the shoulders of the Government. Many of their fellow citizens will be in poverty in their old age when they retire.

The debate has dealt with the equalisation of the state pension age at 65. There is strong evidence that this country is not facing a demographic time bomb or a financial time bomb in funding the state pension. This country's demographic trends show that over the next 20 years the number of people over 65 will rise by just 700,000 people. By the year 2040, three quarters of the population will be under 65 and we will have the best support ratio bar one in western Europe and within the Organisation for Economic Co-operation and Development. The financial cost of elderly people per person of working age will be the lowest bar one in the OECD by 2010, and thereafter it will be by far the lowest. It has been calculated that the additional cost of aging during the next 50 years will add less to the social security budget than the rising cost of unemployment during the past five years.

Mr. French

Would the hon. Gentleman care to tell the House the source of the information that he has just given?

Mr. Ingram

I shall certainly give the House the source of that information. It came from the Equal Opportunities Commission. I hope that the hon. Gentleman will not denigrate that body, which has set out that information in detail.

All that information needs to be properly analysed before we jump to the decision to equalise the pension age at 65. One of the litmus tests of any decent society is how it treats its elderly population. By pushing through the change for a common retirement age of 65 and, at the same time, reducing the level of financial support through changes to SERPS and in other ways, it is clear that the Government are prepared to fail that test, not just for the current generation but for elderly generations to come.

The complexity and scale of the Bill mean that it has not been possible in the time available to cover all its aspects.

Mr. Churchill

Will the hon. Gentleman give way?

Mr. Ingram

No, I shall not give way.

I have not mentioned the vexed question of divorce and pensions or the importance of retaining the guaranteed minimum pension or the treatment of part-time workers in relation to their pension entitlement. I have not mentioned, in relation to occupational schemes, the strong case that can be made for independent custodianship of funds. All those issues will receive the greatest scrutiny in Committee. No one should underestimate the importance of the measure, which has wide-ranging implications for each and every person in this country. If the Government are serious about their commitment to provide security, equality and choice in pension provision, they must respond positively to the many criticisms made of the Bill inside and outside the House.

The Committee stage will allow the Government every opportunity to address those criticisms. Only by taking them on board will the Government ensure that their pension promise of a choice of scheme—public, private or occupational—in return for an appropriate contribution is not broken and that people's pensions will be both secure and adequate enough to avoid poverty in old age. I ask the House to support the Opposition's reasoned amendment.

9.39 pm

The Minister for Social Security and Disabled People (Mr. William Hague)

The debate has been a serious one, but it has had its pleasant and encouraging moments—not least being the number of hon. Members who have volunteered or been volunteered to serve on the Standing Committee which will consider the Pensions Bill. A number of hon. Members also made some very pleasant remarks about my right hon. and hon. Friends in the Department of Social Security.

The hon. Member for Glasgow, Garscadden (Mr. Dewar) said that there could be no more reassuring spectacle than that of my hon. Friend the Parliamentary Under-Secretary of State, the Member for Wanstead and Woodford (Mr. Arbuthnot). Therefore, the hon. Gentleman must be reassured about the Bill, which is largely the work of my hon. Friend. The hon. Gentleman also paid tribute to our noble Friend Lord Mackay of Ardbrecknish in the other place, to whom he attributed a skilful retreat. Given that he supplied the information that our noble Friend was also once president of the university Liberal society, one must conclude that he knew how to accomplish a substantial advance. I think that that is a comfort to us all.

More seriously, the hon. Member for Birkenhead (Mr. Field) echoed the remarks of my right hon. Friend the Secretary of State in paying tribute to the work of Sir John Cuckney. It is worth pausing for a moment to note what has happened to the pension funds which gave rise to much of the debate about scheme security.

