§ Madam Speaker
We now come to the Opposition motion on the Government's pensions policy. I have selected the amendment in the name of the Prime Minister.
§ Mr. Iain Duncan Smith (Chingford and Woodford Green)
I beg to move,That this House believes that the Government's proposed pensions reforms are in chaos and will do great damage to long-term savings and pension provision, especially occupational pension schemes and Group Personal Pensions; that, unless changes are made which have been called for by Her Majesty's Opposition, the stakeholder pension will be an expensive failure; further believes the Minimum Income Guarantee combined with the proposed State Second Pension will constitute a massive extension of means-testing; and condemns the Government's complacency and incompetence which will ensure millions of future pensioners will be forced into dependence on state handouts in retirement.I should like first to put on the record how sorry I was to hear of the death of the Minister of State, Foreign and Commonwealth Office, the right hon. Member for Leeds, Central (Mr. Fatchett). I admired him greatly, although we were on different sides, and I shall remember his diligence and his quality. The same goes for many of my right hon. and hon. Friends.
Today's debate is about what we believe—and the country is rapidly coming to believe—to be the Government's failure on pensions reforms. Almost the first thing that the Government did on coming into power was to send a signal to pensioners that they were second-class citizens. The removal of advance corporation tax dividend tax credits was a massive blow to pensioners and pension funds. In effect, it was a tax of —5 billion on long-term savings. No tax that the Government have imposed fits the description of a stealth tax better than this one. They hoped—no, they knew—that most people would not realise how much money they would lose each year.
Before the election, it was all different. The Labour party said in its manifesto:We will support and strengthen the framework for occupational pensions.The removal of ACT dividend tax credits represents the Labour Government's first abject failure. Labour's first year in social security was about rows and long consultations—a sort of Peckham v. Birkenhead football match, but at least the right hon. Member for Birkenhead (Mr. Field) arrived in government with some costed proposals. Those proposals were cut to pieces by the Chancellor, who demanded something very different. So, while the right hon. Member for Birkenhead gave birth to the term "stakeholder", by the time of his departure, he was no longer responsible for what it meant. Like "new Labour", the name was kept—a sort of fig leaf over the Government's nakedness on pensions.
The first year, which looked and sounded like the Mad Hatter's tea party, was succeeded by the second year, in which No. 10 Downing street parachuted the present 120 Secretary of State in to rescue the situation. The Secretary of State's record is what is to be examined today. After further delay, he finally decided to publish the Green Paper on pensions. Ministers were obviously rowing behind the scenes about compulsion. They were debating behind closed doors whether there should be extra compulsion. It appears that the Chancellor vetoed that, so no compulsion was included—or maybe it was.
If we glance at page 105 of the Green Paper, we find a little reference to what Ministers intended before they decided to publish the paper. It refers to:compulsory funded pensions for those earning over £9,000 a year.A mistake, surely, because elsewhere the Green Paper says:We do not believe higher compulsory saving is justified.So the Government are having it both ways. Is it a mistake or is it deliberate?
The Bill that the Government published as a result of the Green Paper seems to rule out extra compulsion—or does it? The Secretary of State now seems to be shifting his position. He starts, it appears, with some sort of equivocation, but now he is saying, as was reported in the Financial Times on 5 May:The Minister said whether they—he was referring to the self-employed—should be compelled to contribute remained a live issue.So there we have it, absolutely clear as mud. Perhaps it is the new Labour way of making change.
First, the Government advance one line openly and boldly while quietly holding on to another, then they wait to see what the opinion polls tell them before finally settling their policy. Perhaps the public can be convinced that both options are Government policy at the same time. That is not all. The Government were in such a panic, having delayed the reviews for so long, that they published the Bill detailing stakeholder pensions and moved it into Committee before the consultation process was even finished.
The Government set out a consultation process in the Green Paper and suddenly—this is the third one, remember—the Secretary of State got bored and decided to give the answer anyway, and wrote the Bill. It is rather like "Alice in Wonderland"—sentence first, verdict afterwards. That is the nature of the Government. They conduct sham consultation processes that are a waste of their time to cover their inability to make decisions. Yet the consultation process in which they engaged would have showed some serious flaws in the Bill, if they had waited to listen to the responses.
The lack of provision for advice in stakeholder pensions will strike a heavy blow at the proposal. The Government said that the public would not need it because the stakeholder pension is simple and low cost. True to form, however, the Government have not banished advice. They have just moved it outside the scheme.
In January, the Minister of State said:I would expect the costs of advice to be met by the individuals who use it.That is really big of him. So the scheme is low cost and simple provided that individuals pay for the advice themselves. In Committee, my hon. Friend the Member for Grantham and Stamford (Mr. Davies) and others pointed out that, unless the Government tackled 121 that problem, many people would face that extra cost; they would not opt for the advice and could end up taking the wrong pension.
The Government came to power making much of mis-selling; they banged on about mis-selling almost every day and it seemed that that was their only policy. That is ironic, because they are now guilty of creating the most fertile possible territory for the biggest mis-selling exercise of all, and one for whose results future taxpayers will have to pick up the bill.
In the midst of all that, the Secretary of State wobbled. On 6 May, hidden away in Money Marketing, a spokesman for the DSS stated:It is true we are considering the arrangements for provision of advice for stakeholder pension schemes.He had suddenly realised that they had a problem. [HON. MEMBERS: "It is a U-turn."] Is it a U-turn? In a written question, I asked the Minister of State about the matter. He sent me a real answer:We shall be consulting further."— [Official Report, 10 May 1999; Vol. 331, c. 53.]There it is, clear and straightforward—the smack of firm Government. The Minister of State knows where he is going, provided that he can ask someone else to tell him.
Another problem is that stakeholders will need to have trustees. However, the lifelong independent savings account scheme—LISA—launched by the Treasury and supported by the Secretary of State, has no such requirement. Independent observers agreed with Conservative Members that that complex structure of trustees would be expensive and would offer little protection. The NatWest response to the Green Paper was clear:Trustees can add little extra protection but will make schemes more complex and expensive to administer.In Committee, as the Minister of State is aware, my hon. Friend the Member for Grantham and Stamford said again and again that the Government would have to think again. In effect, the Minister said, "No, we know what we are doing." As we have discovered, it takes a little while; we pounded away and, eventually, the penny dropped. The Secretary of State wobbled again. In an interview in the Financial Times, he stated:alternative governance structures to trustees for stakeholder pensions would be allowed.There were nods and winks, but nothing was in the Bill. I asked the Minister of State another written question, to which he answered:We … propose to consult further on governance arrangements."—[Official Report, 10 May 1999; Vol. 331, c. 53.]That is the smack of firm Government.
§ The Secretary of State for Social Security (Mr. Alistair Darling)
When we previously debated this matter, I knew that the hon. Gentleman had not read the Green Paper, but I thought that he would have done so by now. If he reads paragraph 38, he will see that the Government have always made it clear that stakeholder pensions would have trustees or, alternatively, would have alternative forms of governance, on which we were consulting. The point that he has just made is wrong, as his earlier point on compulsion was wrong. The Government have never believed that compulsion was the right option, because, for many people, there is nowhere 122 to go. What the hon. Gentleman was reading, on page 105, was a reference to the present scheme; that scheme is compulsory, if one is employed. I am surprised that he did not know that.
§ Mr. Duncan Smith
It is wonderful. The Secretary of State now seems to want to wobble at the Dispatch Box as well as in the newspapers. On page 55 of his Green Paper, it states:The legislation for stakeholder pension schemes will provide for schemes to be set up under trust law.The Government are wobbling like mad.
§ Mr. Duncan Smith
No, I shall press on. The Secretary of State has stated his position. The Government are trying to do several things at the same time. They issue little briefs to the newspapers saying, "We might do this." In the Chamber or in Committee, they say, "No, we won't." The Secretary of State tells us that they might or they might not. He is clearly aware that the Government are in difficulty.
§ Mr. Darling
The hon. Gentleman is quite right to say that the Bill makes provision for trustees, just as we promised. However, if he reads to the end of paragraph 38, he will see stated—in bold writing, so as to help people like him—that the Governmentwould welcome views from the pensions industry on alternative structures which could provide comparable benefits for stakeholder pension schemes members.For goodness sake, surely it is time the hon. Gentleman read the whole Green Paper, rather than just briefings from his hon. Friends?
§ Mr. Duncan Smith
It is marvellous—the Secretary of State has produced a Bill before the consultation process has even finished. He now claims that he is clear because he invited others to tell him what to do, but he acted before they told him, and the result is the mess in which he now finds himself.
§ Mr. John Bercow (Buckingham)
I would not want my hon. Friend to understate his powerful case in respect of consultation. Does he recall that a former junior Social Security Minister, the hon. Member for Southampton, Itchen (Mr. Denham), told the House on 15 December 1997 that the Government's proposals would be issued for further consultation in the first half of 1998? However, those proposals were eventually forthcoming only six months later. Does my hon. Friend believe that there is any causal link between the breaking of that promise and the removal of the hon. Member for Itchen from the Department of Social Security?
§ Mr. Duncan Smith
It is highly likely that there is such a link—knowing the way in which the Government work, they will come up with almost any excuse.
We are on the third process of consultation, but, in written answers, Ministers offer us only further consultation. There is no end to how little they are prepared to know, but how much over which they are prepared to argue and wobble.
123 That brings me to the third issue: group personal pensions. The Government demanded that stakeholder pension schemes should be pension products that are different from occupational pensions, personal pensions and group personal pensions. They were adamant that there was to be a clear distinction between stakeholder pensions and other schemes, and said that people would not be allowed to have a stakeholder pension and a personal or occupational pension.
Throughout the Committee stage, my hon. Friends made it absolutely clear that that would create serious problems, only to be met with blank stares and shaking heads. However, it appears that the Secretary of State has wobbled again, for, in the Financial Times of 28 April, he said:Some group personal pensions may be allowed to label themselves as stakeholder pensions".In a written question, I asked the Minister of State for clarification; his answer, published yesterday, states that the matterwill be developed in secondary legislation following further consultation."—[Official Report, 10 May 1999; Vol. 331, c. 53.]I must admit, the more one hears the Minister of State, the more one is reminded of Lewis Carroll when he wrote:Why, sometimes I've believed as many as six impossible things before breakfast.That appears to be the Minister of State's state of mind.
There we have it—stakeholder: the great new idea of the millennium; a new Rolls-Royce scheme that turns out, on inspection, to be a three-wheeled Robin Reliant from Arthur Daley. The Chancellor was so impressed with the scheme that he launched his own pension scheme, the LISA, which independent advisers believe will cut across the Department of Social Security and create confusion. The Institute for Fiscal Studies comments:the same end results could have been achieved by simple reforms to the current system"—simple reforms, not the complex nonsense that the Government have produced.
All of that is underscored and made worse by the minimum income guarantee, which creates an unstable platform for future saving for pensions. Of course, the minimum income guarantee, like everything else that the Government have announced, is no such thing. The Government's one consistent feature is that, whenever they announce a new policy, one need only examine their words to realise that they intend to achieve the opposite of what they have announced. Someone on low earnings will now seriously question whether there is any point in saving, because the income delivered under the minimum income guarantee will be as much for those who have saved over their working lives as for those who have not. As the financial section of the Sunday Telegraph put it:don't save go to the pub".All this is a huge attack on savings. Even worse, it is a huge attack on future taxpayers, who will have to pick up the bill for this ill-conceived nonsense. According to the Library's figures, under the new scheme, the number of pensioners in receipt of income support will increase from one in five to one in three. In money terms—this is the most staggering statistic—by 2050, spending will have 124 risen from approximately £13 billion to £20 billion in today's prices. The Government's policy will result in that massive increase.
When we add that to the Government's attack on widows pensions, their real agenda becomes clear. When it set out to gain Government, Labour talked a lot about changing from a handout to a hand up. It is now clear that the Government intend to give a slap down. It is no wonder that the savings ratio is falling when it should be rising. That is an indictment of the Government's policy.
There is also a problem regarding the incompetent handling of issues within the Department. That is illustrated by the problems with the national insurance recording system, the new computer system that runs the Contributions Agency. Those difficulties were already apparent in the early part of last year. Yet, when pressed about the matter, the Secretary of State seemed rather complacent. He said that the system would be available for new claimants inthe next couple of weeks.However, after seven months of drift and indecision, the Government paid interim compensation payments to those who had not received the right money only under pressure from Conservatives in the other place. That is another example of the Government's complacency and incompetence. Many pensioners have experienced real worries and real fears because of the Government's failure to tell them what is going on.
There it is: in the words of Winston Churchill, the Government aredecided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all powerful to be impotent."—[0fficiat Report, 12 November 1936; Vol. 317, c. 1107.]Labour came to office with big talk and smart phrases. A Government who were going to reform pensions, reduce dependency and improve savings have done exactly the opposite. It cannot be stressed enough that Labour set out to do those things and failed. This is an "Alice in Wonderland" Government: they say one thing and do another. They are all over the place, as Ministers have agreed. It is an "Alice in Wonderland" Government—that is worth repeating, because most people will realise that the description fits exactly. It would be laughable were it not for the arrogant and complacent failure that will cost pensioners dear in the future.
This Secretary of State is guilty of failing to deliver, and he will wear that charge like a millstone around his neck. He should leave now before he drags pensioners down with him.
§ 4.3 pm
§ The Secretary of State for Social Security (Mr. Alistair Darling)
I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:`commends the Government's approach to pensions reform, set out in its Green Paper "Partnership in Pensions"; congratulates the Government on its determination to tackle 18 years of abject failure on the part of the Conservative government to put pensions provision on a proper footing and rejects the Conservative plans to privatise pension provision; commends the Government's commitment to end the scandal of pensions mis-selling and its plans to strengthen the financial regulatory system; commends the Government on its commitment to economic stability and low inflation which helps pensioners; believes that its reforms to the corporate tax system, which will result in the lowest ever rate of 125 Corporation Tax, will be in the long-term interests of companies, shareholders and pensioners; and approves of the Government's introduction of the Minimum Income Guarantee, Winter Fuel Payments, the re-introduction of free eye tests and commitment to concessionary travel for the elderly as part of its strategy to provide security in retirement.'.At least "Alice in Wonderland" had a good ending—unlike the speech by the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith). Before I continue, I thank the hon. Gentleman for his very kind tribute to Derek Fatchett, which is much appreciated by all those who knew and worked with him. He was a valued colleague and a decent and a kind man. Our thoughts are with his wife and two children and with his family. I thank. the hon. Gentleman for his courtesy.
We have listened to the hon. Gentleman speak about pensions policy and it is noteworthy that he did not mention his own policy once. Indeed, it is not at all clear whether the Conservative party, after 18 years in Government and two years in opposition, has a policy. [Interruption.] I assure Opposition Members that I intend to speak about our policies at some length. I am happy to do so because at least we have a pensions policy.
I should very much like to know whether basic pension plus—the £150 billion plan to privatise the pension system—is still Conservative party policy, or whether it was junked by the deputy leader when he threw out the Thatcherite baggage that the Conservative party was saddled with. I note from the press that the hon. Member for Chingford and Woodford Green is apparently at daggers drawn with the deputy leader of the Tory party. Perhaps because of that quarrel, he cannot tell us whether basic pension plus—even the mention of those words seems to upset Conservative Members—is still party policy.
We inherited a mess. The problem was not just the absence of a pensions policy from the previous Government. We also inherited the problems caused by the mis-selling of pensions to 2.5 million people. The Conservative Government were active participants in that, through their television advertisements, persuading people wrongly to transfer to personal pensions. We inherited an environment with poor regulation and had to set up the new Financial Services Authority.
The Conservatives imposed VAT on fuel, which we reduced to 5 per cent. They abolished free eye tests for pensioners. We reinstated them. The Conservatives decimated concessionary travel and had a good go at decimating all bus travel. We had to restore it. They neglected the health service—indeed, some of them still want to privatise it. We have invested —19 billion more in it. Even on that, the Conservatives are divided. The shadow Chancellor told us that that investment in the health service was too much. The deputy leader of the Tory party now tells us that it is just about right. We have had to sort out the economic mess that we inherited, with high inflation damaging to pensioners. We now have the lowest ever rate of corporation tax, which helps pension funds, and economic stability, which helps pensioners.
