Stakeholder Pension (Hansard, 17 November 1998)

§ Mr. Frank Field (Birkenhead)

I beg to move, That leave be given to bring in a Bill to require persons to contribute to a personal retirement pension scheme administered by an approved welfare supplier; to make provision with respect to contributions into and payments out of such schemes; to establish arrangements for the strategic direction and monitoring of pensions; and for connected purposes. Our country is scarred by two nations in retirement. There are, thank goodness, a growing proportion of pensioners who have an adequate—sometimes more than adequate—income to see them through their retirement. At the same time, millions of pensioners are poor—some of them very poor. The Government have already introduced a number of measures to target resources on that group. Labour Members are looking forward to additional measures before the next election to help the poorest pensioners.

The Bill would lay the foundations to ensure that all pensioners shared in the growing long-term prosperity of our country by implementing a universal compulsory pension. All those in work would be required to become members of a stakeholder pension scheme on their 20th birthday. As each year went by, successive generations of 20-year-olds would come into the scheme. This is not a short-term measure. Pensions reform, above all else, is a long-term business and concern of the country and the House.

The aim of the Bill is to offer a guarantee. In today's terms, it would offer twice what a pensioner gets from the national insurance retirement pension—a guarantee of 30 per cent. of average earnings for a single pensioner when they came to retire. The link with average earnings is the crucial aspect in guaranteeing that future generations share in the growing long-term prosperity of the country.

That guarantee of 30 per cent. of average earnings for a single pensioner would be made up of two parts: today's national insurance retirement pension and a funded pension scheme—the stakeholder pension. The funded stakeholder part would be sold by approved welfare suppliers. Many groups and individuals could become approved welfare suppliers. They could be sponsored by trade unions, by employers, by associations of employers or by the companies that already provide pensions, such as the Legal and General and the Prudential. The crucial aspect of an approved welfare supplier is that the scheme must be owned by the members. The sponsor must set up the approved welfare supplier at arm's length from the parent organisation.

Above all, the Bill would allow for graduated contributions for the flat-rate guarantee. The scheme would have the finance to bring in the poor and those who were not part of the labour market at any given time. The groups for which the House will have most sympathy, I believe, are the parents—usually mothers, but sometimes fathers—who are outside the labour market looking after children under five and those who are doing the crucial job of looking after the long-term sick and disabled. Through that form of financing, the scheme could become universal, although it would also be compulsory.

I should like to sketch out to the House the difference that the Bill would make to our country. A Bill on compulsory stakeholder pensions would offer the Government the 773 single most important social security change available for the extension of social cohesion, something that is one of the major aims of Government policy. It would also open up a series of other welfare reforms. We are long past the time when any hon. Member thinks that there is a single, big bang reform that would implement the necessary changes. It would be possible to use a compulsory universal scheme as a basis for long-term care insurance, if the House and the Government wanted to move in that direction. Because risks would be pooled, there would also be the possibility of cheap life insurance, offering reformers the chance to move safely from current national insurance provision, such as widows' and what will shortly be widowers' benefits, to a form of cover associated with stakeholder pensions.

If we want better pensions, we need to put more money aside for them. We cannot have better pensions by paying less. Such a reform is a vital accompaniment to the pension guarantee that the Government have already offered—a means-tested income support guarantee that properly offers extra help to the poorest pensioners. Unless that is accompanied by a compulsory savings scheme, the guarantee will send out a clear message to many that they do not need to become members of pension schemes and do not need to bother to save, because, when they come to retire, taxpayers will bail them out.

Let me conclude by declaring how the Bill would change the welfare state fundamentally. It would offer the prospect of ending poverty, which is otherwise the outlook for millions of today's workers. It would offer a guaranteed income on which everybody could build by becoming a member of another pension scheme or having savings. People would know that those schemes would be paid in addition to the stakeholder pension, not withdrawn because of it. Through the delivery of approved welfare suppliers, it would offer a growth in civil society—those organisations that are greater than individuals or families, but less than Governments, states or nations. Above all, it would signal that, in this country, welfare reform is about more welfare, not less, but that more of that welfare will be provided outside the state, through mutual associations and companies, or organisations controlled by their members.

§ Mr. Edward Leigh (Gainsborough)

It was a privilege to serve with the right hon. Member for Birkenhead (Mr. Field) on the Social Security Select Committee. He knows how much I admire his work. We had many conversations, and were party to many more, on pension reform, notably during our Committee's visit to Chile to study one of the world's most revolutionary pension reforms—imposed, interestingly enough, by a dictator. We can safely say that Frank ain't no Pinochet.

The right hon. Gentleman has risen to greater things in government. I still serve on the Committee, which continues to grapple with the intractable problems of pension reform. The right hon. Gentleman is in the happy position of being an ex-Minister, something that can provide opportunities for even more creative thinking, untrammelled by the dreary tramlines of office, laid down by the Treasury, which dictate that, whichever way one may want to turn, the points always ensure that one ends up in the station marked "means testing".