The position of the Maxwell pension funds in 1992 created much controversy in the House and elsewhere, with a number of calls for the Government to commit very large sums of public money to rescue or underwrite the schemes. Three years on, thanks to the patient work of Sir John Cuckney and others and at a relatively small cost to public funds in securing pension payments in the interim, the position of the Maxwell pensioners has been secured. However, until today it was largely unremarked on in the House. It is important for us to recognise the successful outcome of that work. As the hon. Member for Birkenhead gracefully acknowledged, it totally vindicates the judgment and the actions of my right hon. Friend the Secretary of State in 1992. That fact should be respected across the House.

It will be impossible in the time available to respond to every point that has been raised during the debate, but I will do my best to respond to the largest possible number of them. The hon. Member for Antrim, South (Mr. Forsythe) inquired about the position of Northern Ireland in relation to the Bill—a question with which I am becoming familiar from one Bill to another. I assure the hon. Gentleman that the Bill's provisions will be reflected in a corresponding Order in Council for Northern Ireland. The need to legislate for Northern Ireland in that way arises from the fact that the current legislative framework there is somewhat different.

The hon. Gentleman also expressed the hope that some consideration would be given to early leavers from pension schemes. It is worth noting that the Government have done a lot for early leavers in recent years. Pension rights exist after only two years' service, deferred rights are protected against inflation and there are transfer rights—all of which my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) introduced in the Social Security Act 1986. The Bill goes further, notably by extending the statutory right to transfers to most pre-1986 early leavers and by speeding up the payment of transfer sums.

My hon. Friend the Member for Brighton, Kemptown (Sir A. Bowden) asked about clause 36 and the provision of particular documents to scheme members. I assure him that the Bill achieves the effect that he seeks. We intend to make regulations under clause 36 which will require schemes to make available to scheme members and to others the documents mentioned in the clause. The schemes will have to comply with those regulations; it will not be a discretionary matter.

My hon. Friend also inquired, as did some other hon. Friends—particularly my hon. Friend the Member for Gloucester (Mr. French)—about compulsory trustee training. I agree that trustees should receive appropriate training. The Bill will facilitate that by implementing the Pension Law Review Committee recommendation that trustees who are employees should be entitled to paid time off for training and for undertaking their trustee duties, but the Government are greatly concerned about the practicality of establishing and policing any compulsory training requirements. There would be no point in making a statutory requirement if there were no possibility of monitoring or enforcing compliance. To do that would require someone—presumably the regulator—to specify the level of competence a trustee should have and to find some way of determining the individual training requirements of each and every trustee. That would not be a simple matter and could mean statutory responsibilities and complexities that would be disproportionately expensive. No doubt we will return to that aspect later in the Bill's progress.

I will refer briefly to three matters that sparked particular interest and controversy following debates in the other place. One is pensions and divorce. The hon. Member for Garscadden was worried that Government policy would require contact between a husband and ex-wife many years after their divorce, to divide a pension in payment. That would not be so under the spirit of the amendments made in another place, which we indicated that we intend to accept. Pension schemes could be required by the courts to make payments under deferred maintenance orders direct to the ex-wife. I make it clear that the Government intend to accept the spirit of that provision, so further contact between the parties would not be necessary in most cases.

Some hon. Members argued for pension splitting—such as the hon. Member for Leyton (Mr. Cohen), who has a private Member's Bill on the subject. The Government are extremely concerned about the complexity involved in pension splitting, particularly in relation to SERPS, and the more favourable tax treatment thereby given to people who had divorced as opposed to couples who remain married. We would of course be concerned about the large amount of tax revenue thereby lost, particularly in view of the spending commitments urged on the Government in the debate.

The announcement by my right hon. Friend the Secretary of State regarding war widows was unanimously welcomed in all parts of the House. I noted the additional issues raised by my hon. Friends the Members for Davyhulme (Mr. Churchill) and for Dorset, West (Sir J. Spicer) and by the right hon. Member for Manchester, Wythenshawe (Mr. Morris), but general retrospective changes to occupational pension schemes raise questions of fairness and precedent not necessarily raised by changes to the DSS war widows scheme. They are distinct from questions of obligations to war pensioners, which many people would prefer to discuss.