Interestingly, the Conservatives have also not mentioned the difficulty that we inherited with their policy on the state earnings-related pension scheme and the reduction of widows' entitlement. For nine years after 1986, when the Conservatives cut the widows' entitlement to SERPS, not a single Department of Social Security leaflet referred to what they had done. Perhaps there is a simple reason why we have not heard a cheep out of them about that this 126 afternoon: many of the DSS Ministers during those nine years are still representing the Conservative party at the highest level. The people who knew that the policy had been changed but who chose not to tell the public include the leader of the Tory party—who was a social security Minister in 1993—the deputy leader of the Tory party, the shadow Home Secretary, the shadow Health Secretary, the right hon. Member for South-West Norfolk (Mrs. Shephard), who is jumping ship—
§ Mr. Darling
Just a moment. That is not all. The list also includes the right hon. Members for Fylde (Mr. Jack), for Huntingdon (Mr. Major), for Fareham (Sir P. Lloyd) and for North-East Hampshire (Mr. Arbuthnot), and the hon. Member for North-East Hertfordshire (Mr. Heald). All those Conservative Members were in the DSS during that time and did not see fit to alter the departmental leaflets to tell pensioners what was happening. That is another mess that the Labour Government have to sort out.
§ Mr. Pickles
When instructions went out to officers about that problem on 12 January this year, why did the Government make no mention of looking again at the advice that had been given to people? Why was that not included in the memo? The right hon. Gentleman is complaining about others not taking action. Why has he not addressed the problem himself?
§ Mr. Darling
I caution the hon. Gentleman against relying too heavily on Conservative party press releases as an authoritative source of anything. We are having to sort out the problem and ensure that the proper information is given.
The hon. Member for Chingford and Woodford Green referred to the problems with the national insurance recording system computer. Who signed the contract with Andersen—a contract whose difficulties we are having to sort out? It was the Conservative party.
Before I deal with our proposals, I remind the House that we have heard nothing about the Tories' pension plans. With perhaps two years to go before the next election, one might have thought that they would turn their minds to some alternative if they do not think that our proposals are acceptable.
§ Mr. Darling
I am not worried about it, but the hon. Gentleman ought to be. I would be deeply worried if I belonged to a party that had not even thought about the next election because it still could not come to terms with what had happened at the previous one.
§ Mr. Duncan Smith
The Secretary of State again tries to shift the burden of blame. His party, in government, has been responsible for the implementation of NIRS2. The report of the Public Accounts Committee said:In view of the potential impact of the delay on benefit recipients and the pensions industry, we think that contingency planning should have been given greater priority at a much earlier stage.That is an indictment of the Secretary of State.
§ Mr. Darling
I interpreted that report in another way: one might have thought that, in 1996, when the contract was entered into, some thought would have been given to what would happen if a changeover were designed so that the old system had to be entirely switched off in the hope that the new system would operate from day one.
The final part of our inheritance, which is, perhaps, the most damning indictment of the Conservatives' 18-year term of government, is that one in three people now working faces retirement on means-tested benefits by 2050. We produced our proposals to deal with that problem and, unlike any other proposals in recent memory, they have been almost universally accepted by those who responded to them.
Mr. David Bendel (Newbury)
I want to return, for a moment, to SERPS. As the right hon. Gentleman knows, I have great sympathy with him because his Government have been left with an appalling problem that will be difficult to solve. However, does he not accept that his Government must take a share of the blame because, although the brochures were changed in 1996, for a year and a half after Labour took power, the letters that his Department sent out still gave the wrong information?
§ Mr. Darling
I fully accept the hon. Gentleman's point: we have to clear up the difficulties that have been caused. There is no doubt about that, and we shall do it.
§ Mr. Darling
Opposition Members want me to say sorry, but the root cause of the problem is that, for nine years, those in government—who, as I said, included the highest echelons of the present Tory party—did nothing to ensure that the right information was given. We shall sort out that problem, but the hon. Member for Newbury (Mr. Rendel) will have to wait until the Government have decided how best to proceed.
I turn now to our proposals, which were published in our Green Paper last year. As I said, it is interesting that, unlike the Conservative Government's proposals, which were made at the fag-end of the previous Parliament and collapsed within 24 hours of being announced, our principles and approach have been almost universally accepted. We received more than 500 responses, of which the vast majority agreed that our approach to the new state second pension, to funded pensions for moderate and high earners and to the new stakeholder pension is right.
Having established the principles, it is now necessary to get right the details. I make no bones about the fact that we are consulting because the pensions industry depends on a partnership between the Government, pension providers and individuals. It is important to get the details right, and I welcome the fact that the industry is keenly engaged in that discussion.
We are building on what is good about the current system. We are supporting occupational pensions. We introduced proposals to simplify regulations, which will help. We want to encourage the take-up of personal pensions, where appropriate, and the building of personal savings. We want to build a partnership between the state and the individual, moving from the present relationship 128 in which 60 per cent. of pension provision is public and 40 per cent. private, to one, by 2050, in which 40 per cent. is publicly provided and 60 per cent. is private.
§ Mr. Julian Brazier (Canterbury)
The right hon. Gentleman says that he wants to get the details right, and the House can understand that, but what is his overarching aim? Does he want to encourage self-provision, or not? If he does, how will increasing the proportion of people who will ultimately be caught up in means-testing achieve that aim?
§ Mr. Darling
We are reducing that proportion, so the hon. Gentleman is wrong on that point. I shall answer his question by setting out our actions, because his remark is specifically directed at the new minimum income guarantee. That is the target, or basic standard of decency, that we want people to beat.
The hon. Gentleman asked me about my overriding objective. What I want to do is ensure that all who can save do save. My proposals make provision for everyone: everyone will have the option of saving, and we want to encourage everyone to do so. We recognise that some people will not be able to save enough, for whatever reason, which is why we are introducing the minimum income guarantee. I understand that the Conservative party opposes the guarantee. Conservative Members nod, so I must be right.
Without the guarantee, this year alone 1.5 million pensioners would be £160 a year worse off. That does not strike me as very sensible, but if the Conservatives' policy is to ensure that 1.5 million people are £160 a year worse off, that is a matter for them. Labour Members believe that a minimum income guarantee, uprated each year in line with earnings—as announced by the Chancellor earlier this year—will ensure a basic, decent standard of living for the poorest pensioners. We have inherited a good many pensioners who are poor. But I want pensioners to do better than that—
§ Mr. Darling
I will give way now, but, after that, I shall explain how our proposals will enable pensioners to do better.
§ Mr. Duncan Smith
The Secretary of State has not replied to the question posed by my hon. Friend the Member for Canterbury (Mr. Brazier). A written answer given to the right hon. Member for Birkenhead (Mr. Field)—who I see is present—on 13 April makes it clear that, as a result of the Secretary of State's minimum income guarantee, a pensioner retiring in 15 years' time would require an extra £15,000 to stay above the level for the guarantee, or £19,000 in 1999 prices. What does the right hon. Gentleman say to pensioners who know that they cannot make it, and that they will be sucked back into dependency?
§ Mr. Darling
I would say two things. Because of the neglect of the past 20 years, in the next few years, many 129 pensioners will not be able to save enough to retire on a level above the minimum income guarantee. We recognise that, but, according to the hon. Gentleman's logic, we should not help people at all: we should say, "Tough luck—we are not going to uprate your benefit." The hon. Gentleman does not understand. If the minimum income guarantee is uprated merely in line with prices, rather than in line with earnings, it follows that many pensioners will be worse off than they would otherwise have been.
§ Mr. Darling
Not just now; I want to make some progress. This is an Opposition day debate, and I assume that Opposition Members wish to speak in it.
Let me set out the proposals that will, I believe, enable people to do better than the minimum income guarantee. There is already a universal basic state pension, but we are introducing a new state second pension, which will help people on low incomes to save enough to retire above the level of the guarantee. It will also tackle one of the other weaknesses in the current system. Under the state earnings-related pension scheme, those who do not earn very much will not receive very much. We are providing significant new help for people earning less than £9,000 a year. For example, the contributions made by someone earning £6,000 a year would give that person £13 a week under SERPS; under the new state second pension, he or she would receive £46 a week, an increase of £33.
Opposition Members should look at table 5 on page 41 of the Green Paper. The hon. Member for Grantham and Stamford (Mr. Davies) has been consistently wrong about the state second pension, because he patently does not understand how it works. If he acquires a copy of the Green Paper from the Vote Office, he will see that the state second pension will be of huge benefit to people on low incomes. It also provides new help for carers and disabled people with broken work records, allowing them to build up a second pension as of right.
We need to do more than just reform the state system, however. We believe that most moderate and higher earners will be better off on funded pensions—occupational pensions, or private pensions. But we are determined to create the right framework: not everyone can secure an occupational pension and, for many people, private pensions are not appropriate. To plug that gap, we are introducing the new stakeholder pension schemes, providing minimum standards, flexibility and simplicity in order to ensure that those who do not have the option of an occupational pension, or for whom a personal private pension is inappropriate, have an extra savings option.
The hon. Member for Chingford and Woodford Green mentioned advice. It has always been our case—I have said this time and again, especially when we were in opposition—that people should obtain advice before signing a pensions contract. Taking out a pension is arguably far more important than buying a house. The repercussions could be substantial, and people need good advice, as is clearly demonstrated by the pensions mis-selling scandal that the Tories allowed to happen under their noses. We want to provide advice, but we want to ensure that costs are kept to a minimum for the benefit of future members of stakeholder pension schemes.
The Green Paper made it clear that, in addition to the trustee structure, we wanted to consider alternative forms of governance. The hon. Member for Chingford and 130 Woodford Green tried to make something of that, too. I have already suggested that he should read the Green Paper. He should also have a go at reading the relevant Bill.
The hon. Gentleman said that there was no mention of alternative forms of governance other than trustees. There is, at paragraph 38, on page 55 of the Green Paper. Furthermore, clause 1(2) refers to other forms of governance, in addition to the trustee structure. I am astonished that he did not know that. The hon. Member for Grantham and Stamford looks puzzled. Perhaps if he had talked less and read more in Committee, he might have seen that we had provided for it. We have always said—
§ Mr. Davies
I am grateful to the right hon. Gentleman. Once again he has completely misunderstood what I said. Of course the Bill is so drafted that the Government take powers by secondary legislation to do anything. It states one thing, and then gives a power to relax that provision if the Government wish to do so in secondary legislation. It is clear in the Bill that no other structure for stakeholder pensions is provided for or mentioned, apart from the trust structure. That remains the case.
§ Mr. Darling
As the hon. Gentleman has mentioned it, let me read out the relevant provision in the Bill. With reference to the conditions for stakeholder schemes, it states:The first condition is that the scheme is established under a trust or in such other way as may be prescribed.That is precisely what was stated in the Green Paper. It is astonishing that Opposition Members have not read it.
The hon. Member for Chingford and Woodford Green referred to my interview in the Financial Times. I am glad that a number of my remarks there have been welcomed by people in the industry, as they can see that the Government are working constructively with them to ensure that the system operates successfully. I have made it clear that the Government are open to suggestions for alternative forms of governance. We have ideas that we are examining, and we have asked people in the industry whether they have specific measures in mind. I know that there has been some concern about group personal pensions.
I am happy to consider alternative forms of governance, so long as they provide the level of security that we believe trustees could give to stakeholder pensions. The Government's concern is to ensure that the interests of members of pensions schemes are properly protected. That is our main objective, and that is why I am willing to listen to whatever the industry has to say. I am happy to work constructively with the industry on this and any other subject.
§ Mr. Bercow
The Minister said a few moments ago that he supported occupational pensions. Quite apart from the fact that the new stakeholder pension threatens to act as a disincentive to employers to offer occupational pensions, which is a serious problem associated with the 131 stakeholder pension, is the right hon. Gentleman aware that, as a result of the abolition of the advance corporation tax dividend tax credits, the future pensions of those in occupational schemes could fall by up to 10 per cent? Does the right hon. Gentleman think that that might explain why the chairman of the Association of Consulting Actuaries, Paul Thornton, said in March last year that the Government must stop loosening the hitherto solid foundations of occupational pensions?
§ Mr. Darling
The Government are not doing that. I did not read those particular remarks, but I recall that what the actuaries said in July 1997 was rather different from what they were saying 12 months later. One of the effects of the reform of corporation tax is that we now have the lowest rate of corporation tax that the country has ever had. [Interruption.] Opposition Members do not like that. After 18, years they did not manage to reduce corporation tax that far.
The hon. Member for Chingford and Woodford Green referred to pooled pension investments and suggested that the Treasury had magicked them up out of nowhere. We have discussed the matter before. The plans for pooled pension investments were being worked up when I was a Minister at the Treasury. I 'was aware of them, which is why the Green Paper—if Conservative Members would care to read it—made it abundantly clear at paragraph 39 on page 55 that pooled pension investments would be proposed in a consultation paper that would be announced shortly. I have made it clear that my view of compulsion, which is set out at paragraph 13 on page 81 the Green Paper, is that, at present, there is no justification for it, for the reasons that are clearly stated.
This pensions reform is designed to cover the next 50 years, but we are also anxious to ensure that we help today's pensioners. I have mentioned the minimum income guarantee; the Conservatives are no doubt pledged to get rid of it, which would cost many poor pensioners dear. We want to look at the capital and income rules to ensure that we do not penalise people who save. I should point out that, from April next year, the poorest pensioner couples could be getting £400 a year more than under the previous Government. It is a pity that the Conservatives are set on reversing that.
I make no apologies for the minimum income guarantee, because it is an effective way of reducing pensioner poverty as quickly as possible. Although pensioner incomes overall have increased since we came to office—thanks, in no small part, to occupational pensions—many pensioners are on low incomes and the minimum income guarantee is designed to ensure that they receive significant help. We are determined to extend that.
§ Mr. Rendel
I am grateful to the right hon. Gentleman for giving way again. Will he accept what he has never accepted in the past and what I firmly believe to be true? The poorest pensioners are those who are not on income support; those who could be on income support, but are not receiving it for one reason or another; and those who cannot be on income support because of their savings. They will not benefit at all from the minimum income guarantee.
§ Mr. Darling
The hon. Gentleman keeps raising that point and I keep giving the same answer—he might want 132 to look at it again. The Government are aware that, because of the present capital and income rules, many pensioners who have modest savings or a modest income stream are adversely affected by the benefits system. We said in the Green Paper that we are determined to tackle that, but one thing that the Liberals really have to—[Interruption.] The Tories were in power for 18 years and did nothing about that.
One thing that the Liberals really have to grasp is that people in government must face the fact that they have to fund the things that they want to do, and it is not always possible to do everything we want on day one. The hon. Gentleman has his policy for a penny on income tax; as we know from our debates on social security, let alone other subjects, he has spent it many times over; but he will have to face the fact that Governments cannot do that.
The House should bear in mind the fact that we have increased the winter fuel payment fivefold—to £100 from this winter—which will help all pensioners, but particularly the poorest. Through the minimum tax guarantee, we have taken two thirds of pensioners out of tax altogether, something that the previous Government did not do at all.
We are supporting today's pensioners, addressing some of the problems that we inherited and reforming pension provision for the next 50 years. Our pension proposals have been widely—almost universally—welcomed. We are now moving to the second stage to ensure that the detail is right and the system is affordable, sustainable and, above all, workable. We are fine-tuning the details and we are on exactly the course that we set out in our Green Paper in December.
I am confident that, by the end of this Parliament, pension provision and structure will be set on a firm footing that will serve this country well for generations to come. By contrast, the Tories have shown today that they have absolutely nothing to say and have no proposals of their own. They clearly have not even read the Green Paper or the Welfare Reform and Pensions Bill, which is going through Parliament. Their criticisms, therefore, are entirely misplaced. Our proposals are radical, realistic and, above all, the right thing to do. I commend our amendment to the House.
§ Mr. David Rendel (Newbury)
First, I wish to associate myself and my party with the tributes to Derek Fatchett, who so sadly died at the weekend.
In talking about pensions, it is always important to respect the fact that two aspects must be considered—the long term and the short term. It should be remembered that some of the things that we could do about the short-term aspects of pensions provision for current pensioners might also help to solve some of the problems that the Government face in trying to rectify the long-term problems.
On the long-term issues, we must remember four things. First, it is important that, in the long term, pensions apply universally. One of the great problems is that too many people, for one reason or another, do not have an adequate pension provision. We must ensure that, whatever policies we introduce for the long term, they are universal, so that everyone has sufficient income to live on in retirement.
133 Secondly, we must make sure that money invested in pensions—through private pension funds, stakeholder pensions or elsewhere—provides good value for money and a reasonable return on the investment to encourage people, as far as possible, to put aside enough money when they are of working age to look after themselves in their retirement.
Thirdly, it is important that our long-term plans are reliable. One of the difficulties with pension provision over the past few years has been that, all too often, legislation introduced by one Government has been changed later by another Government. That is precisely what happened with the state earnings-related pension scheme, and that is one reason why it has hit so many problems.
Fourthly, whatever legislation is introduced and whatever provision for pensions may exist, it is important that pensions are relatively easy to understand, and that there is good education on how to invest and provide oneself with the best possible pension for the future.
The first problem with pensions is one that neither of the other two main parties has addressed properly—it is the oldest who are the poorest. Almost invariably, the oldest pensioners turn out to be the poorest pensioners. One in three of those over 75 is living in poverty. For a modern society, that is a shameful situation which we need to address as quickly as we can.