774 The right hon. Gentleman is a revolutionary. Like so many revolutionaries of the intellectual rather than the bruising type, he has, sadly, been devoured by his own revolution. Perhaps it is in the nature of great moralists and idealists that they can pen an idea or a concept, but cannot steer it through the muddied byways of government to fruition.

What is the great idea of the right hon. Member for Birkenhead? It is that the state can impose moral behaviour, Victorian virtues and self-reliance on all or most of us. Not surprisingly, I, too, am attracted by this antidote to libertarianism. Sadly, government is a pursuit of dreams frustrated by practicalities, particularly politics. As the Chancellor no doubt made clear to the right hon. Gentleman, the Bill simply will not deliver Labour, or anyone else who proposes it, any popularity.

Why should I care if the right hon. Member for Birkenhead or Labour does what is right at the expense of popularity? After all, we Conservatives did it often enough—eventually with fatal results. I care because any reform must be sustainable through a 40-year gestation period. The proposal is undeliverable in this sad world of spin doctors, opinion polls and elections because, with the decline in yields from gilts and the rise in annuity costs—I am grateful to my hon. Friend the Member for Arundel and South Downs (Mr. Flight), who knows about such things and works in the City, for his help with this part of my speech—a contribution rate of 12 per cent. of everybody's salary would be required to create an effective retirement pension of the type proposed. That means a massive rise in taxation.

We would still be left with the desperate problems of those who, through disability, unemployment, bad luck or lack of effort were incapable of sustaining such contributions. As the Minister of State, Department of Social Security said off the record, "Why should people on low incomes have help in funding their pensions when their incomes might be much higher later?" Not surprisingly, the right hon. Member for Birkenhead crashed into the No. 10 buffers with his ideas. The great game of No. 10 is not the creation of a new Jerusalem but the return, at the next election, of new Labour. A massive hike in taxation is not part of that scenario to No. 10.

All that is rather sad, because compulsion to save is probably the best way forward, but, I do not believe that it is politically deliverable. Although we respect the work that the right hon. Member for Birkenhead has done, he is being disingenuous if he claims that, having battled through the arguments during 14 months in government and having had finally to resign, his ideas are acceptable to the Government. I do not believe that they are.

We cannot, of course, go on as we are. We know—or, it is hinted at—that, as a way forward, a shoddy compromise is being imposed by the Treasury enforcer who is ensconced in Richmond house, the Minister for the Cabinet Office. That shoddy compromise has been carefully crafted to leave out in the cold the non-voting poor and to leave to their own devices the influential better-off. Meanwhile, the state pension will go on declining, eventually into a miserly 17 per cent. of average earnings by 2020. Means-testing, to the disgust of the right hon. Member for Birkenhead and, indeed, all of us, will increase. The poor, and even the not-so-poor on lower incomes, will have no incentive to save because any hard-won private pension contributions will simply deprive them of income support. 775 Perhaps we are trying to reinvent the wheel. Perhaps we should create a political consensus—if that is possible—to restore the earnings link to the state pension, funded through higher national insurance contributions, to provide a decent living for elderly people, and not make them rely increasingly on income support. Perhaps, indeed, my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), the former Social Security Secretary and present deputy leader of the Conservative party, was right: we must devise a long-term plan to privatise all pensions, building on the world-leading role of our private pensions industry.

I fear that such a radical solution must await the next Conservative Government; we shall not get it from this Government. Meanwhile, we should vote to flush out from those on the Government Benches and their supporters just how many hon. Members are prepared to follow the prophet down the path of pension righteousness and into the path of political peril.

Division No. 378]	[5.14 pm
AYES
Ashdown, Rt Hon Paddy	Johnson Smith
Baker, Norman	Rt Hon Sir Geoffrey
Ballard, Jackie	Jones, Nigel (Cheltenham)
Brake, Tom	Kirkwood, Archy
Brand, Dr Peter	McDonnell, John
Burstow, Paul	Morre, Michael
Cable, Dr Vincent	Öpik, Lembit
Campbell, Menzies (NE Fife)	Russell, Bob (Colchester)
Chaytor, David	Sanders, Adrian
Chidgey, David	Sheldon, Rt Hon Robert
Cotter, Brian	Skinner, Dennis
Dalyell, Tam	Smyth, Rev Martin (Belfast S)
Davey, Edward (Kingston)	Tapsell, Sir Peter
Davis, Rt Hon David	Tyler, Paul
(Haltemprice)	Webb, Steve
Field, Rt Hon Frank	Wicks, Malcolm
Foster, Don (Bath)	Willis, Phil
Foster, Michael Jabez (Hastings)	Wise, Audrey
George, Andrew (St Ives)	Tellers for the Ayes:
Heath, David (Somerton & Frome)	Mr. James Plaskitt and
Hinchliffe, David	Mr. Paul Stinchcombe

NOES
Leigh, Edward	Tellers for the Noes:
	Mr. Michael Fabricant and
	Mr. Howard Flight.