Mr. Alfred Morris

rose—

Mr. Churchill

rose—

Mr. Duncan

rose—

Mr. Hague

I am spoilt for choice, but I will give way to my hon. Friend the Member for Davyhulme.

Mr. Churchill

My hon. Friend mistakes me if he imagines that I was particularly pressing any case other than that of expatriate state retirement pensioners. Evidently my hon. Friend misunderstood the point that I was trying to put before him. I was referring to people who, in a lifetime's work, contributed through national insurance contributions to a retirement pension, and who are being cheated by the Government of the entitlement for which they have paid. Will my hon. Friend explain the fairness of denying to people who live across the border in Canada—in Windsor, Ontario—the full pension that they would receive in Detroit?

Mr. Hague

I did not misunderstand my hon. Friend. I was referring to points made by my hon. Friend the Member for Dorset, West and by the right hon. Member for Wythenshawe, which I understood my hon. Friend the Member for Davyhulme to be supporting. He is talking about another matter, to which I was about to refer—the payment of state pensions overseas. He was worried that his eloquent and forceful pleas would fall on deaf ears. They do not fall on deaf ears, but they do fall on the ears of Ministers who have to manage a huge budget on which there are constant upward pressures. For now I shall just say that we will have to debate these issues later in more detail. When we come to debate them, I hope that the House will remember that any increase in spending commitments involving sending money to people overseas will of course mean corresponding reductions in our expenditure here at home. Hon. Members should bear that in mind.

My hon. Friend the Member for Ryedale (Mr. Greenway) was worried about the position of large, mature schemes in relation to the minimum funding requirement. As he acknowledged, I am well aware of the concerns. The position of such schemes will have been considerably eased by the decisions that we have made on the operation of the minimum funding requirements, announced on 8 December last year. In particular, my hon. Friend might like to reflect on the fact that if a scheme is found to be less than 90 per cent. funded on a particular day, the sponsoring employer will have a year in which to restore funding to that level, and could do so in part by using bank guarantees or subordinated loans of the kind that my hon. Friend mentioned. There must also be a funding plan to restore 100 per cent. funding within five years, but that could be changed if the fund recovered as a result of market changes during that period. So it seems most unlikely that a properly funded scheme could be seriously affected in the way my hon. Friend has described; but my hon. Friend the Under-Secretary and I will be happy to set out the Government's thinking in more detail in the Committee.

Mr. Alfred Morris

The Minister referred to my speech about war widows and service widows. With regard to the Secretary of State's announcement this afternoon of his acceptance of the Lords amendment, questions are being asked about whether the restored entitlement will be automatic and whether it will be subjected in any way to means testing. I raise those points immediately; there was no reference to them in the DSS press statement about the Minister's announcement this afternoon. Can the hon. Gentleman enlighten us now?

Mr. Hague

People will need to apply for the announced changes, but there is no question of their not taking place or of their being means-tested. I hope that that reassures the right hon. Gentleman.

Listening to all today's speeches, I thought that the speech that did most to put things in perspective was that of my right hon. Friend the Member for Sutton Coldfield. He drew attention to the importance of the 1986 Act, which did so much to boost the prospects of occupational pension funds and to protect the accrued rights of people who had left schemes, thereby encouraging job mobility. Those changes permitted and encouraged the growth of occupational pension funds, to the extent that this country now has at least as much funded occupational pension provision as does the whole of the rest of the European Community. Indeed, my hon. Friend the Member for Dover (Mr. Shaw) reminded us of the huge unfunded pension liabilities that have built up across Europe. They mean that other European Governments are extremely puzzled as to how they will meet those liabilities, for which they have not provided.