The second problem is that it is often the women in our society who are the poorest—first, because women usually live longer, and therefore tend to be the majority of the older pensioners, and, secondly, because many women have tended to rely on their husbands for their pension provision, whether through the state system or through private or occupational pensions; when the husband dies, those pensions are reduced in one way or another, and widows often find that the pension provision with which they are left is too small for their real needs. The abolition of the widows bereavement allowance will not help; nor will halving the additional SERPS pensions next year.
On that issue, I was sorry that the Secretary of State did not have the grace earlier to accept that there is a problem, which the Labour party must face, with what happened in the first year and a half of Labour's time in office. The right hon. Gentleman would be on stronger ground in his accusations about the Conservatives—which are well founded, as there is no question but that the lion's share of the blame for the problems with which he is faced in terms of SERPS lies with the previous Governmentif he were prepared to admit that, in the first year and a half of his party's time in government, the letters from the Department were still giving the wrong information, in spite of the fact that the Department was well aware by that time of the situation, since it had, in 1996, changed the booklets that were going out.
There is an issue there. My understanding now is that pressure was put on civil servants in the Department to do something about that, and to change the instructions about what letters were sent out, but the pressure was not enough. No one took a grip of the situation. No one forced the issue and ensured that it was dealt with early enough. As a result, the difficulty went on for much longer than it should have after the present Government took control.
134 It is a great pity that the Secretary of State is not prepared to admit that. As I say, in talking about the issue, his hand would be strengthened if he were prepared to admit that there was a problem in the first months in which the Labour party was in office.
Thirdly, too much of what the Government are doing will, sadly, discourage people from saving, particularly the fact that pensioners' savings will not be taxed at the 10p rate. In effect, there will often be an unearned income surcharge on pensioners. That will only hinder people and discourage them from providing for themselves through savings.
Fourthly, I come to the minimum income guarantee. Again, to a large extent, the guarantee is a fraud on pensioners because it is not any sort of guarantee of a minimum income for them. The poorest pensioners, those who are not on income support, will not get the minimum income guarantee. They will still live below income support levels—even the lower level of income support that people have been used to.
It is wrong of the Government to claim that, simply by introducing a minimum income guarantee, they will solve the problems of poverty among pensioners. It will not happen. We know that it will not happen. The Government have to do better than that.
§ Mr. Duncan Smith
Does the hon. Gentleman recall that a fellow Liberal Democrat Member, the hon. Member for Northavon (Mr. Webb), who sometimes speaks on pension issues, has raised the point that someone who is retiring who is just ahead of the minimum income level will be rapidly overtaken by the minimum income guarantee because it is in line with prices? Even those who, on retirement, are ahead of the level will get trapped because the return from their income will be less and less compared with the minimum income guarantee; so the Government are setting a huge poverty trap for later on.
§ Mr. Rendel
What the hon. Gentleman says is true. I was going to make a similar point later, so I will leave my precise response to his intervention until then. He is right, however. Of course, there is a great problem with the minimum income guarantee. It will not guarantee the poorest pensioners a minimum income.
In his response to my intervention, the Secretary of State made the point that he had plans at some time in the future, which is as yet unspecified, to do something about the level of savingscapitalthat people are allowed to have before they lose their income support and, therefore, their minimum income guarantee. We have said that we are delighted that he has plans to increase the figure of £8,000. He should increase it by a considerable amount to overcome the problem.
Many elderly people feel that they need considerable savings to ensure, for example, that they do not leave debts behind to their descendants, or burden them with the cost of their funerals. They want to have a little to pass on to their children from what they have earned during their lifetime.
I hope that the Secretary of State will speed up the process, which he has been telling us about for a long time, of reviewing that figure, of deciding on a new figure and of implementing it as soon as possible. It is badly needed.
135 The Secretary of State failed to respond to the other half of the problem: the 700,000 or so pensioners who are eligible for income support—they do not have particularly high savings—but who, for various reasons, are not claiming and receiving it. Even if he does review the capital allowance, those pensioners will still be below income support levels and living in dire poverty. His minimum income guarantee will do nothing for them.
The Secretary of State has told us that he has plans to reduce that figure, to ensure that more and more of those who are eligible for income support claim it. That, too, is welcome, but he will never be able to remove the problem altogether. He will never be able to ensure that everyone who is eligible for income support claims it. The attempt to reduce the figure is a truly Sisyphean task because, as soon he starts removing one or two from the figure and enabling them to claim their rights, he will find that more and more people are becoming eligible for income support and not claiming it. Therefore, just as some people come off the top of the list, others will join it at the bottom.
I should be prepared to bet that, however hard the Secretary of State works on the problem, the 700,000 figure will never be reduced to anything approaching a manageable level, and that hundreds of thousands of people will be eligible for income support, but will not claim it. Those people will therefore not be eligible for the minimum income guarantee, but will still be living in the most dire poverty. Unless he can overcome that specific problem, the minimum income guarantee will not overcome the more general problems.
I should spend a minute or two considering the Conservative policy—or, as the Secretary of State has rightly said, the Conservative non-policy. One of the tragic aspects of the current situation is that, so far, Conservative Members have told us only that—at some time, one hopes before the next general election—they will produce a pensions policy.
§ Mr. Rendel
I shall, if I may, describe it in a moment.
Pensions plus seems long since to have sunk without trace. The Conservatives also have to accept that, by breaking the basic state pensions link with earnings, they have caused many of the current problems of pensioner poverty.
As for Labour—as the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) said a moment ago—the minimum income guarantee will rise in line with earnings, thereby creating a problem for the Government as the gap between the minimum income guarantee and the basic state pension grows and grows.
As ever more people are covered by the minimum income guarantee, an inevitable consequence will be more means testing. It is inevitable also that ever fewer people will feel that private pensions are worth it. Increasingly, people who have saved into some form of private pension will discover that they are still below the minimum income guarantee level, but that anything that they have provided towards their own pension has been, for them, simply money wasted. Although they will be saving taxpayers and the Exchequer a bit of money, they themselves will be no better off from paying into their own pension.
136 There is also a need—which the Secretary of State rather too easily glossed over—for Labour to grasp the nettle of compulsory second-tier pensions. The Government have argued that they do not want to pursue that policy because people do not have a proper vehicle into which to place their pension funds. However, that argument does not answer the question—which is the first one that should be answered—of whether compulsion is required. We believe that compulsion is necessary. Once the Government answer that question and take a decision on it, they will have to ensure that appropriate vehicles are available. Simply saying that such vehicles are not yet available does not answer the compulsion question.
What is the way forward? We have to accept a number of facts. The first one is that the average age of our population is rising, and that the number of people of pension age is growing.
Secondly, we have to acknowledge that people are remaining active for longer. Therefore, when examining long-term pension provision, we have to ensure that people have flexibility—particularly in deciding their retirement age—in pension provision. Some people may be able to remain active and in work for much longer than they do now. If they are prepared to do so, that will help us in providing for pensions. We—and any pension policy that we introduce—should make allowances for that.
Thirdly, we should accept that there is a real need for cross-party consensus in addressing the pensions issue. For some time, I have been asking for consensus, and suggesting that the three main political parties should get together and try to talk through the various issues. Unfortunately, so far, the requests have not met with agreement from the other two parties. Nevertheless, I hope that they will accept the need for consensus on the issue. If we simply continue the cross-party dogfight on the issue and refuse to accept that other parties have a worthwhile point of view on it, we can be sure as hell that legislation introduced now will be overturned by a future Government, whoever they may be. That is no way to deal with long-term pensions for our population.
We shall be letting down our people if we are not prepared to come together and hammer out a cross-party consensus on a realistic and long-lasting pensions policy which, if we introduce it now, will last through future Governments and be properly implemented when those pensions become payable. I make a strong plea for cross-party consensus on these issues. The SERPS fiasco has demonstrated how necessary that is.
We have to accept the need for greater saving. We are simply not putting away enough to look after our needs when we have all retired. We also have to accept the need for compulsion. Sadly, human beings all too readily spend now, rather than put away money for their future. We propose a compulsory second-tier pensions policy. We made that plain last year when we passed the policy through our conference. We need the right vehicles for that policy, and those should be found as soon as possible.
The policy should apply to both the employed and the self-employed, and there should be a scheme under which the Government can ensure that credits are paid, perhaps at the lower earnings limit level, on behalf of those who are non-earners because, for example, they are carers.
§ Mr. Rendel
The Government's policy contains something similar to that, but the scheme is not 137 compulsory, so it fails the vital test of ensuring that everybody has a pension that is good enough to look after their needs in the long term.
§ Mr. Rendel
It does not sound as though the hon. Gentleman understood the policy that I was proposing, as it had nothing to do with increasing national insurance or tax. [Laughter.]
§ Mr. Rendel
I am delighted that I have created at least a two-party consensus, but I was not talking about a second-tier pension based on national insurance. I am not sure what the intervention was about.
§ Ms Sally Keeble (Northampton, North)
The hon. Gentleman seems to be suggesting that it should be compulsory for the state to provide a second pension, but the idea of compulsion usually applies to the person who has to pay for the pension. If we compel people to contribute to a pension, what sanctions will there be for those who refuse?
§ Mr. Rendel
There are obviously means of forcing people to pay tax, and the same means could be used to make them pay into a pension fund.
§ Mr. Rendel
Clearly, the rates of compulsory second-tier pensions would have to be fixed when the legislation was introduced. Our feeling is that we could start at a level equivalent to the current SERPS contributions, so there would be no real increase, but that, once the system was in place, we could increase the contributions as required to ensure that people saved enough to look after themselves properly.
We can do something straight away for the current pensioners, to help to overcome the problem of the gap between the minimum income guarantee and the basic state pension. As the most elderly pensioners are, on the whole, the poorest, we should introduce an extra age payment of £3 a week for the over-75s and £5 for the over-80s.
That would be an affordable start, and the extra payment should be increased beyond that as soon as possible. I am sorry that the Government did not introduce such a payment in the Budget, as it would certainly have helped them to overcome some of the problems in their own proposals on the long-term future of pensioners. In the past few weeks and months, I have travelled around the country advancing that proposal, and it has met with warm acceptance the length and breadth of the land. I hope, therefore, that the Government will adopt it, and earn for themselves the popularity that they would get if they introduced it.
The pensioners of our country have been betrayed by both the present Government and the previous Government. Many of the poorest people are our 138 pensioners and, in particular, our older pensioners. We need to end the party politicking on the subject and to get together to achieve a consensus about which policies should be introduced for the long term. We need to take action urgently to help today's pensioners, who are among the poorest in our country.
§ Mr. Tony Colman (Putney)
I support the Government amendment, but first I wish to declare an interest as the former chair of the United Kingdom standing committee on local authority pension funds. I chaired that body up until last year.
The Putney and Roehampton organisation of pensioners met my hon. Friend the Minister of State last week and urged on him the restoration of the earnings link. However, after he told those pensioners the costs that would be involved and reassured them that the Government wished to ensure that the poorest pensioners in the community were dealt with first, they left convinced. Perhaps Opposition Members have not met their pensioners' groups. Mine was pleased to hear from my hon. Friend the Minister about the review of how much capital could be held before it affected the amount of the minimum income guarantee that could be drawn down. My local pensioners were also pleased to hear about the work that was being done in tracking down those people who would benefit from the minimum income guarantee but who are not at the moment registered for it—the 700,000 mentioned by the hon. Member for Newbury (Mr. Rendel).
I support the changes to corporation tax. A few months after I became a Member of Parliament, I wrote a letter to my right hon. Friend the Chancellor of the Exchequer stating the extra sums that would be needed for local authority pension funds, following the changes to ACT. That letter, I am glad to say, was unnecessary, because the stock market has risen and companies have benefited enormously from the removal of ACT from pension funds. The dampener on companies has been removed and, as a result, we have seen a tremendous change—as my hon. Friend the Secretary of State put it—in the way that companies relate to their owners, the pension funds.
One issue that I pursued strongly as the chair of the local authority pension funds committee was the need to ensure that those members who had previously been direct employees of local authorities, but were becoming employees of private sector firms under best-value regimes, should be able to remain members of the local authority pension funds. I hope that my hon. Friend the Minister will take up that point, because the right to remain a member was negotiated over a long time by representatives of the local authority trade unions, by the Confederation of British Industry committee set up to examine the issue and by the local authorities. A solution was worked out and the Department of the Environment, Transport and the Regions had blessed the arrangement. However, I understand from Public Treasurer today that the arrangements have been turned down by the Inland Revenue, which is concerned that the tax-exempt status that would apply to private sector schemes should not be allowed. I want to ensure that the introduction of best-value arrangements is not held up as a result, as I am sure that the Government and all hon. Members support it. I hope that my hon. Friend the Minister, when he winds up the debate, will assure the House that any problems have been, or are being, resolved.
139 I pay tribute to my hon. Friend the Minister for his work on ethical investments in the context of the financial regulatory system. In particular, I congratulate him on his recent speech, in which he proposed requiring trustees of pension funds to make a statement of the ethical and environmental principles according to which investments are made.
Not all hon. Members will agree that that is the best way forward, but I strongly support the democratic basis of the proposal, which would render pension fund trustees accountable to their members. I remind the House that many of the ethical funds have achieved significantly higher returns than their non-ethical counterparts. Although I do not suggest that it should be mandatory, I would welcome a clear statement from trustees about the way forward for their pension fund.
I presented a Bill in the previous Session requiring independent financial advisers, as part of the regulatory regime, to ask the ethical question—whether the individual investor or pension fund wanted an investment placed in an ethical or environmental fund. I realise that there is a background of mis-selling in the pensions industry and among some independent financial advisers. However, those independent advisers have now put their house in order, and it is important that they are supported. We must ensure that one of the choices that they offer is that of ethical and environmental investment.
To sum up, let me say that although my pensioner constituents want the earnings link restored, they understand that poorer pensioners are the priority. Moreover, the corporation tax changes have been of great benefit to the pension funds—the owners of the major companies in the country. I applaud the moves on ethical investment, and I hope that the regulatory regime for independent financial advisers will include among their routine requirements the need to ask the ethical question. The pensions industry and the independent financial advisers have largely sorted themselves out and it is important that the House should welcome them as partners in taking forward the provision of pensions.
§ Mr. Edward Leigh (Gainsborough)
I think that the hon. Member for Newbury (Mr. Rendel) felt, when I intervened in his speech, that I was trying to be unfair to him or to make a party political point. On the contrary: I think that the hon. Gentleman's contribution to the debate was very fair, and I want to add to his remarks.
Since the second world war, the development of pensions policy in this country has been a notable failure of public policy making. The basic pension developed by Sir William Beveridge stood the test of time until the link with earnings was broken in the 1980s. At first sight, it was a very effective instrument. It provided the elderly with a degree of security and ensured that most people were required to set aside an adequate amount for their pensions. At the same time, the occupational pension movement developed satisfactorily.
The problem came with the break with earnings. I know that, as soon as I say that, some Members on the Government Benches will be tempted to point out that the Government whom I supported made the break. However, the present Government have accepted that the break was 140 essential, however it was done. Since then, however, the basic pension has been untenable, and it will decline rapidly in value. It is clear that something must be done.
I regret that we did not identify that problem earlier. I had no complaint about the basic pension plus proposal advanced by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) when he was Secretary of State for Social Security. However, his proposal was made right at the end of the period of Conservative government, and it was difficult at that stage to imbue it with all the authority that a Government proposal should have. The politicking of the time did not help.
There was nothing wrong with the basic pension plus proposal, and I commend it to my hon. Friends the Members for Chingford and Woodford Green (Mr. Duncan Smith), for Grantham and Stamford (Mr. Davies) and for Brentwood and Ongar (Mr. Pickles) as they develop our policy. We can tinker with the details. I accept that the scheme may not have been fully satisfactory, but the basic philosophy of privatising the pensions industry was, and remains, right. It is the only way in which we shall make progress.
The hon. Member for Newbury was feeling his way in his speech towards radical reform. However, that radical reform must involve some compulsion. The hon. Gentleman suggested that it might not entail any increase in national insurance contributions or taxation, and said that, under his system, people would see their contributions going into a funded scheme and would not consider those contributions to be increases in taxation or national insurance. In reality, however, that is how people would perceive the scheme. It would take a very courageous Government to insist on that.
§ Mr. Leigh
The hon. Gentleman agrees that only a courageous Government could insist, particularly given the decline in the value of annuities, that people should put by the requisite amount every month for an adequately funded scheme,
The hon. Gentleman may be surprised to hear that I agree with him on two points. We shall make progress only if there is some compulsion and only if there is some cross-party co-operation. Sadly, because of the way in which our politics is organised, I doubt whether the cross-party co-operation needed to create a new pension scheme along the lines that he suggested can be achieved. That is not how the House works. The adversarial system has stood us in good stead for many years and I doubt whether we can achieve some great cross-party consensus on a pension plan that will stand the test of time for 10, 15 or 20 Parliaments, but that is what we would need if the hon. Gentleman's scheme were to have any chance of success.