The interesting thing to note is that if we had continued the policy bequeathed to us by the Labour Government, we would now be joining countries that have large unfunded state pension liabilities. The Opposition like to pose today as the friends of occupational pension provision, but they undertook none of the reforms that were undertaken by my right hon. Friend the Member for Sutton Coldfield and his colleagues. They saddled the future taxpayers of this country with the colossal and unsustainable burden of a state earnings-related pension system which, in the next century, would have cost more than £30 billion a year—and which they had no idea how to pay for. They introduced a pay-as-you-go system which everyone is now willing to criticise, intending people of the future to pay for it long after they had left the scene. It was left to the Government to reform that, to ensure that it was an affordable system. Now, of course, it would be interesting to know whether the Opposition would plan to reintroduce such a scheme. We do not know, because they do not know.

My right hon. Friend the Member for Sutton Coldfield asked whether the Labour party now thought that earnings or prices were the right basis for uprating state pensions in the future. That question has been asked again of the hon. Member for East Kilbride (Mr. Ingram), in the closing moments of his speech. It was one of the Labour party's most important pledges in four general election campaigns. If it had won and implemented that policy, expenditure would now be nearly £9 billion a year higher than it is. We have heard rumours that the Labour party has changed its policy, but they remain rumours and the country remains in the dark because the Labour party has declined the opportunity to confirm it in the House.

If those are not big enough spending commitments on which the Labour party does not know what it is doing, we also find that, on the state pension age, where the arguments are obvious to the Governments of Australia, Austria, Canada, Denmark, Finland, Germany, Greece, Ireland, Iceland, the Netherlands, New Zealand, Portugal, Spain and the United States—all of whom have moved or are moving to a common retirement age of at least 65—only the Labour party remains unaware of the arguments—[Interruption.] And the Liberal Democrats. I beg the hon. Gentleman's pardon.

The amendment tabled by the hon. Member for Garscadden said that the Government's policy is rigid. It is not. There will be a 10 per cent. increment for every year in which the taking of the pension is postponed. I hand it to the hon. Gentleman. No one could accuse him of having a rigid policy. He would be lucky to be accused of having a policy at all. Two years ago, the Labour party conference voted that the retirement age for both men and women should be equalised at 60—a policy that sounds very nice but which would cost £12,000 million a year more than that of the Government. Seeing the danger, the Commission on Social Justice, in its report, said: It is quite reasonable to start phasing in a common pension age of 65 in the next century. That is the policy of the Government. But then the Trades Union Congress announced last year that it had stepped up its campaign to achieve a state pension age for all at 60.

Mr. Kirkwood

rose—

Mr. Hague

It is against that background that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who is trying so valiantly to attract my attention, said that major pension changes should take place only if there is a consensus. How long would we have to wait for a consensus if Labour Members cannot even arrive at a consensus with one another on the central question of pensions policy? Faced with the choice between stark reality on the one hand and the demands of the unions on the other, Opposition Front-Bench Members have opted for a fudge—a pivotal age of 63, which splits the difference between the groups but would bring the worst of every world. It would mean that people could claim a reduced pension at 60, topped up by other benefits, leading to an escalating bill for the taxpayer of billions, and a growing number of pensioners dependent for life on income-related benefits.

On these three questions: the right future for SERPS; the basis of pensions uprating; and the equalisation of the state pension age, each of which dwarfs almost every other public expenditure decision taken by the House, the Opposition do not know their policy. It ranges from the largely uncertain on the one hand to the completely unknown on the other. They have clutched at a flexible decade of retirement as a fig leaf form of words to cover the embarrassment of a flexible decade of not having a clue what to say.

That is no basis for government. Governments have to know what they are going to do. Governments have to calculate the costs and benefits of their policies. Governments have to arrive at the right balance, which means that we will have strong, funded occupational pension provision, in this country, thoroughly regulated without killing the goose that lays the golden eggs. That is what we are setting about in this major piece of legislation. It is the right legislation. It will bring security, equality and choice to pension provision. It deserves the support of the House.

Question put, That the amendment be made:—

The House divided: Ayes 228, Noes 267.