What can we do? I shall make a proposal in the hope that the next Conservative Government—whenever they come—will have the courage to pick up the ball and run with it. That Government must have the courage to try to create a proper funded scheme for all sections of the population.
I want to be fair to the Government. I understand what they are trying to achieve. The Government rightly hold the view that no pensioner, even a pensioner who has not 141 made adequate contributions, should live on less than £75 a week. That is why they have introduced the minimum income guarantee. I understand that.
It is easy to be critical of people, but there may be good reasons why people have not managed to put aside adequate savings for their old age. It may not be a matter of fault. I am philosophically sympathetic to the concept that every pensioner should have some minimum income guarantee. I understand why the Government propose it. The difficulty that immediately faces the House as it tries to grapple with pensions policy once it has agreed a minimum income guarantee is this: how on earth are we to encourage people on relatively modest incomes to put aside money for their old age?
One of the most telling points made by my hon. Friend the Member for Chingford and Woodford Green was that the number of people in receipt of means-tested benefits would rise from one in five of the population to one in three. I do not criticise the Government for trying to drag people out of poverty. That is a noble aim but, once they have made the decision to ensure that everyone receives a minimum income in their old age, how will they stop ever-larger numbers of people being reduced to reliance on means-tested benefits, which many people still view with a great deal of horror? The Government have no answer to that point.
One can forgive the Government for many things. One can forgive them for the disaster with the NIRS2 computer. One can forgive them for the SERPS disaster and the wrong letters that were sent out. We all know that we are entitled to criticise them, but that they can pass the blame back to previous Governments. Yet, when the Labour party was in opposition, articulate spokesmen such as the right hon. Member for Birkenhead (Mr. Field) tried to convince us that it had within its grasp the holy grail of pensions policy; that it could both take people out of poverty and take people out of means-tested benefits.
§ Mr. Bercow
Can my hon. Friend reassure me that he has not gone soft and that he certainly does not forgive the Labour party for its calculated misrepresentation of the basic pension plus proposals made by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley)?
§ Mr. Leigh
I was trying not to be too party political. I wanted to get some sort of sensible debate running, but of course my hon. Friend is right. The Labour party could not resist the opportunity, so intent was it on regaining power, to use any untruth—I must use the word "lie", Mr. Deputy Speaker, but I am not referring to any individual Member of the House, so I hope that you will not mind me doing so—against my right hon. Friend's proposals. That was a tragedy. It has soured the debate. What went on in the few days after my right hon. Friend proposed the scheme makes it difficult to achieve any rational or sensible debate.
I pay tribute to the hon. Member for Newbury, even though he has not costed his proposals. It is dangerous for any party that wishes to become a party of government to come to the House with uncosted proposals. It is not good enough for a potential party of government to deal in soundbites. It should present practical proposals. The hon. Gentleman failed to do so.
The only practical radical solution of which I can conceive—we have not had one from the Government—is some move towards compelling people to put a 142 proportion of their income into a privately funded scheme if they do not already have a satisfactory private or occupational pension. I see that the hon. Member for Newbury is nodding. Is he doing so because he agrees with the proposal that I am making? If so, although he may disagree with some aspects of the proposal advanced by my right hon. Friend the Member for Hitchin and Harpenden as Secretary of State for Social Security, does he accept my right hon. Friend's basic philosophical approach? If the hon. Gentleman accepts that, we have already achieved an element of cross-party consensus.
§ Mr. Rendel
I am still not clear whether the hon. Gentleman understands my proposals. He mentioned costings. A compulsory second-tier pension, based on individuals' saving from their earnings from employment, has no cost to the Government; that is why it does not need to be costed. I am not sure whether the hon. Gentleman understood that point. That is one reason why there is no need to raise the issue of costings. However, if we are talking about credits for non-earners, there will be a cost; that is why such a scheme would have to be introduced slowly.
§ Mr. Leigh
I am glad that the hon. Gentleman mentioned the problem for non-earners, which was also referred to by the hon. Member for Northampton, North (Ms Keeble). Anyone who takes a serious interest in pensions has to argue a way through that problem. Many people are quite incapable of making adequate provision for their old age—that may not be their fault. However, the hon. Gentleman makes my point. I did not misunderstand his proposals, because, under his proposals—and, indeed, under my proposals—people will be told that they are required to devote an increased proportion of their weekly or monthly income to their pension. That would have to go through Parliament.
The hon. Gentleman may argue that that would not be an increase in taxation, because the money would come out of people's incomes and be placed in a funded scheme, but people would consider it to be an increase in taxation. Every month, they would see that in the amount left available to them. That is what people care about; when people are in their 20s, 30s or 40s, they do not care about pensions, they care about paying the mortgage and looking after their children. If Parliament tells them that they must pay an increased amount, they will not worry whether it is listed in the coding for their monthly tax. They will blame us—or the hon. Gentleman if he is in government—for proposing it.
§ Mr. Rendel
It is clear to most of us who already put money into an occupational pensions scheme that our wage slip shows a basic salary amount, and that amounts are taken off for tax, national insurance and pension. The only change would be that the amount taken off for pension would be rather higher.
§ Mr. Leigh
In this House, we are fortunate because we are members of a most satisfactory occupational pension scheme. The first point that the hon. Gentleman must address is that not everyone works for the state or for large employers. Many people have only casual or low-paid work. Under his scheme—and, to be fair, my scheme too, because I am not ducking the problem—many people will not be paying money into an excellent 143 occupational pensions scheme, and, in the case of the House's scheme, a heavily subsidised one; they will be paying into a private pensions scheme, while annuities are falling. That is what this House would require people on extremely low incomes to do. If one enjoys the relative affluence of a Member of Parliament with a relatively good salary, it is easy to contribute a certain proportion of that salary to an excellent occupational pension scheme. However, if people are earning only £10,000 or £15,000 a year, like many of my constituents in the north of England, and Parliament tells them that they must pay 4, 5, 6 or even 8 per cent. of their salary into a new pension scheme, there will be a massive row. That is the real world in which we all live.
To be fair to the Government, that is why they have had to come up with a chaotic response. I do not blame them for that, because, above all, they are members of a party of power and they want to remain in power. They know, therefore, that they must try to hide their intentions by introducing a scheme that confuses even those Members of the House who take an interest in social security.
I wonder whether there is a single Member of Parliament, apart from those who sit on the Front Benches and on the relevant Select Committees, who has a detailed understanding of the nature of the Government's second pension scheme or their stakeholder pension scheme, or a detailed knowledge of their implications. I suspect that there are very few such Members. If the average Member of Parliament, who assiduously reads through a daily postbag and all the briefings from the Whips Office and other sources, does not understand all those schemes, how can the public be expected to understand them?
I fear that the Government have lost a great opportunity. It all started with the attack on advance corporation tax, for, as my hon. Friend the Member for Buckingham (Mr. Bercow) made clear in his intervention, that attack has dramatically reduced the attractiveness of occupational pension schemes. That attack has continued and I believe that, among those who are the target group for the Government's stakeholder pensions—those earning about £15,000 a year—there will be a continuing flight from occupational pensions, which are the best sort of pensions, into stakeholder pensions.
I might be among those all-too-ignorant Members of Parliament who have insufficient understanding of these matters, but I am not clear how the second pension will operate as it replaces SERPS for those earning less than £9,000 a year. I only know that the high hopes engendered among the British public by all that they were told before the election are being lost. As we tinker with the pensions system, we add to the delay and we lose what should have been a most marvellous opportunity.
§ Ms Sally Keeble (Northampton, North)
I am grateful for the opportunity to speak in the debate. It is a shame that few hon. Members are present, because pensions are one of the most important issues facing us. It is a particular shame that, having called a useful debate, the Opposition have not turned up in any great number.
§ Mr. Bercow
On a point of order, Mr. Deputy Speaker. I seek your guidance: is it in order for the hon. Lady to castigate Conservative Members for poor attendance when there are only three Labour Back Benchers in the Chamber?
§ Mr. Deputy Speaker (Mr. Michael J. Martin)
The hon. Gentleman has been a Member of Parliament long enough to know that that is not a point of order.
§ Ms Keeble
Thank you, Mr. Deputy Speaker.
I held two interesting consultations on the Government's proposals in my constituency, one with pensioner groups and the other with people who are in work. I should like to express my gratitude to Nationwide for having provided the facilities to allow us to discuss with its employees the financial arrangements and the life style that they wanted in their retirement, and how they envisaged achieving them. Some of the major issues that arose were very much in line with the thinking that underlies the Government's proposals.
The employees, who were of all ages, realised that self-provision was the way of the future: they did not expect all their financial needs to be met by the state, but expected by and large to provide for themselves. They did not think of that as punitive, but preferred it because it meant that they could arrange their financial affairs for their retirement as they wanted to and in a way that suited their personal circumstances. However, they made it clear that they wanted the Government to provide a safety net, not only in terms of financial support when their circumstances became pressing, as so often happens when people attain great age, but in terms of services. When considering the package that they wanted for their retirement and pension, they thought as seriously about service provision and service arrangements as about financial arrangements.
The three-tier system proposed by the Government is in line with the sort of issues raised by my constituents. I believe that it will help to keep pensioners out of poverty and do so without causing undue cost to the state. I cannot remember the exact costings of the Government's proposed scheme—I am sure that my hon. Friend the Minister will remind me of them in his winding-up speech.
My constituents—like those of all other hon. Members—want quite a high level of disposable income and do not want to be burdened with unnecessary taxation. Therefore, any pension arrangements that place an undue financial burden on those who are in work—and we have an ageing population—will not be generally accepted or welcomed.
§ Mr. Rendel
Of course people do not want to pay pension contributions out of their disposable incomes when they are young. However, we must accept that, as a society, we are not putting away enough for our old age. 145 That is why we must introduce an element of compulsion. People want to live now and pay later, but we cannot afford to let them do that. They must pay a bit more now in order to live better later.
§ Ms Keeble
I will deal with the hon. Gentleman's point in the course of my speech. In discussing how much money the nation puts aside, we must ask whose money it is and where it goes. Money must be spent to provide for the destitute and for those in the greatest need. We do not want to see our pensioners living in conditions such as those endured by pensioners in countries where there is no welfare state. When I worked as a journalist abroad, I wrote a story about pensioners living in a country with no welfare state. The photographs accompanying that story depicted the appalling circumstances in which pensioners lived and were censored from the article. We never want to see similar conditions in this country.
Many people are capable of making their own pension arrangements, and they say—I have heard them—that they want to be able to do so in order to choose how to spend their money. Future pensions arrangements will be about making personal choices, with a good safety net provided by the state. That is not a particularly remarkable or controversial statement. However, such arrangements are difficult to organise, and I believe that the Government's proposals will produce that outcome.
The stakeholder pension will affect most of my constituents, as average earnings in my area are £15,000 to £16,000. That funded scheme has particular merits. The hon. Member for Gainsborough (Mr. Leigh) described it as "chaotic", but the people to whom I have spoken have used the word "flexible". The hon. Gentleman might claim that people today lead chaotic lives, but I would say that their lives are perhaps less sedate and organised than in the past. People will change jobs several times, are likely to move house several times and may have several families. Their circumstances will change, and they need a pension scheme that keeps pace with their lives.
We should not talk only about the private sector as it has operated. Pension schemes must not have high administration costs. While people may not like to contribute to their own pension schemes out of their pay packets, they certainly do not want to see large sums siphoned off to pay for administration costs. People want to be able to link their savings—whatever they can afford at particular stages in their lives—with their pension arrangements later on. The Government should look closely at that issue. People clearly consider a home to be a major financial asset that should be counted as a resource in retirement.
§ Mr. Bercow
I am most grateful to the hon. Lady for giving way. She said a few moments ago that she wanted to minimise the burden on the taxpayer. Is the hon. Lady aware that the higher national insurance rebates designed to encourage people to take the stakeholder pension are calculated to cost the taxpayer an extra £500 million a year in the first instance, rising to £700 million a year for every additional 1 million people who opt out of the compulsory second pension? Is the hon. Lady aware of the conflict between her ambition and reality?
§ Ms Keeble
The reality of the Government's proposals will be a good level of state provision, giving people choice in the organisation of their finances. Different 146 aspects of the tax changes may mean more to some people than to others. For people in my constituency, the Government's changes so far have resulted in a lower tax burden. They have been very good for pensioners.
I agree with what Conservative Members have said about compulsion. Actually, I have been here only for the speech of the hon. Member for Gainsborough, but I agree with him and with the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) that it would be wrong to make contributions to a stakeholder pension compulsory. People's circumstances change and insisting on a fixed level of deduction throughout someone's working life would be wrong and would be resented. There is also a problem of practicality and the sanctions that would be applied. Positive incentives to join the stakeholder scheme, as the Government have proposed, are a better way forward than compulsion, which would make a good scheme bitterly resented and would not be remotely workable.
§ Mr. David Heath (Somerton and Frome)
Is the hon. Lady aware that we have compulsory pension schemes in the public service—in the police force and the fire brigade? Proper criticisms may be made about the use to which the money is put in not providing a funded scheme, but the schemes are compulsory for the employee. They are not resented for that because they are part of the terms and conditions that provide the eventual pension.
§ Ms Keeble
Yes, but for new pension arrangements, we can draw up a scheme that presents the best possible options. In a scheme that is supposed to encourage people to make extra provision for their retirement, there is no practicable way in which the Government can force everybody earning within a certain salary range—not just those working for big employers—to pay a certain amount.
Many people who make provision for their retirement greatly resent the fact that others will not do so and will rely on the state. That grievance is where some of the feeling about compulsion comes from, but the Government are right to resist it in drawing up their plans for the stakeholder pension.
The next level of pension is a second state pension. The hon. Member for Newbury (Mr. Rendel) seemed to be proposing that. It is a pay-as-you-go scheme, which means that, if people cannot pay in, it will be topped up by the Government. The revolutionary aspect is that it will be topped up specifically for people who are looking after young children at home or those who are looking after disabled relatives and are in receipt of certain benefits. That answers the frequent complaints of Conservative Members that the Labour party does not appreciate the enormous contribution made to society by women who stay at home to look after families and that we discourage caring because we encourage people to rely on state benefits.
With our carers pension, we are telling carers that the Labour Government value their contribution and are prepared to make up their pension contributions while they are doing that important work. I shall return to that point, which is particularly important for women. That measure will influence many women in deciding whether to take a career break to look after children or ageing parents. In the past, many felt that, if they did that 147 extremely important work, they would be clobbered in their old age because they would be unable to keep up their pension contributions.
The minimum income guarantee will not affect very many people in my constituency because most, like others in affluent parts of the country, are fortunate enough to have work most of the time and to be paid at a rate that puts their income above the very low level that would entitle them to the minimum income guarantee. The policy is an important safety net because it gives people the assurance that, if they do not earn enough to make their own pension arrangements, they will get a pension that will ensure that they can live their lives with greater dignity than present pensioners can.
Pensioners throughout the country are in uproar about the impoverished state of many old people, but when one presses them, they are often talking not about themselves but about friends or acquaintances. The need to ensure that old people can look forward to security and a decent standard of living in their retirement is extremely important. I am particularly pleased that the minimum income guarantee takes into account the extra costs that people face when they live longer, as people now do. It guarantees an enhanced income rate for pensioners aged over 75, rather than the 25p increase that has, until now, been given to them.
The Government will not force people to live off benefits, as the Opposition's motion says; that is complete nonsense. The Government will encourage people to make provision for themselves and provide the safety nets that people want. Above all, I am pleased that, in their first couple of years in power, the Government have dealt with the major, pressing issues that have affected pensioners. They have tackled the grievance that many pensioners felt about having to pay so much in taxation. Lifting the tax threshold for each pensioner to £5,900 means that two thirds of pensioners will not now have to pay any income tax at all. Many pensioners had felt aggrieved because they had paid income tax all their lives and were still being clobbered for tax when they were having to rely on the arrangements that they had made for their old age.
The Government have also dealt with fuel poverty. Many Labour Members joined pensioner groups to campaign about that issue in the many years during which our party was in opposition. The Government have tackled that problem through the winter allowance, which was £20 when it was first introduced and is now £100, by reducing VAT and by making other arrangements for fuel charges. That deals with one of the main problems that affected many of our older people.
The Government have also taken action on the savings limit and dealt with issues relating to the health service. In my consultations, I have found that people generally expect to provide for themselves but recognise that they cannot possibly meet the extra costs caused by declining health in old age. The Government have cut eye test charges for pensioners and—this is not always recognised as a pensioners' issue—provided a huge amount of extra money to deal with the winter crisis. In most health authorities, that money has gone towards looking after pensioners during the winter, trying to ensure that they do not go into hospital but are looked after, much more appropriately, at home and, in some instances, ensuring 148 that special beds are opened up. The Government are trying to ensure that pensioners get the level of care that their often frailer health requires in winter. They are also dealing with the problems of long-term care, and the real issues raised by the level of nursing-homes charges.
Above all, the Government are dealing with the pressing problems experienced by female pensioners, a group that is often overlooked. The hon. Member for Gainsborough referred to the problems of the Beveridge model. One of the main problems was the assumption that the man of the house would work and support his family, and that his work would pay for the family in his old age—an assumption that ignored the fact that women live longer. Many women were left in destitution because they had made no arrangements themselves; they also experienced the humiliation of having no independent means, and being regarded as mere appendages of their husbands. I am very glad that more women can now make their own pension arrangements, having had a full career. The Government's proposals for carers pensions and for a second state pension will be particularly important to women.
Far from being the problem area that the Opposition motion claims it to be, the area of pensions is the one on which the Government can rightly claim to have made the most progress. They have dealt with massive social issues, as well as financial issues, and I believe that, in years to come, many people who are working now will be extremely glad of such arrangements when they retire.
§ Mr. Howard Flight (Arundel and South Downs)
I remind the House that the growth of private-sector pension provisioning was one of the major successes of the last 20 years. In this country—unlike most other countries in the European Union—some £800,000 million of private-sector pension assets have been built up, and, as a result, UK tax rates and the proportion of the national income taken by the Government are nearly 10 per cent. lower. Some 85 per cent. of people who are now retiring already have some form of private pension; I believe that only 7 per cent. of men and 12 per cent. of women in full-time employment have no pension provision.
We have been considering those who do not already have some sort of private pension. The Government's stakeholder proposals—having finally come forth—seek to deal with that problem. I think that there is a broad cross-section of agreement in the House that as many people as possible, if not everyone, should have some form of private pension, because—as has been said today—the alternative is a massive growth in social security bills. People are living longer and longer. I was amazed to learn yesterday that, in the last decade, life expectancy has risen by a year for every four years that have passed. That is phenomenal. Moreover, there is the population bulge of which several of us, including me, are key representatives, having been born in the late 1940s and early 1950s. By 2010 or 2020, the country will have a much larger population of retired people, who will have to be provided for.
The specific issue is whether or not the Government's proposals satisfactorily address the problem of those who have no existing private pension. This very morning—I should declare an interest at this point: as many hon. Members know, I am chairman of an investment 149 management company—I addressed an industry conference on the Government's pension proposals and, in particular, on trying to assess what the LISA proposals are all about. The conference was attended by some hundred people, most of them representing pension product providers. Their first complaint was -that there is still considerable lack of clarity about the stakeholder scheme. We are halfway through the passage of the Welfare Reform and Pensions Bill through Parliament, yet nobody knows what the LISA will be, if it comes into existence.
The Government realise that the basic stakeholder proposals involve severe cost problems. The costs are likely to be too high to meet the Government's CAT mark target and very few members of the industry are willing to provide stakeholder scheme, so the Government are going back and consulting. We do not know how even the stakeholder pension will eventually operate.
I have twice asked questions about the interregnum. The response that I got from Ministers at the Department of Social Security and at the Treasury was that the Financial Services Authority had already issued guidance to providers for the interregnum. Whatever guidance has been given, it is useless. There are major problems—for example, for companies that wish to set up money purchase schemes.
For various reasons, group personal pensions schemes are generally more popular with staff than are occupational money purchase schemes. It seems at present, although the matter is not absolutely black and white, that, if a company has a group personal pension scheme, it will have to introduce a stakeholder scheme as well, even though the group personal pension scheme may offer better terms. No company wants to be saddled with the costs of two competing schemes. What is it to do?
On the major issue as between the stakeholder pension and the LISA, according to the joint paper issued by the Treasury and the DSS, the LISA is purely a way in which pension fund moneys can be managed. The paper advises that the proposed LISA is a collective investment management scheme that can be used by occupational schemes, personal schemes and stakeholder schemes.
The original concept was for a much simpler pension arrangement, analogous to a PEP and an ISA, dispensing with the need for, and cost of, trustees. The LISA is intended to be a pension tax wrapper with appropriate rules about how much could be invested in it each year. The accumulated investment could be drawn out when the holder reached a certain age for a pension. The money invested out of income would be tax deductible and would accrue free of tax. The scheme was intended to be simple and cheap, particularly suitable for people who are self-employed.
That was the concept originally postulated. There has been a big debate between the DSS and the Treasury about whether it will be introduced or whether all pension provisioning schemes must have the hassle and costs of a trustee. It is fundamental to providers to know what we will end up with. If we have a LISA like an ISA and like a PEP was, that opens up a massive new field of product provision and marketing, but if the LISA is merely to be a method of managing money, that is nothing new. Pension fund money can already be managed in collective investment schemes.
150 With regard to the Government's proposals and the problem that they are intended to address, I put carers into a separate category. The main problem is the growth in the number of self-employed. There are now 3.2 million self-employed and the figure is rising. Partly as a reaction to the UK's adoption of the European social chapter, many people in regular employment now function on a self-employed basis.
There are a lot of self-employed people with incomes below £9,000—1.6 million, according to the Government's figures. Many part-time transient workers and 43 per cent. of female part-time workers have no pension provisions. Most people with a track record of transient employment do not have any pension provisions. I suggest that the stakeholder scheme will have big problems in meeting the needs of people in those categories.
It will not be so easy to move pension arrangement under the stakeholder scheme on changing jobs, as presently proposed; and it also has the strange requirement that people can contribute £3,600 per annum or 100 per cent. of their income, whichever is less. The cost of working out the income of people in transient part-time employment for the record-keepers and the providers will be a nightmare. I cannot understand why there is such a requirement; moreover, people in transient employment may not even necessarily qualify for a stakeholder scheme put in place by a company. Self-employed people will certainly not be covered by company-sponsored stakeholder schemes.
The second problem with the stakeholder scheme is expense. What indications have the Government received of how many providers have suggested that they will provide stakeholder schemes on the CAT mark cost basis of, I understand, a 1 per cent. all-in charge? A lot of tax-oriented requirements such as the contribution rule will make the stakeholder scheme not a low-cost animal at all. Jobbing back, one of the attractions of the LISA as originally proposed was that it could be a low-cost vehicle, just as the competitive PEP market had become a low-cost vehicle.
§ Mr. Bercow
In his description of those excessive costs, is my hon. Friend taking account also of the higher national insurance rebates that the Government propose to encourage people to opt for stakeholder pensions?
§ Mr. Flight
That is a major issue, but it falls into a separate category. The crude issue is wanting to keep the charges as a percentage of assets that flow into stakeholder pensions down to the minimum, which is a quite understandable reaction to the fact that personal pensions have often turned out to be far too expensive.
I would add that the great irony is that—after all the trouble with personal pensions and just as the market is, if anything, coming round to delivering competitive, low-cost personal pension products which may compete on cost grounds with stakeholder schemes—the Government's proposals contribute an attack on personal pensions. I find that quite extraordinary, given that 8 million people have personal pensions. Are the Government sending to all those people the message that they should cash in a personal pension—potentially at great loss, given some of the costs involved in early redemption? On the other side, group personal pension schemes for many medium-sized companies are very 151 competitive and the best answer for their employees. However, it appears that they will not be permitted as an alternative to a stakeholder scheme.
My main point is that there is a great deal of confusion—not only among individuals about what possible pension arrangements are coming up and how they should decide on them, but in the industry itself over where the Green Paper and the Welfare Reform and Pensions Bill, which is going through Parliament, will crystallise. By their own admission, the Government are going back to the industry to consult—that may be wise, but time is getting on. I can tell them that I know of many companies that do not know what to do with their pension arrangements; and the pension interregnum, for the next two years has only just started.
The second main issue, about which I have spoken and written elsewhere, is that the stakeholder proposals, combined with advance corporation tax changes pushing companies in the direction of money purchase schemes, mean that there will be a huge increase in money purchase pensions as opposed to final-salary pensions.
Final salary pensions involve a closed pot of assets operated by a company pension scheme, whereas, in money purchase pensions, there is an obligation to buy an annuity, either on retirement or at the age of 75. The numbers of those needing to buy annuities will rise dramatically. However, as economic policies have put the Government's finances into surplus, the net supply of long-dated gilts—the natural investment vehicle for annuities—has disappeared. No wonder annuity costs have risen dramatically. Real interest rates are nearly half the level of recent years, and traditional fixed-interest annuities are not necessarily the right vehicle for people to convert money-purchase accumulation into an eventual pension. That matter has not been thought about by the Government at all adequately. All the focus has gone on the saving and provisioning side, where there are a few gaps. However, in terms of how that saving is converted into pensions, a great deal more thought is needed.
The solution may be to permit maximum draw-down arrangements and to abolish the obligation to buy an annuity, or to reform annuity law to permit much more flexible equity-linked annuities—or a combination of the two—but a solution is urgently needed.
In pursuing the issue of insurance companies that provide equity-linked annuities, I was horrified to find that, if an equity-linked annuity performs at more than 3 per cent. over the Revenue's benchmark, the insurance companies are not allowed to distribute it—it must go on one side as a reserve. If, as has so often happened, that reserve builds up higher and higher, the beneficiaries of the annuity entirely lose those funds.
I have a letter from the Inland Revenue to an insurance company which had asked what it was to do with the money. In a cavalier fashion, the Revenue suggested that it be booked to windfall profits! Booking someone's pension savings to windfall profits? Why has not the issue of fair tax treatment for equity-linked indexed annuities been addressed as part of the pension reform process? When millions of people with money-purchase pensions will need to buy annuities, we must give the greatest thought to how best to turn those savings into pension income.
152 I am uncomfortable with the Government's minimum pension guarantee. I am sympathetic to the proposals from the Liberal Democrats, in that increasing state pensions for the elderly is the simplest and fairest method of addressing the problem of pensioner poverty, although it may involve a rather different state pension structure emerging in due course. The earnings-linked guaranteed pension support will be a major disincentive to pension saving and, as it gathers momentum, will be seen as enormously unfair. It would appear that someone earning an average wage who has accumulated his stakeholder or LISA pension may have no greater pension than someone who has managed to get away with doing nothing, and who picks up something similar in 20 years' time as a result of the minimum pension guarantee. That does not seem fair.
The pension guarantee arrangements also pose complex related issues in relation to sorting out the annuity problem in permitting draw-down arrangements. We cannot allow people to draw down and to be left with no capital. However, if we want to put in a protection barrier, logically it should be equal to the state minimum guarantee. The higher that guarantee is, the fewer people, effectively, will be able to draw down.
I plead with the Government to get a move on and sort out precisely what the LISA will be. If the LISA comes out of the debate as was intended, the stakeholder pension will be redundant for much of the territory that it was intended to cover. There is a need to sweep together stakeholder pensions, group personal pensions, occupational money-purchase pensions and occupational final salary pensions into a signal code for occupational schemes.
We would do better as a country to move towards the United States model, where there is a basic choice between occupational schemes and self-provisioning schemes, called the 401K. We would be close to that model if we ended up with the LISA, as intended, and the ISA. Those two together would be fairly similar to the tax incentives and the tax packaging for self-provisioning pensions saving that has been vastly successful in the United States.
As it stands, we will have a whole array of different types of pension that people do not understand, so they will have to incur the expense of advice. I suggest that the stakeholder system will also be inflexible for many in the categories needing to provide private sector provisioning—who will fall through the woodwork again—because they are in transient employment and will not be covered by employer-led stakeholder schemes.
There is widespread support for the Government's objectives and, next time that we Conservatives are in power, we will have to sort out, and work with, whatever the Government have put in place. Therefore, it is desirable to get as much of a consensus as possible—and to get the issues as right as possible—now. However, many issues have not been addressed and time is moving on.
We have had two years waiting for the initial proposals. Candidly, from the point of view of the industry, the last thing that we need is three years in which no one has known what pension arrangements to propose. The result of that will be that people will give up and lose interest, just as some 360,000 people have given up their old PEP savings schemes because of the complexity of the mini and maxi ISAs. We need simplicity, and we need to get a move on.
§ Mrs. Theresa May (Maidenhead)
Before I contribute, I should inform the House that I have in the Register of Members' Interests a non-registerable shareholding in the Prudential corporation.
I am grateful for the opportunity to speak because I want to raise an issue that has not been dealt with in depth in the debate—although it was touched on briefly by the hon. Member for Northampton, North (Ms Keeble)—the particular impact of the Government's pensions proposals on women. Women should be concerned about many aspects of the Government's pension proposals.
Before the end of the consultation period on the Green Paper, I participated in a seminar on the impact of the Government's proposals on women. The seminar was organised by the Fawcett Society—the hon. Member for Newbury (Mr. Rendel) also spoke there—and it was unfortunate that no Government spokesman attended. The seminar brought together a number of organisations, academics, union representatives, people from the City, pension providers and women's organisations to talk about the issue. Across the board, everybody expressed concern about the implications of the Government's pensions proposals for women.
The figures on the number of women who have their foot on the pension scheme ladder—a point made by the hon. Member for Northampton, North—show that there is a real problem in terms of alerting women to the need to make pension provision. The National Council of Women of Great Britain published a document called "Securing our Future", in which it set out the results of a survey it had undertaken about women and their attitudes to pensions. The survey showed that almost one third of the women interviewed had no pension scheme in operation; some two thirds expressed concern about their future financial situation; and half were concerned that they would never be able to save enough to secure their old age. Those are figures that should concern us. It is right that the House should focus on them and on the need to raise awareness among women about the desirability of making provision for a pension.
It is particularly unfortunate that, just as more women are getting their foot on to the ladder of occupational pension schemes and are in employment that offers such schemes, the Government are dealing them a blow through stakeholder pensions, introducing arrangements that many people think may encourage employers to cut occupational pension schemes, and increasing the complexity of the system.
Again, I was interested to hear my hon. Friend the Member for Arundel and South Downs (Mr. Flight) talk about the array of pension provisions that will be available after the Government's proposals have been put in place. Some of the provisions are difficult to understand without advice, and that will be necessary. I want to come on to the way in which the Government are ignoring the need for advice on many of their pension proposals. Just as women appear to be getting their foot on to the occupational scheme ladder, the Government are introducing a complex system that will have an adverse impact on them.
154 That point was taken up by the National Council of Women in its response to the Government's Green Paper. It said:We do not … think that the present proposals are adequate. They present a confused picture of piecemeal provision. Having to choose from a mix of public and private schemes will leave most people feeling confused and (perhaps rightly) insecure.I have met representatives of the council who have spent considerable time examining the Government's proposals and raising concerns with them. The council has raised a particular concern. It was mentioned at the Fawcett Society seminar that I attended; I have heard others make the point.
Having looked at the Government's Green Paper in some depth and detail—it went to many organisations for consultation—and having taken the views of its members, because it believed that the Government's consultation exercise was a proper consultation exercise, the council found that, before the deadline for getting comments on the consultation exercise to the Government, they had gone ahead and published the Welfare Reform and Pensions Bill. During the seminar, many people commented that they were discussing and debating the impact of the Government's Green Paper proposals on women's pension provision while, at the same time, in the House, the Government's proposals were already being examined in detail in Standing Committee; the Bill had had its Second Reading.
Therefore, many people felt that the consultation exercise was something of a sham. My hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), the shadow Secretary of State, referred to a number of issues where the Government have indicated, through ministerial written answers, that there will be further consultation. I hope that the Government are not doing what they did on the consultation on the Green Paper. I hope that they do not think that, by telling people that they are consulting, everything will be all right. As we saw with the Green Paper, they had made their mind up all along and the consultation exercise was nothing but a sham.
§ Ms Keeble
I agree with the hon. Lady that what happens to women's pensions is important. However, does she not accept that, although it is true that women are getting their first toehold on the occupational pension ladder, for quite a long time to come, the pension that will apply to many women will be the state second pension, which, as it is not a funded scheme, will have a substantial contribution from the Government? In setting that up, particularly with the carers pension, the Government will make a huge contribution to the well-being of women pensioners.
§ Mrs. May
I will address the impact of the second state pension on women later. All I will say at this point is that I suggest that the hon. Lady looks carefully at the implications of the Government's proposals. When one looks at the proposals in detail, one finds that they are not as beneficial to women as perhaps, on the surface, she may have taken them to be.
I reiterate the concern that I and many others have about the complexity of the pension provision that will be in place after the Government's proposals go through, assuming that the Welfare Reform and Pensions Bill is passed. That complexity is of particular concern to women 155 who are worried that they are not in a position to make provision for their old age, and who feel the need for advice. Faced with that enormous complexity, advice will be important. It is of much concern that the Government do not appear to have accepted the fact that there is a need for advice on their stakeholder pension proposals.