Division No. 134]	[9.59 pm
AYES
Abbott, Ms Diane	Flynn, Paul
Adams, Mrs Irene	Foster, Rt Hon Derek
Ainger, Nick	Foster, Don (Bath)
Allen, Graham	Fraser, John
Anderson, Ms Janet (Ros'dale)	Fyfe, Maria
Armstrong, Hilary	Galbraith, Sam
Ashton, Joe	Galloway, George
Austin-Walker, John	Gapes, Mike
Barnes, Harry	Garrett, John
Barron, Kevin	George, Bruce
Battle, John	Gerrard, Neil
Bayley, Hugh	Gilbert, Rt Hon Dr John
Beckett, Rt Hon Margaret	Godman, Dr Norman A
Beith, Rt Hon A J	Godsiff, Roger
Bell, Stuart	Golding, Mrs Llin
Benn, Rt Hon Tony	Gordon, Mildred
Benton, Joe	Graham, Thomas
Bermingham, Gerald	Grant, Bernie (Tottenham)
Berry, Roger	Griffiths, Nigel (Edinburgh S)
Betts, Clive	Griffiths, Win (Bridgend)
Blunkett, David	Grocott, Bruce
Boateng, Paul	Gunnell, John
Bradley, Keith	Hain, Peter
Bray, Dr Jeremy	Hall, Mike
Brown, N (N'c'tle upon Tyne E)	Hanson, David
Burden, Richard	Hattersley, Rt Hon Roy
Byers, Stephen	Henderson, Doug
Callaghan, Jim	Heppell, John
Campbell, Mrs Anne (C'bridge)	Hill, Keith (Streatham)
Campbell, Ronnie (Blyth V)	Hinchliffe, David
Campbell-Savours, D N	Hodge, Margaret
Cann, Jamie	Hoey, Kate
Chisholm, Malcolm	Hogg, Norman (Cumbernauld)
Church, Judith	Home Robertson, John
Clark, Dr David (South Shields)	Hoon, Geoffrey
Clarke, Eric (Midlothian)	Howarth, George (Knowsley North)
Clarke, Tom (Monklands W)	Howells, Dr. Kim (Pontypridd)
Clelland, David	Hoyle, Doug
Clwyd, Mrs Ann	Hughes, Kevin (Doncaster N)
Cohen, Harry	Hughes, Robert (Aberdeen N)
Connarty, Michael	Hughes, Simon (Southwark)
Cook, Robin (Livingston)	Hutton, John
Corbett, Robin	Ingram, Adam
Corbyn, Jeremy	Jackson, Glenda (H'stead)
Corston, Jean	Jamieson, David
Cousins, Jim	Janner, Greville
Cunningham, Jim (Covy SE)	Jones, Barry (Alyn and D'side)
Cunningham, Rt Hon Dr John	Jones, Ieuan Wyn (Ynys Môn)
Dafis, Cynog	Jones, Lynne (B'ham S O)
Dalyell, Tam	Jones, Martyn (Clwyd, SW)
Darling, Alistair	Jowell, Tessa
Davidson, Ian	Kaufman, Rt Hon Gerald
Davies, Bryan (Oldham C'tral)	Keen, Alan
Davies, Rt Hon Denzil (Llanelli)	Kennedy, Jane (Lpool Brdgn)
Davies, Ron (Caerphilly)	Khabra, Piara S
Denham, John	Kilfoyle, Peter
Dewar, Donald	Kirkwood, Archy
Dobson, Frank	Lestor, Joan (Eccles)
Donohoe, Brian H	Lewis, Terry
Dowd, Jim	Liddell, Mrs Helen
Dunwoody, Mrs Gwyneth	Livingstone, Ken
Eagle, Ms Angela	Lloyd, Tony (Stretford)
Eastham, Ken	Loyden, Eddie
Etherington, Bill	Lynne, Ms Liz
Evans, John (St Helens N)	McAllion, John
Fatchett, Derek	McCartney, Ian
Fisher, Mark	Macdonald, Calum