Somewhat worryingly, the National Council of Women survey to which I have referred showed that, although 54 per cent. of the women interviewed said that they trusted a professional adviser, 64 per cent. said that they trusted the media to provide them with pensions advice. That should concern us all. I suspect that many people—women and men—take their advice from newspapers, rather than from a professional adviser. Given the complexity, it is important that advice is available to people as to what the best option is and what they should do in taking out a pension.
It appears that the Government have accepted the need for advice on stakeholder pensions, but only if the individual concerned pays for the advice. Therefore, what has been billed as a wonderful low-cost option that will be of enormous benefit to people on lower incomes has its drawbacks. The Government did not properly consider the need for advice when they first looked at those pensions, although I note from the comments of the shadow Secretary of State that advice is one of issues on which we are to have a consultation exercise, sham or otherwise.
I have mentioned a concern about the impact of the proposals on occupational pensions. That is a real issue that needs to be addressed. There is a concern that some employers will look at stakeholder pensions and say, "It is easier just to let employees take out stakeholder pensions and not to provide occupational pensions for them."
That would be a retrograde step. The provision of occupational pension schemes has been of enormous benefit. As I have said, it is extremely good news that many women are now able to get their foot on to the occupational pension scheme ladder. Sadly, many of those may now find that the ladder is pulled away from them by the Government's policy of introducing stakeholder schemes.
It has been difficult for women to make provision for the pension that they want because, as the hon. Member for Northampton, North said, they are more likely to have interrupted career patterns and periods when they are not in employment. They are more likely to be in part-time jobs, where earning levels are not significant. It is important that we look at the implications for those women, and the means by which they can ensure that they make pension provision for their elderly years.
The hon. Member for Northampton, North lauded the second state pension. She believes that it is particularly beneficial because it will provide pension credits and make available a pension for carers and for women who look after their families. However, as I cautioned her in my response to her intervention—I am sorry that she is no longer in the Chamber—she should look in more detail at the Government's provisions. The regulations that Government are proposing, and the criteria that they are setting for second state pension credits, will significantly 156 disadvantage many women, namely, those who choose to stay at home to look after children aged between five and 16.
If one is looking after children, under the Government's proposals, one will qualify for credits for the state second pension only if the children are under five years old. Therefore, someone who chooses to remain in the home to look after her family members who are over five years old will not benefit from the state second pension. Many women would be disadvantaged by implementation of the proposal. Once again—as in so many other aspects of the Government's welfare proposals—single-earner couples in which the wife chooses to stay at home to look after the family will be hit.
What about the Government' s proposals on carers? The hon. Member for Northampton, North made quite something of them, saying that they will significantly benefit carers. Interestingly, however, those on the minimum wage will have to work only about 18 hours a week to reach the lower earnings limit, whereas those caring at home for someone in receipt of disability benefits will have to provide 35 hours of care a week to qualify for state second pension credits.
Therefore, the Government—far from recognising that caring is a beneficial occupation, which it is, and that we should be grateful to the many people who stay at home to care for elderly and disabled relatives—are setting the credit qualification threshold significantly higher for carers than for those who are in the workplace.
I have not made up those points, which were made also by the Pension Provision Group in its Green Paper response—which was produced by the Department of Social Security. The group went on to say that the value of the state second pensionearned by working just enough to reach the lower earnings limit will be much greater than it would have been for SERPS. The reward for combining a modest amount of paid work with caring responsibilities will therefore be greater.The impetus behind the current proposals—as in so many of the Government's actions—is to get people into the workplace. The Government are saying that people will benefit if they not only look after a relative with a disability, but do some work. The abiding theme in so many of the Government's proposals, including those on disability benefits, is that one is of value in society only if one is in the workplace. I do not hold that belief. However, I tell the Government that they should carefully reconsider their proposals, specifically those on disability benefits, which most starkly demonstrate their motivating theme.
Ministers should reconsider the value contributed to society by those who are not in the workplace. Women who stay at home because they have decided to look after their families are contributing value to society, as are those who stay at home because they have decided to care for an elderly or disabled relative. Those people are playing a valuable role in society, and they should not—consistently—be dismissed by the Government, as they would be by the Government's welfare proposals.
My right hon. and hon. Friends have already made very eloquent and detailed speeches on the impact in other spheres of the Government's pension proposals. I entirely agreed with, and welcomed, the comments made by my hon. Friend the shadow Secretary of State on the pensions reform mess into which the Government have 157 got themselves. The Government have dithered, delayed, practised obfuscation and shown uncertainty about pensions reform. One minute, they say that they will do one thing; the next minute, they say that they will do something else.
§ Mr. Collins
My hon. Friend is developing a very powerful argument. Is not another stark contrast the fact that, on matters that the Government thought were important—such as a windfall tax, an emergency Budget and giving the Bank of England independence—they rushed into taking action as soon as they got into office, whereas they took no such action on pensions, because they did not think that pensions were important? In 18 years in opposition, the Government were able to work out plans on some matters, whereas pensions did not seem to be sufficiently important for them to think about.
§ Mrs. May
I am grateful to my hon. Friend for that intervention, and he was absolutely right. Furthermore, the contrast that he drew—especially on the windfall tax—was even starker than that drawn by my hon. Friend the shadow Secretary of State. Ministers knew before they were elected to government that they would hit pension funds by changing the treatment of advance corporation tax. They are now taking £5 billion out of pension funds—
§ Mrs. May
Yes; I am grateful to my hon. Friend—who said earlier that, as a consequence of that change, occupational pension schemes will either cost individuals 10 per cent. more or benefit individuals 10 per cent. less.
Although the Government had worked out that they would immediately hit pension funds and take money out of pensioners' pockets, they had not worked out their welfare reform proposals, although welfare reform was one of the key points mentioned in their general election manifesto.
Before the general election, the Labour party consistently said that welfare reform was the one thing that it would do. Two years down the line, where are we—what have the Government done about welfare reform? They have produced muddled proposals on pension provision. Moreover, the only way in which they are reducing the welfare budget is to cut widows and disability benefits. Widows and disabled people are under attack by the Government. I suggest that the Government's pension proposals will put women under attack, too.
§ Mr. Tim Collins (Westmorland and Lonsdale)
It is a particular pleasure to speak in this debate, as the most cursory examination of the Chamber will reveal that Labour Members have fled the field on the issue.
[Interruption.] Ministers are getting terribly excited about that, but, if they care to look behind them, they will note that precisely two Labour Back Benchers are in the Chamber. One of those is a Parliamentary Private Secretary, and the other—who is very welcome in the Chamber—has not sought to contribute to the debate.
I am, conversely, making the third consecutive speech by a Conservative Member—on a subject that the Government themselves said was absolutely at the heart 158 of their legislative programme. The Prime Minister said that the issue was of paramount importance. In the general election campaign, Labour Members told the electorate that pensions and welfare reform was their number one priority. Famously, the Prime Minister even launched a programme of social security road shows, which concluded after only one event. It all goes to show—as my right hon. and hon. Friends have consistently said in the debate—how embarrassed the Government have become on the subject of pensions and welfare reform. Although they have talked a great game, they have delivered remarkably little.
The Government have not been reluctant to rush into action in other spheres. Indeed, in many other spheres—whether it is the working time directive or, as hon. Members have said, the measures on advance corporation tax introduced in the Chancellor's first Budget—critics may well lay at the Government's door a charge of rushing into premature action. However, on pensions and welfare reform, which the Government have themselves named as their top priority, we have had precious little action—although we have had consultation upon consultation, Minister succeeding Minister, and White Papers and Green Papers.
As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said very eloquently, the only way in which the Government have changed the system's effects on savings has been to replace the successful tax-exempt special savings account and personal equity plan schemes with their extremely ill-thought-through, unsuccessful, confusing and—to put it most generouslyyet—to-be-proven individual savings account scheme. As my hon. Friend said, 300,000 people who had been saving in PEPs are currently not saving in ISAs, which does not bode well for the future—when those people will become pensioners, and when we had hoped that dependence on the basic state pension would be reduced by savings in such schemes.
The Government's amendment to today's Opposition motion shows a little brass neck, even by the standards of this Government. That amendment seeks praise for delivering "economic stability" for pensioners. Well, that is one interpretation of what they inherited: the fastest-growing economy in Europe. Now they preside over the slowest growing economy in Europe; and whereas they inherited falling unemployment, they have delivered rising unemployment.
One could call that economic stability or, more likely, one could call it frittering away a golden economic legacy, which has consistently been the tale of this Government and which, sadly, will result in many people—not least pensioners—paying a high price.
My hon. Friend the Member for Maidenhead (Mrs. May) spoke eloquently about the impact on pensions provision of some of the Government's changes to other forms of taxation and benefit. The overwhelming majority of people in their late 40s or 50s, or just coming up to their 60s, are likely to be married couples, so they will lose out from the abolition of the married couples allowance. People coming up to the time when they have to calculate the pensionable income on which they will have to depend in retirement are losing out.
The Government may say that they have made provision for older couples, but the provision is to keep the married couples allowance only if one member of the 159 couple was born before 1935. You do not need to be a master of mental arithmetic—although I know that you are, Mr. Deputy Speaker—to work out that people born before 1935 will turn at least 64 some time this year, so people on the verge of retirement, in their 50s, are not helped at all by the concession for which the Government have so eloquently called for thanks.
The Government also task us with the idea that we should be grateful, on behalf of pensioners, for the concessionary travel scheme. I would have thought that travel and transport would be the last issue that the Government wanted to raise in a debate on the situation facing pensioners.
§ Ms Keeble
Does not the hon. Gentleman accept that in London, for example, the concessionary travel fares provided by Labour local authorities have made it possible for many pensioners to have a reasonable life style, with some mobility? Several pensioners whom I know in London say that they are able to stay only because of the generous transport schemes.
§ Mr. Collins
I am most grateful to the hon. Lady, because she has made precisely the point that I was about to make. My constituents, who live nearly 300 miles from London, are fed up with policies devised by people who think that everyone can get on a bus or a tube. Tubes do not run in south lakeland. Rural pensioners are suffering because of the Government's reckless pursuit of ever higher petrol and diesel duties and their ever more effulgent denunciation of the use of the car. Many pensioners have no choice.
§ Mr. Deputy Speaker
Order. The amendment may have mentioned transportation in passing, but we must now get on to pensions.
§ Mr. Collins
Indeed, as I pointed out, it was the Government who rather unwisely raised the subject, but of course I accept your ruling, Mr. Deputy Speaker.
We have not had any clarification from the Government of the measures that they intend to introduce to assist pensioners. The Secretary of State restated the fact that the Government believe that the minimum income guarantee is the answer to all pensioners' problems. It has been widely pointed out—by Conservatives, Liberals and, although not this afternoon, also by the right hon. Member for Birkenhead (Mr. Field)—that the minimum income guarantee, far from being a solution, will make pensioners' problems far worse.
The minimum income guarantee will increase means-testing and provide an active disincentive for future pensioners to save. The message will be that people without a very sizeable income would be mad to save for a rainy day because they would be far better off expecting the minimum income guarantee to pick up all their bills.
The subject that comes up most frequently on the doorstep in my constituency—I am sure that other hon. Members find the same—is why pensioners who have saved a little and perhaps bought a house should have to pay all their bills, while people just down the road who 160 have never lifted a finger have every single bill paid for them. With the minimum income guarantee, that problem will increase.
§ Mr. Collins
I am sorry, but I have given way to the hon. Lady already, and I am keen to hear what will no doubt be a powerful speech from my hon. Friend the Member for Grantham and Stamford (Mr. Davies); I do not want to delay it other than to say that it has been very clear this afternoon that Conservative Members stand for support for those who save, for families and for pensioners who seek to make provision for themselves and their families, whereas Labour Members—those few who have spoken—have simply parroted the usual belief that the Government are doing the right thing for pensioners.
Pensioners in my constituency and throughout the country believe that the Government are doing anything but serving their interests. The Government have run the economy into the sand. They are penalising those who are trying to save and not helping pensioners. They started by imposing a £5 billion a year stealth tax on pensioners' income and they will carry on harming pensioners until the day that they are slung out of office. That is why we condemn them.
§ Mr. Quentin Davies (Grantham and Stamford)
We learn from this morning's press that the Government have lost the support of a substantial proportion of their Back Benchers on the means-testing of incapacity benefit, and it is clear from what we have seen this afternoon that they are also losing the support of their Back Benchers on their pensions proposals. Of the enormous number of Labour Members, only two Back Benchers have been prepared to turn up and defend the Government's actions.
That absence has been more than made up for by some extremely powerful contributions from Conservative Members. The hon. Member for Newbury (Mr. Rendel) made various proposals, some of which, in themselves, might have been quite interesting, but I cannot be the only one who will take a long time to take any Liberal proposal remotely seriously again, now that we have seen the Liberals running up the white flag on tuition fees in Scotland—only a week after they were apparently resolutely committed to their policy—and all for a mess of pottage: two pathetically junior seats in the Labour Administration in Scotland.
The other Labour contribution—that was a Freudian slip, because it is very hard to distinguish between Labour and Liberal these days—was from the hon. Member for Putney (Mr. Colman). I strongly agreed with him. He spoke with feeling, and evidently with some personal knowledge, about the position of local authority employees who continue to do the same job in the private sector because they are contracted out or are working for agencies that are privatised.
Clearly, such people should not lose any pension rights as a result of the change. The Opposition strongly support the hon. Gentleman's representations, and we hope that the Government will listen. We need an equivalent of the Transfer of Undertakings (Protection of Employment) Regulations 1981 for pensions in the local authority sector. That is a very good cause.
161 My hon. Friend the Member for Gainsborough (Mr. Leigh) spoke in original vein, as he always does on these occasions, and with much thought and obvious preparation. He suggested that it would be a good idea to continue the consideration that the previous Conservative Administration gave to the possibility of introducing a greater element of funding to the state pension system. I know that he feels strongly about such matters and we shall take his views into account. He also made a powerful attack on the evils of means-testing.
The hon. Member for Northampton, North (Ms Keeble) made a valiant attempt to defend the Government. She was alone on the Government Back Benches in so doing, because the hon. Member for Putney had his own reasonable agenda. My hon. Friend the Member for Arundel and South Downs (Mr. Flight) spoke with great knowledge and he is a fine example of the great utility to the House of having Members of Parliament who have had a direct professional involvement in the matters under discussion. My hon. Friend made a well-informed and useful contribution.
My hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins) made a powerful speech about the evils of means-testing and my hon. Friend the Member for Maidenhead (Mrs. May) made a memorable speech. She brought a new dimension to the consideration of pension issues. We forget too often how whole sections of the population—women, of course, make up 50 per cent. of the population—may lose out badly. My hon. Friend was right to say that only in the past few years have women started to benefit substantially from the occupational pension system. Unfortunately, we now have a Labour Government who have no regard for that great national asset and who may do serious damage to it. The opportunities provided by the occupational pension system are being closed off to future generations, men and women, and some women will find that they have never had the opportunity to benefit from it.
The Labour Government's handling of pensions has been almost unimaginably muddled. We have had administrative confusion, destructive departmental rivalry and, above all, incompetence and bad principles. Let us start with the bad principles. The Labour party won the election on a manifesto that made it clear that it was committed to maintaining SERPS for those who wished to participate in it. It was in the manifesto in black and white but, when the Labour party got into office, it promptly broke that electoral commitment. That was a bad start and a bad principle to begin on.
§ Mr. Davies
The hon. Lady has obviously taken a course at Millbank in how to defend the indefensible by talking about something else. The Labour Government decided to destroy the SERPS system, in breach of their electoral promise, and have replaced it with another system, announced in the Green Paper as the state second pension. However, it is clear that even someone with a full earnings record will, at very best, end up with a pension that—on the day of their retirement—is marginally above the minimum income guarantee. Because the minimum income guarantee—that new 162 means-tested benefit so beloved of the Labour party—will be indexed to earnings, but the state second pension will be indexed to prices, it is axiomatic that, within a few years, even someone with a full entitlement to the state second pension will find that it has been overhauled by the value of the minimum income guarantee.
The Government will have condemned everyone in the state second pension scheme to spend their declining years dependent on means-tested benefits. What an extraordinarily unjust system. How perverse, unfair and crazy it is to decide to uprate to a lesser degree a pension to which someone has contributed than a pension to which no one has contributed. It takes new Labour to think up a system as unfair and irrational as that.
§ Mr. Davies
My time is limited. The hon. Gentleman had his chance and I have already expressed my views about his party's policies. He should not take it personally.
Bad principles are the foundation of all the mistakes that the Government have made. The Government have introduced another fundamentally bad principle into our national economy by taxing savings at a higher level than other income. As if that is not enough, they have added the unfair to the irrational and have decided that people who depend on savings income—even those whose savings income is so modest that it does not take their total income above the income tax threshold—will still pay income tax on that savings income. That is a desperately unfair and cruel policy that will have a huge impact on pensioners with a small savings income.
It is also a bad principle to increase taxation on pension funds, as the Government did with the withdrawal of the dividend tax credits—the introduction of the pensions tax. It is no surprise, therefore, as my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) pointed out, that the savings ratio in this country is declining. It has fallen from more than 11 per cent. when the Government came to power to around 7 per cent. now. It may have fallen even lower since I last saw the figures. That is a potential catastrophe for this country and it was brought about by the application of deliberate policies that were extremely ill conceived.
Stakeholder pensions are in an extraordinary shambles. The Government's introduction of stakeholder pensions will become a locus classicus—a case study—in political science classes in many parts of the world on how not to make effective policy. The Government came to power with a manifesto commitment to introduce a stakeholder pension, but they did not have the faintest idea what to do. For 18 months, nothing happened. The Government went through two Secretaries of State and three Pensions Ministers. After 18 months, we still had not seen the Green Paper that was promised in the summer, then in the autumn.
The Government were desperate and had to publish something by Christmas. They lifted the Australian superannuation model—which has now been abandoned by the Australians, although the Government probably have not noticed that—which was based on compulsory contributions by employees and employers to a funded scheme. Everyone in Australia who was earning above a certain minimum income—A$450 a month—had to 163 take part. The Government changed the figure here to £9,000 a year, but the system was basically the same. However, they then changed their minds.
I do not know whether it was the Chancellor of the Exchequer or the Prime Minister who vetoed compulsion, but one of them did. I was shocked this afternoon by the way the Secretary of State tried to bluff his way out of that. My hon. Friend the Member for Chingford and Woodford Green put to the Secretary of State the reference on page 105 of the Green Paper to compulsory funded pensions for those earning more than £9,000 a year. Clearly, that contradicts the rest of the Green Paper and is a leftover from the original proposal. It shows that—in panic, at the last moment, and without taking the time or trouble even to proofread the document—the Government have allowed a trace of the previous model to survive.
The Secretary of State said earlier that that interpretation was a misunderstanding and that the reference was to the existing system. The right hon. Gentleman should return to the House and make a statement to clarify the matter. As all hon. Members know, this country has no compulsory funded pension system. It never has had. There is a compulsory non-funded system of national insurance, and there are various funded schemes—occupational, personal and others—that are voluntary. However, the phrase in the Green Paper to which I have referred could not, by definition, apply to anything that exists at present. Therefore, this attempt to cover up—I shall not use the possibly unparliamentary term that first springs to mind—has been blown wide open.
When the Government abandoned compulsion, the rest of the package—the trust system, for example, and the promise of low costs—stopped making sense. The absence of compulsion means that there are no economies of scale, that there are marketing expenses and that there is a great need for advice.
The Government do not understand that people earning between, say, £9,000 and £20,000 a year and who have a personal pension face a dilemma. Should they move out of that pension to join a stakeholder pension? If the Government fulfil their promise, the stakeholder costs may be lower, but the costs of a personal pension might have been paid already at the front end. Should people whose incomes are just above £9,000 stay in the state second pension, or take out a personal pension? If the opportunity exists, should they join an occupational scheme? If they are in a personal pension scheme, should they remain in it?
Grotesquely, people on £9,000 a year cannot now take that decision in an educated way—avoiding the traps and the possibility of mis-selling—without expert actuarial advice tailored to their circumstances. Any solution to such a problem will depend on people's ages, their promotion prospects, whether they intend to stay in the same job, and so on.
The Government have the effrontery to say that people on £9,000 a year are supposed to pay for tailored actuarial advice. That shows how little they know about pensions or about the circumstances of such people.
As if that were not enough, the Government further fragmented the market with the unnecessary and gratuitous introduction of differing tax regimes for 164 stakeholder pensions and for personal and other pensions. The Secretary of State made a concession this afternoon when he said that he may allow group personal pensions to count as stakeholder pensions. For the first time, under pressure from Conservative Members, he is considering that positively. However, if he does allow that, what tax regime will apply? At present, group personal pensions enjoy the tax reliefs applicable to personal pensions. If they are to count as stakeholder pensions, will they have to accept the stakeholder regime's maximum limit of £3,600 a year, or will different stakeholders come under different tax regimes?
These are important matters. They add to the complexity and to the number of traps. They add also to the likelihood—nay, the certainty—of mis-selling unless people take complicated actuarial advice when they decide to join a pension scheme.
The LISA has introduced further complications. What tax regime will apply there? Will there be one regime for LISAs when offered as stakeholder pensions, and another for other provision?
It is plain that the Government did not begin to think through these matters before they put pen to paper. So arrogant were they, they did not even wait for the end of the consultation period—but now they are learning the lesson the hard way. The Secretary of State said this afternoon that he is opening up new consultation on the proposals, all of which are so misconceived that none will work. The Secretary of State now has to go back to the drawing board and take the advice that he should have taken at the beginning.
There could be no more dramatic illustration of incompetence and boneheadedness. It is an example of the arrogance of power into which the Government have fallen and into which they continue to fall further, day by day.
§ The Minister of State, Department of Social Security (Mr. Stephen Timms)
As always, the House will have enjoyed the energetic and theatrical performance from the hon. Member for Grantham and Stamford (Mr. Davies). If his contribution were to be measured by gusto rather than content, no doubt it would have more impact than it actually does. I have had the good fortune to listen to the evolution of the hon. Gentleman's line in rhetoric over these past months. However, I am bound to say that the more over the top his contributions become, the more detached they are from the reality of what the industry and all informed commentators are saying, and the more desperate they sound as well.
Indeed, one is bound to ask why, after requisitioning an Opposition day for a pensions debate as recently as February, Conservative Members have found it necessary to have another go today. The answer, of course, is because they failed so abysmally to make any impact the last time. I do not blame them for wanting to have another go, but I am afraid that they have made no more impact today than they did last time.
It would be a good idea for the Conservative party to try to make sure that, in an Opposition day debate such as this, at least a minimal number of its Back Benchers are present to support the policy of those on the Front Bench. Today, we have seen the extraordinary spectacle of the hon. Member for Maidenhead (Mrs. May) being 165 dragooned from her place on the Front Bench so that she can speak in the debate from the Back Bench. Also, I had never seen a Whip be dragooned from the Front Bench to the Back Bench in a desperate attempt to try to make up the numbers, but that is what happened to the hon. Member for Westmorland and Lonsdale (Mr. Collins), who has now returned to the Front Bench. Hon. Members on the Conservative Front Bench would be well advised to make sure that there is at least a little Back-Bench support before they embark on a debate such as this.
§ Mrs. May
I am grateful to the Minister for finally giving way, as he referred to me specifically. I was not dragooned from the Front Bench to take part in the debate. I have a particular interest in this matter, and I have referred before to the comments that I have made in seminars on women and pensions. In reality, those on the Government Front Bench did not want to listen to my remarks because of the impact that their proposals will have on more than 50 per cent. of the population.
§ Mr. Timms
The hon. Gentleman says that he does not need such substance, but empty rhetoric is not enough, no matter how over the top it might be.
The Opposition motion talks about "complacency and incompetence"—those words sum up the previous Government's record pretty well. Under the previous Government, there was the problem of the mis-selling of personal pensions: up to 2.5 million people—people such as nurses and teachers—were sold the wrong pension. That is incompetence indeed and, as in so many matters, we are clearing up the mess.
Under the previous Government, there were millions of people for whom no suitable funded pension was available on the market. We are introducing stakeholder pensions to meet a need that was completely ignored by the previous Government. That is an example of their complacency.
Then there was the problem with the inherited state earnings-related pension scheme. The Conservative Government introduced changes in the law in 1986 and then did not tell anyone. They told the Committee scrutinising the relevant Bill that they would launch a major publicity campaign about the changes, yet not only did they forget to do that, they did not even tell the people who worked for them in the Department of Social Security. Again, we are left to sort out the legacy of the previous Government's incompetence. What a shambles it was.
Conservative Members accuse this Government of complacency but, as my right hon. Friend the Secretary of State said at the start of the debate, on the basis of their policies, we are heading for a situation in which, by 2050, one person in three will retire straight on to income support. That is not acceptable. We are introducing the state second pension precisely to reduce the amount of means-testing that there would otherwise be in the system. That means-testing is a result of the previous Government's policies.
166 We want a contributory system so that people who work and contribute all their lives will retire on an income above the level of the means-tested threshold. Our plans will deliver that; the previous Government's policies did not.
§ Mr. Quentin Davies
If the Minister really values the contributory principle over means-testing—I do not believe that for a moment, but that is what he has just told us—why does he uprate the minimum income guarantee at a higher level than the contributory state second pension?
§ Mr. Timms
I shall come to the minimum income guarantee in a moment. Let me first remind the hon. Gentleman that the state second pension is wholly contributory.
I referred to the Opposition's policies, but that may have been rather generous—we have in fact heard remarkably little about their policies this evening. We know what their policies were before the election, and the damage that they were doing; but we do not know what their policies are now, and they have not given us the slightest hint. Do they still believe in basic pension plus?
I commend the forthrightness of the hon. Member for Gainsborough (Mr. Leigh) who said that he supported privatising the state pension, but is that the position of his Front-Bench colleagues? People would like to know. Do the Opposition have a policy? They have given no clues about it tonight. Even if we do not know what they favour, or what their policies are, they have given us a pretty clear idea of what they are against.
The hon. Member for Grantham and Stamford (Mr. Davies) mentioned the minimum income guarantee a moment ago, and the Opposition are clearly against that. They say, in the motion, that it will lead to too much means-testing. In fact, our policy for the minimum income guarantee and the state second pension will reduce the amount of means-testing in comparison with where their policies were taking us, but we shall let that pass.
The Opposition say that our policy on the minimum income guarantee will increase means-testing. What they do not say, but what they mean—if one listens carefully, one can pick this out—is that the minimum income guarantee is too generous at £75 per week for a single pensioner and £116 for a pensioner couple, to be uprated in line with earnings next April. That is what the Opposition object to. They think that we are being too generous to pensioners on income support—they think that the 1.5 million pensioners on income support should receive less than we are proposing.
During the Committee stage of the Welfare Reform and Pensions Bill, a number of Opposition Members apologised for social security measures introduced by the previous Government, informing us that they never really believed in them. The Conservative party leadership issued the entire population of Scotland with an apology. The deputy leader of the Conservative party has been attempting to shake off his party's hard-faced, privatising image, and to convince us—with the support of the party leader—that the Conservative party does care after all.
The social security team has no truck with all that wishy-washy nonsense from the party leader and his deputy. They are not for turning. They stand for the old ways. They are faithful to the true path. They yearn for the glory days of yore, for the poll tax, for mass 167 unemployment that was the price worth paying, for top rate VAT on fuel and for charges for pensioners' eye tests—those were the days.
We heard the shadow Secretary of State argue that the minimum income guarantee for pensioners is too generous. Uprating in line with earnings for 1.5 million of the least-well-off people in the country is too soft hearted for him. That may be his policy; it may even be his party's policy—but do not tell the leadership. However, it is not our policy, because our aim is that even the least-well-off pensioners should be able to share in our country's rising prosperity and the benefits of this Government's economic success.
We have heard several interesting speeches today. The hon. Member for Newbury (Mr. Rendel) expressed what appeared to be some reservations about uprating the minimum income guarantee in line with earnings. Of course, the Liberal Democrat spokesman on pensions has repeatedly supported uprating the minimum income guarantee with earnings, so I am slightly unclear what point the hon. Gentleman was making. He was on more solid ground in advocating consensus on pensions.
§ Mr. Rendel
I am delighted to give the Minister a point of explanation. The minimum income guarantee being uprated in line with earnings works perfectly well if there is also an age addition, but it does not work without it.
§ Mr. Quentin Davies
I know that the Minister likes to field soft balls from the Liberal Democrats, but will he answer my question about who will pay for the advice required by a person on £9,000 a year, who will have a bewildering range of choices and who will be the victim of serious mis-selling unless advice is available?
§ Mr. Timms
Advice, as we have always said, is important, and the charging regime for stakeholder schemes will reflect the need for advice. People will receive the advice that they need—[Interruption.] Yes, they will.
My hon. Friend the Member for Putney (Mr. Colman) made an excellent speech, and I was grateful for what he said about my meeting with his constituents. When one meets pensioner groups to explain how the minimum income guarantee will work, one finds that it is well received. People acknowledge that it is right that extra help should be concentrated on those who need it most.
My hon. Friend raised the problem of membership of local authority pension schemes for those transferred out of local authority employment under the Transfer of Undertakings (Protection of Employment) Regulations 1981. Employees of private sector organisations providing services to local authorities under contract may not automatically remain members of their local government pension scheme, but the Inland Revenue rules permit employees of contractors to join or remain in the scheme if the employer joins the scheme as a non-associated 168 employer. I should be happy to draw my hon. Friend's concerns to the attention of ministerial colleagues at the Treasury.
I welcome what my hon. Friend said about transparency in socially responsible investment for pension schemes.
The hon. Member for Gainsborough made a characteristically thoughtful speech, and Members on both sides will have appreciated it. He argued for greater compulsion, but expressed sympathy—I am not quite sure that it was support, but it was going in that direction—for the minimum income guarantee. Our proposals, coupling the minimum income guarantee with the state second pension, will ensure that everyone who contributes throughout their lives to the state second pension or contracts out into a funded scheme is assured of retiring on an income above the minimum income guarantee level. We have squared the circle of addressing low incomes in retirement for those in low-paid work throughout their working lives and providing incentives to save.
§ Mr. Duncan Smith
Will the Minister now clear up the point that he has not answered in his replies to my hon. Friend the Member for Grantham and Stamford (Mr. Davies)? Will he make it clear that the Government are saying that anyone on £9,000 or more must invest in a stakeholder pension? Is that the Government's advice, because those people will get no other?
§ Mr. Timms
I have already answered that point.
I congratulate my hon. Friend the Member for Northampton, North (Ms Keeble) on her helpful and thoughtful speech. She has already spoken to me about her useful meeting with constituents who work for the Nationwide building society, and I welcome the fact that she and other Labour Members are working closely with employers and pension providers to contribute to the taking of correct decisions.
We have set out the principles underlying our reforms: work for those who can and security for those who cannot, and a responsibility to save towards their retirement for those able to do so. We want to put pensions on a sound footing. We want a pensions system that provides a secure retirement for all pensioners—today's as well as tomorrow's, people on low incomes as well as those on good salaries. We want a system that balances fairly the responsibilities of the state and the individual. Those are the objectives that our proposals will achieve.
The Opposition Front-Bench team seem to suffer particular apoplexy over the fact that we are listening to what the pensions industry is saying and are working up the details accordingly. I make no apology for that. We are leaving no stone unturned in ensuring that we get the details of our public-private partnership right—and we will get them right.
The state second pension will deliver much better state pensions to those on low incomes. Also, carers, long-term disabled people with broken work records and mothers with small children will be credited in for the first time. The framework for stakeholder pensions will open up good-value, funded pensions for millions of people who cannot get them at the moment. We shall ensure, for the first time, that people have clear information about the pension that they can expect when they retire.
Except in the Conservative party, there is widespread support for developing better pensions options for moderate earners. Like the hon. Member for Newbury, 169 I genuinely regret that the Conservative party is opting out of the growing consensus around both the aims and the framework that we have proposed for our national pensions policy. Others in this House, including Opposition Back Benchers, are engaging constructively in this process. It is a shame that Front-Bench Members are not able to do so, but time is a great healerI genuinely regret that the Conservative party is opting out of the growing consensus around both the aims and the framework that we have proposed for our national pensions policy. Others in this House, including Opposition Back Benchers, are engaging constructively in this process. It is a shame that Front-Bench Members are not able to do so, but time is a great healer—even the hon. Member for Grantham and Stamford will in due course recognise that it is in all our interests that everyone should be able to look forward to an adequate income in retirement. That is what our proposals will achieve, and I commend them to the House.