McFall, John	Roche, Mrs Barbara
McKelvey, William	Rooker, Jeff
McLeish, Henry	Rooney, Terry
McMaster, Gordon	Ross, Ernie (Dundee W)
McWilliam, John	Rowlands, Ted
Maddock, Diana	Ruddock, Joan
Mahon, Alice	Sedgemore, Brian
Mandelson, Peter	Sheerman, Barry
Marshall, David (Shettleston)	Sheldon, Rt Hon Robert
Marshall, Jim (Leicester, S)	Shore, Rt Hon Peter
Martin, Michael J (Springburn)	Short, Clare
Martlew, Eric	Simpson, Alan
Maxton, John	Skinner, Dennis
Meacher, Michael	Smith, Andrew (Oxford E)
Meale, Alan	Smith, Chris (Isl'ton S & F'sbury)
Michael, Alun	Smith, Llew (Blaenau Gwent)
Michie, Bill (Sheffield Heeley)	Snape, Peter
Michie, Mrs Ray (Argyll & Bute)	Soley, Clive
Milburn, Alan	Spellar, John
Miller, Andrew	Steinberg, Gerry
Mitchell, Austin (Gt Grimsby)	Stevenson, George
Moonie, Dr Lewis	Strang, Dr. Gavin
Morgan, Rhodri	Straw, Jack
Morley, Elliot	Sutcliffe, Gerry
Morris, Rt Hon Alfred (Wy'nshawe)	Taylor, Mrs Ann (Dewsbury)
Morris, Rt Hon John (Aberavon)	Taylor, Matthew (Truro)
Mowlam, Marjorie	Timms, Stephen
Mudie, George	Tipping, Paddy
Mullin, Chris	Touhig, Don
Murphy, Paul	Turner, Dennis
Oakes, Rt Hon Gordon	Vaz, Keith
O'Brien, Mike (N W'kshire)	Walker, Rt Hon Sir Harold
O'Neill, Martin	Walley, Joan
Paisley, The Reverend Ian	Wardell, Gareth (Gower)
Patchett, Terry	Wareing, Robert N
Pearson, Ian	Watson, Mike
Pendry, Tom	Wicks, Malcolm
Pickthall, Colin	Wigley, Dafydd
Pope, Greg	Williams, Rt Hon Alan (Sw'n W)
Powell, Ray (Ogmore)	Williams, Alan W (Carmarthen)
Prentice, Bridget (Lew'm E)	Wilson, Brian
Prentice, Gordon (Pendle)	Winnick, David
Primarolo, Dawn	Worthington, Tony
Quin, Ms Joyce	Wright, Dr Tony
Radice, Giles	Young, David (Bolton SE)
Raynsford, Nick
Reid, Dr John	Tellers for the Ayes:
Rendel, David	Ms Estelle Morris and
Robinson, Geoffrey (Co'try NW)	Mr. Jon Owen Jones.

NOES
Ainsworth, Peter (East Surrey)	Boyson, Rt Hon Sir Rhodes
Aitken, Rt Hon Jonathan	Brandreth, Gyles
Alison, Rt Hon Michael (Selby)	Brazier, Julian
Allason, Rupert (Torbay)	Bright, Sir Graham
Amess, David	Brooke, Rt Hon Peter
Arbuthnot, James	Brown, M (Brigg & Cl'thorpes)
Arnold, Sir Thomas (Hazel Grv)	Browning, Mrs Angela
Ashby, David	Budgen, Nicholas
Atkins, Robert	Burns, Simon
Atkinson, Peter (Hexham)	Burt, Alistair
Baker, Nicholas (North Dorset)	Butler, Peter
Baldry, Tony	Butterfill, John
Bates, Michael	Carlisle, John (Luton North)
Batiste, Spencer	Carlisle, Sir Kenneth (Lincoln)
Bellingham, Henry	Carrington, Matthew
Bendall, Vivian	Carttiss, Michael
Beresford, Sir Paul	Cash, William
Biffen, Rt Hon John	Channon, Rt Hon Paul
Body, Sir Richard	Churchill, Mr
Booth, Hartley	Clappison, James
Boswell, Tim	Clark, Dr Michael (Rochford)
Bottomley, Peter (Eltham)	Coe, Sebastian
Bottomley, Rt Hon Virginia	Colvin, Michael
Bowden, Sir Andrew	Congdon, David
Bowis, John	Conway, Derek

Coombs, Anthony (Wyre For'st)	Jenkin, Bernard
Cormack, Sir Patrick	Jessel, Toby
Couchman, James	Johnson Smith, Sir Geoffrey
Cran, James	Jones, Gwilym (Cardiff N)
Currie, Mrs Edwina (S D'by'ire)	Jones, Robert B (W Hertfdshr)
Curry, David (Skipton & Ripon)	Jopling, Rt Hon Michael
Davies, Quentin (Stamford)	Kellett-Bowman, Dame Elaine
Davis, David (Boothferry)	Key, Robert
Day, Stephen	King, Rt Hon Tom
Deva, Nirj Joseph	Kirkhope, Timothy
Devlin, Tim	Knapman, Roger
Dicks, Terry	Knight, Mrs Angela (Erewash)
Dorrell, Rt Hon Stephen	Knight, Greg (Derby N)
Douglas-Hamilton, Lord James	Knight, Dame Jill (Bir'm E'st'n)
Dover, Den	Knox, Sir David
Duncan, Alan	Kynoch, George (Kincardine)
Duncan-Smith, Iain	Lait, Mrs Jacqui
Dunn, Bob	Lamont, Rt Hon Norman
Eggar, Rt Hon Tim	Lang, Rt Hon Ian
Emery, Rt Hon Sir Peter	Lawrence, Sir Ivan
Evans, David (Welwyn Hatfield)	Legg, Barry
Evans, Jonathan (Brecon)	Leigh, Edward
Evans, Nigel (Ribble Valley)	Lennox-Boyd, Sir Mark
Evans, Roger (Monmouth)	Lester, Jim (Broxtowe)
Evennett, David	Lidington, David
Faber, David	Lightbown, David
Fabricant, Michael	Lilley, Rt Hon Peter
Field, Barry (Isle of Wight)	Lloyd, Rt Hon Sir Peter (Fareham)
Fishburn, Dudley	Lord, Michael
Forman, Nigel	Luff, Peter
Forsythe, Clifford (S Antrim)	Lyell, Rt Hon Sir Nicholas
Forth, Eric	MacGregor, Rt Hon John
Fowler, Rt Hon Sir Norman	MacKay, Andrew
Fox, Dr Liam (Woodspring)	Maclean, David
Fox, Sir Marcus (Shipley)	McLoughlin, Patrick
Freeman, Rt Hon Roger	McNair-Wilson, Sir Patrick
French, Douglas	Malone, Gerald
Gale, Roger	Mans, Keith
Gallie, Phil	Marland, Paul
Gardiner, Sir George	Marshall, John (Hendon S)
Garel-Jones, Rt Hon Tristan	Martin, David (Portsmouth S)
Garnier, Edward	Mates, Michael
Goodlad, Rt Hon Alastair	Mellor, Rt Hon David
Goodson-Wickes, Dr Charles	Merchant, Piers
Gorst, Sir John	Mills, Iain
Greenway, Harry (Ealing N)	Mitchell, Andrew (Gedling)
Greenway, John (Ryedale)	Mitchell, Sir David (NW Hants)
Griffiths, Peter (Portsmouth, N)	Moate, Sir Roger
Grylls, Sir Michael	Molyneaux, Rt Hon James
Gummer, Rt Hon John Selwyn	Monro, Sir Hector
Hague, William	Montgomery, Sir Fergus
Hamilton, Rt Hon Sir Archibald	Moss, Malcolm
Hamilton, Neil (Tatton)	Nelson, Anthony
Hannam, Sir John	Neubert, Sir Michael
Hargreaves, Andrew	Newton, Rt Hon Tony
Haselhurst, Alan	Nicholls, Patrick
Hawkins, Nick	Nicholson, David (Taunton)
Hawksley, Warren	Nicholson, Emma (Devon West)
Hayes, Jerry	Norris, Steve
Heald, Oliver	Onslow, Rt Hon Sir Cranley
Heath, Rt Hon Sir Edward	Oppenheim, Phillip
Heathcoat-Amory, David	Ottaway, Richard
Hendry, Charles	Page, Richard
Hicks, Robert	Paice, James
Higgins, Rt Hon Sir Terence	Patnick, Sir Irvine
Hogg, Rt Hon Douglas (G'tham)	Patten, Rt Hon John
Horam, John	Pattie, Rt Hon Sir Geoffrey
Hordern, Rt Hon Sir Peter	Pawsey, James
Howard, Rt Hon Michael	Peacock, Mrs Elizabeth
Howarth, Alan (Strat'rd-on-A)	Pickles, Eric
Howell, Rt Hon David (G'dford)	Porter, David (Waveney)
Hughes, Robert G (Harrow W)	Portillo, Rt Hon Michael
Hunter, Andrew	Powell, William (Corby)
Hurd, Rt Hon Douglas	Redwood, Rt Hon John
Jack, Michael	Renton, Rt Hon Tim
Jackson, Robert (Wantage)	Richards, Rod