§ Question put, That the original words stand part of the Question:—
§ The House divided: Ayes 134, Noes 362.172
|Division No. 169]||[7 pm|
|Amess, David||Hamilton, Rt Hon Sir Archie|
|Ancram, Rt Hon Michael||Hammond, Philip|
|Arbuthnot, Rt Hon James||Hawkins, Nick|
|Atkinson, Peter (Hexham)||Hayes, John|
|Bercow, John||Heald, Oliver|
|Beresford, Sir Paul||Heathcoat—Amory, Rt Hon David|
|Blunt, Crispin||Heseltine, Rt Hon Michael|
|Boswell, Tim||Hogg, Rt Hon Douglas|
|Bottomley, Peter (Worthing W)||Horam, John|
|Bottomley, Rt Hon Mrs Virginia||Howarth, Gerald (Aldershot)|
|Brady, Graham||Hunter, Andrew|
|Brazier, Julian||Jack, Rt Hon Michael|
|Browning, Mrs Angela||Jackson, Robert (Wantage)|
|Burns, Simon||Jenkin, Bernard|
|Butterfill, John||Key, Robert|
|Cash, William||Kirkbride, Miss Julie|
|Chapman, Sir Sydney||Lait, Mrs Jacqui|
|(Chipping Barnet)||Lansley, Andrew|
|Chope, Christopher||Leigh, Edward|
|Clappison, James||Lewis, Dr Julian (New Forest E)|
|Clark, Rt Hon Alan (Kensington)||Lidington, David|
|Clark, Dr Michael (Rayleigh)||Lilley, Rt Hon Peter|
|Clifton—Brown, Geoffrey||Lloyd, Rt Hon Sir Peter (Fareham)|
|Cran, James||Loughton, Tim|
|Curry, Rt Hon David||Luff, Peter|
|Davies, Quentin (Grantham)||MacGregor, Rt Hon John|
|Davis, Rt Hon David (Haltemprice||McIntosh, Miss Anne|
|& Howden)||MacKay, Rt Hon Andrew|
|Day, Stephen||Maclean, Rt Hon David|
|Dorrell, Rt Hon Stephen||McLoughlin, Patrick|
|Duncan, Alan||Madel, Sir David|
|Duncan Smith, lain||Malin, Humfrey|
|Evans, Nigel||Maples, John|
|Faber, David||Mates, Michael|
|Fabricant, Michael||Mawhinney, Rt Hon Sir Brian|
|Fallon, Michael||May, Mrs Theresa|
|Flight, Howard||Moss, Malcolm|
|Forsythe, Clifford||Ottaway, Richard|
|Forth, Rt Hon Eric||Page, Richard|
|Fowler, Rt Hon Sir Norman||Paice, James|
|Fox, Dr Liam||Paterson, Owen|
|Fraser, Christopher||Pickles, Eric|
|Gale, Roger||Prior, David|
|Garnier, Edward||Randall, John|
|Gibb, Nick||Redwood, Rt Hon John|
|Gill, Christopher||Robathan, Andrew|
|Gillan, Mrs Cheryl||Roe, Mrs Marion (Broxbourne)|
|Goodlad, Rt Hon Sir Alastair||Rowe, Andrew (Faversham)|
|Gorman, Mrs Teresa||Ruffley, David|
|Gray, James||St Aubyn, Nick|
|Green, Damian||Sayeed, Jonathan|
|Greenway, John||Shephard, Rt Hon Mrs Gillian|
|Grieve, Dominic||Shepherd, Richard|
|Gummer, Rt Hon John||Simpson, Keith (Mid-Norfolk)|
|Soames, Nicholas||Waterson, Nigel|
|Spelman, Mrs Caroline||Wells, Bowen|
|Spicer, Sir Michael||Whitney, Sir Raymond|
|Spring, Richard||Whittingdale, John|
|Steen, Anthony||Widdecombe, Rt Hon Miss Ann|
|Streeter, Gary||Wilkinson, John|
|Syms, Robert||Willetts, David|
|Tapsell, Sir Peter||Winterton, Mrs Ann (Congleton)|
|Taylor, Ian (Esher & Walton)||Winterton, Nicholas (Macclesfield)|
|Taylor, John M (Solihull)||Woodward, Shaun|
|Taylor, Sir Teddy||Yeo, Tim|
|Tredinnick, David||Young, Rt Hon Sir George|
|Tyrie, Andrew||Tellers for the Ayes:|
|Walter, Robert||Mrs. Eleanor Laing and|
|Wardle, Charles||Mr. Tim Collins.|
|Abbott, Ms Diane||Campbell— Savours, Dale|
|Adams, Mrs Irene (Paisley N)||Cann, Jamie|
|Ainger, Nick||Casale, Roger|
|Anisworth, Robert(Cov'ty NE)||Caton, Martin|
|Alexander, Douglas||Cawsey, Ian|
|Allan, Richard||Chapman, Ben (Wirral S)|
|Allen, Graham||Chaytor, David|
|Armstrong, Rt Hon Ms Hilary||Clark, Rt Hon Dr David (S Shields)|
|Ashdown, Rt Hon paddy||Clark, Dr Lynda|
|Ashton, Joe||(Edinburgh Pentlands)|
|Atherton, Ms Candy||Clark, Paul (Gillingham)|
|Atkins, Charlotte||Clarke, Charles (Norwich S)|
|Austins, John||Clarke, Eric (Midlothian)|
|Baker, Norman||Clarke, Rt Hon Tom (Coatbridge)|
|Ballard, Jackie||Clarke, Tony (Northampton S)|
|Banks, Tony||Clelland, David|
|Barnes, Harry||Clwyd, Ann|
|Barron, Kevin||Coaker, Vernon|
|Bayley, Hugh||Coffey, Ms Ann|
|Beard, Nigel||Coleman, lain|
|Beckett, Rt Hon Mrs Margaret||Colman, Tony|
|Begg, Miss Anne||Connarty, Michael|
|Beith, Rt Hon A J||Cook, Frank (Stockton N)|
|Bell, Martin (Tatton)||Cook, Rt Hon Robin (Livingston)|
|Bennett, Andrew F||Corston, Ms Jean|
|Benton, Joe||Cotter, Brian|
|Bermingham, Gerald||Cousins, Jim|
|Berry, Roger||Cranston, Ross|
|Betts, Clive||Crausby, David|
|Blackman, Liz||Cryer, Mrs Ann (Keighley)|
|Blears, Ms Hazel||Cummings, John|
|Blizzard, Bob||Cunliffe, Lawrence|
|Boateng, Paul||Cunningham, Rt Hon Dr Jack|
|Bradley, Keith (Withington)||Cunningham, Jim (Cov'try S)|
|Bradley, Peter (The Wrekin)||Darling, Rt Hon Alistair|
|Bradshaw, Ben||Darvill, Keith|
|Brake, Tom||Davey, Edward (Kingston)|
|Brand, Dr Peter||Davey, Valerie (Bristol W)|
|Brinton, Mrs Helen||Davidson, Ian|
|Brown, Rt Hon Nick (Newcastle E)||Davies, Rt Hon Denzil (Llanelli)|
|Brown, Russell (Dumfries)||Davies, Geraint (Croydon C)|
|Browne, Desmond||Dawson, Hilton|
|Bruce, Malcolm (Gordon)||Dean, Mrs Janet|
|Buck, Ms Karen||Denham, John|
|Burden, Richard||Dismore, Andrew|
|Burgon, Colin||Dobbin, Jim|
|Burnett, John||Dobson, Rt Hon Frank|
|Burstow, Paul||Donohoe, Brian H|
|Butler, Mrs Christine||Doran, Frank|
|Byres, Rt Hon Stephen||Drew, David|
|Cable, Dr Vincent||Drown, Ms Julia|
|Carborn, Rt Hon Richard||Dunwoody, Mrs Gwyneth|
|Campbell, Alan (Tynemouth)||Eagle, Angela (Wallasey)|
|Campbell, Mrs Anne (C'bridge)|
|Campbell, Rt Hon Menzies|
|Campbell, Ronnie (Bylth V)|
|Eagle, Maria (L'pool Garston)||Jones, Jon Owen (Cardiff C)|
|Edwards, Huw||Jones, Dr Lynne (Selly Oak)|
|Efford, Clive||Jones, Marlyn (Clwyd S)|
|Ellman, Mrs Louise||Jones, Nigel (Cheltenham)|
|Ennis, Jeff||Jowell, Rt Hon Ms Tessa|
|Etherington, Bill||Keeble, Ms Sally|
|Fearn, Ronnie||Keen, Alan (Feltham & Heston)|
|Field, Rt Hon Frank||Keen, Ann (Brentford & Isleworth)|
|Fisher, Mark||Keetch, Paul|
|Fitzsimons, Lorna||Kelly, Ms Ruth|
|Flint, Caroline||Kemp, Fraser|
|Follett, Barbara||Kennedy, Jane (Wavertree)|
|Foster, Don (Bath)||Khabra, Piara S|
|Foster, Michael Jabez (Hastings)||Kidney, David|
|Foster, Michael J (Worcester)||Kilfoyle, Peter|
|Fyfe, Maria||King, Andy (Rugby & Kenilworth)|
|Galloway, George||Kingham, Ms Tess|
|Gapes, Mike||Kirkwood, Archy|
|Gardiner, Barry||Kumar, Dr Ashok|
|George, Andrew (St Ives)||Ladyman, Dr Stephen|
|George, Bruce (Walsall S)||Laxton, Bob|
|Gerrard, Neil||Leslie, Christopher|
|Gibson, Dr Ian||Levitt, Tom|
|Gilroy, Mrs Linda||Lewis, Ivan (Bury S)|
|Godman, Dr Norman A||Lewis, Terry (Worsley)|
|Godsiff, Roger||Liddell, Rt Hon Mrs Helen|
|Goggins, Paul||Linton, Martin|
|Gordon, Mrs Eileen||Livingstone, Ken|
|Griffiths, Jane (Reading E)||Lock, David|
|Griffiths, Win (Bridgend)||Love, Andrew|
|Grocott, Bruce||McAvoy, Thomas|
|Hain, Peter||McCartney, Rt Hon Ian|
|Hall, Mike (Weaver Vale)||(Makerfield)|
|Hamilton, Fabian (Leeds NE)||McDonagh, Siobhain|
|Hanson, David||McDonnell, John|
|Harman, Rt Hon Ms Harriet||McGuire, Mrs Anne|
|Heal, Mrs Sylvia||Mackinlay, Andrew|
|Healey, John||Maclennan, Rt Hon Robert|
|Heath, David (Somerton & Frome)||McNulty, Tony|
|Henderson, Ivan (Harwich)||MacShane, Denis|
|Hepburn, Stephen||Mactaggart, Fiona|
|Heppell, John||McWilliam, John|
|Hewitt, Ms Patricia||Mahon, Mrs Alice|
|Hill, Keith||Mallaber, Judy|
|Hinchliffe, David||Mandelson, Rt Hon Peter|
|Hodge, Ms Margaret||Marsden, Gordon (Blackpool S)|
|Hoey, Kate||Marsden, Paul (Shrewsbury)|
|Home Robertson, John||Marshall, David (Shettleston)|
|Hood, Jimmy||Marshall, Jim (Leicester S)|
|Hoon, Geoffrey||Marshall—Andrews, Robert|
|Hope, Phil||Martlew, Eric|
|Hopkins, Kelvin||Maxton, John|
|Howarth, Alan (Newport E)||Meacher, Rt Hon Michael|
|Howarth, George (Knowsley N)||Meale, Alan|
|Howells, Dr Kim||Merron, Gillian|
|Hoyle, Lindsay||Michie, Bill (Shef'ld Heeley)|
|Hughes, Ms Beverley (Stretford)||Michie, Mrs Ray (Argyll & Bute)|
|Hughes, Kevin (Doncaster N)||Miller, Andrew|
|Hughes, Simon (Southwark N)||Mitchell, Austin|
|Humble, Mrs Joan||Moonie, Dr Lewis|
|Hurst, Alan||Moran, Ms Margaret|
|Hutton, John||Morgan, Ms Julie (Cardiff N)|
|Iddon, Dr Brian||Morley, Elliot|
|Ingram, Rt Hon Adam||Mudie, George|
|Jackson, Ms Glenda (Hampstead)||Mullin, Chris|
|Jackson, Helen (Hillsborough)||Murphy, Denis (Wansbeck)|
|Jamieson, David||Naysmith, Dr Doug|
|Jenkins, Brian||Oaten, Mark|
|Johnson, Alan (Hull W & Hessle)||O'Brien, Bill (Normanton)|
|Johnson, Miss Melanie||O'Brien, Mike (N Warks)|
|(Welwyn Hatfield)||Olner, Bill|
|Jones, Barry (Alyn & Deeside)||O'Neill, Martin|
|Jones, Mrs Fiona (Newark)||Öpik, Lembit|
|Jones, Helen (Warrington N)||Organ, Mrs Diana|
|Jones, Ms Jenny||Osborne, Ms Sandra|
|(Wolverh'ton SW)||Palmer, Dr Nick|
|Pearson, Ian||Steinberg, Gerry|
|Perham, Ms Linda||Stevenson, George|
|Pickthall, Colin||Stewart, David (Inverness E)|
|Pike, Peter L||Stewart, Ian (Eccles)|
|Plaskitt, James||Stinchcombe, Paul|
|Pond, Chris||Stoate, Dr Howard|
|Pound, Stephen||Stott, Roger|
|Powell, Sir Raymond||Strang, Rt Hon Dr Gavin|
|Prentice, Ms Bridget (Lewisham E)||Stringer, Graham|
|Prentice, Gordon (Pendle)||Stuart, Ms Gisela|
|Primarolo, Dawn||Sutcliffe, Gerry|
|Prosser, Gwyn||Taylor, Rt Hon Mrs Ann|
|Quin, Rt Hon Ms Joyce||(Dewsbury)|
|Quinn, Lawrie||Taylor, Ms Dari (Stockton S)|
|Radice, Giles||Taylor, David (NW Leics)|
|Rammell, Bill||Taylor, Matthew (Truro)|
|Raynsford, Nick||Temple—Morris, Peter|
|Reed, Andrew (Loughborough)||Thomas, Gareth (Clwyd W)|
|Reid, Rt Hon Dr John (Hamilton N)||Thomas, Gareth R (Harrow W)|
|Rendel, David||Timms, Stephen|
|Robinson, Geoffrey (Cov'try NW)||Todd, Mark|
|Roche, Mrs Barbara||Tonge, Dr Jenny|
|Rooker, Jeff||Touhig, Don|
|Rooney, Terry||Trickett, Jon|
|Ross, Ernie (Dundee W)||Truswell, Paul|
|Roy, Frank||Turner, Dennis (Wolverh'ton SE)|
|Ruane, Chris||Turner, Dr Desmond (Kemptown)|
|Ruddock, Joan||Turner, Dr George (NW Norfolk)|
|Russell, Bob (Colchester)||Twigg, Derek (Halton)|
|Russell, Ms Christine (Chester)||Twigg, Stephen (Enfield)|
|Sanders, Adrian||Tyler, Paul|
|Sarwar, Mohammad||Vaz, Keith|
|Savidge, Malcolm||Ward, Ms Claire|
|Sawford, Phil||Wareing, Robert N|
|Sedgemore, Brian||Watts, David|
|Shaw, Jonathan||White, Brian|
|Sheerman, Barry||Whitehead, Dr Alan|
|Sheldon, Rt Hon Robert||Wicks, Malcolm|
|Shipley, Ms Debra||Williams, Rt Hon Alan|
|Simpson, Alan (Nottingham S)||(Swansea W)|
|Singh, Marsha||Williams, Alan W (E Carmarthen)|
|Skinner, Dennis||Williams, Mrs Betty (Conwy)|
|Smith, Rt Hon Andrew (Oxford E)||Willis, Phil|
|Smith, Angela (Basildon)||Wills, Michael|
|Smith, Miss Geraldine||Winnick, David|
|(Morecambe & Lunesdale)||Winterton, Ms Rosie (Doncaster C)|
|Smith, Jacqui (Redditch)||Wise, Audrey|
|Smith, John (Glamorgan)||Wood, Mike|
|Smith, Llew (Blaenau Gwent)||Woolas, Phil|
|Snape, Peter||Wright, Anthony D (Gt Yarmouth)|
|Soley, Clive||Wright, Dr Tony (Cannock)|
|Southworth, Ms Helen||Wyatt, Derek|
|Spellar, John||Tellers for the Noes:|
|Squire, Ms Rachel||Mr. Greg Pope and|
|Starkey, Dr Phyllis||Mr. Jim Dowd.|
§ Question accordingly negatived.
§ Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.
§ MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.
§ That this House commends the Government's approach to pensions reform, set out in its Green Paper "Partnership in Pensions"; congratulates the Government on its determination to tackle 18 years of abject failure on the part of the Conservative government to put pensions provision on a proper footing and rejects the Conservative plans to privatise pension provision; commends the Government's commitment to end the scandal of pensions mis-selling and its plans to strengthen the financial regulatory system; commends the Government on its commitment to economic stability and low inflation which helps pensioners; believes that its 173 reforms to the corporate tax system, which will result in the lowest ever rate of Corporation Tax, will be in the long-term interests of companies, shareholders and pensioners; and approves of the Government's introduction of the Minimum Income Guarantee, Winter Fuel Payments, the re-introduction of free eye tests and commitment to concessionary travel for the elderly as part of its strategy to provide security in retirement.