Rifkind, Rt Hon Malcolm	Tapsell, Sir Peter
Robathan, Andrew	Taylor, Ian (Esher)
Roberts, Rt Hon Sir Wyn	Taylor, John M (Solihull)
Robertson, Raymond (Ab'd'n S)	Temple-Morris, Peter
Robinson, Mark (Somerton)	Thompson, Patrick (Norwich N)
Roe, Mrs Marion (Broxbourne)	Thurnham, Peter
Ross, William (E Londonderry)	Townsend, Cyril D (Bexl'yh'th)
Rowe, Andrew (Mid Kent)	Tracey, Richard
Rumbold, Rt Hon Dame Angela	Trend, Michael
Ryder, Rt Hon Richard	Trotter, Neville
Sackville, Tom	Twinn, Dr Ian
Sainsbury, Rt Hon Sir Timothy	Vaughan, Sir Gerard
Scott, Rt Hon Sir Nicholas	Viggers, Peter
Shaw, David (Dover)	Waldegrave, Rt Hon William
Shaw, Sir Giles (Pudsey)	Walden, George
Shephard, Rt Hon Gillian	Walker, Bill (N Tayside)
Shersby, Michael	Waller, Gary
Sims, Roger	Ward, John
Skeet, Sir Trevor	Wardle, Charles (Bexhill)
Smith, Tim (Beaconsfield)	Waterson, Nigel
	Watts, John
Spicer, Sir James (W Dorset)	Wells, Bowen
Spicer, Michael (S Worcs)	Whittingdale, John
Spink, Dr Robert	Widdecombe, Ann
Spring, Richard	Wiggin, Sir Jerry
Sproat, Iain	Willetts, David
Squire, Robin (Hornchurch)	Winterton, Mrs Ann (Congleton)
Steen, Anthony	Winterton, Nicholas (Macc'f'ld)
Stephen, Michael	Wolfson, Mark
Stern, Michael	Yeo, Tim
Stewart, Allan	Young, Rt Hon Sir George
Streeter, Gary
Sumberg, David	Tellers for the Noes:
Sweeney, Walter	Mr. Sydney Chapman and
Sykes, John	Mr. Timothy Wood.

Question accordingly negatived.

Main Question put forthwith, pursuant to Standing Order No. 60 (Amendment on Second or Third Reading), and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).