HC Deb 07 November 2002 vol 392 cc424-6
10. Mr. Andrew Robathan (Blaby)

What assessment he has made of the impact of recent changes in pensions taxation. [78232]

The Financial Secretary to the Treasury (Ruth Kelly)

From April 2002, as a result of the Government's personal tax and benefit changes, pensioner households are, on average, £840 a year better off than in 1997.

Mr. Robathan

But is it not the Chancellor's policies that have so badly harmed people's private pensions and indeed their future in retirement, especially the fact that more than £25 billion has been taken out of pension funds—£5 billion a year since the abolition of advance corporation tax relief?

Can the Minister confirm leaked reports from the Labour spin machine that the Chancellor plans further harm to people's pensions and futures by ending higher-rate tax relief on pension contributions and by taxing lump-sum payments on retirement, which are currently tax free?

Ruth Kelly

The hon. Gentleman wholly misrepresents the situation. As he knows, and as has often been pointed out to the House, the abolition of payable tax credit was an essential part of wider corporation tax reforms, which included cutting both main and small company corporation tax rates. Since 1997, cuts in corporation tax have been worth more than £3.5 billion a year to companies, and pension funds benefit from that as well.

In relation to some of the measures that the hon. Gentleman cites, about which there has also been much speculation in the press, the Treasury has said repeatedly on numerous occasions that no proposal for the abolition of higher-rate tax reliefs has even been considered by Treasury Ministers, never mind agreed.

John Robertson (Glasgow, Anniesland)

My hon. Friend will be aware of the high number of pensioners in my constituency, where there are well over 13,500 pensioner households. I thank my right hon. Friend the Chancellor for the work that he has done to alleviate pensioner poverty, but will he reconsider the winter fuel allowance that people in my constituency receive in wintertime when it is needed the most? Will he consider upping it by £50 to £250 as soon as possible?

Ruth Kelly

I thank my hon. Friend for his support. Unlike the Conservatives, the Government have made tackling pensioner poverty a priority. We introduced not only the £200 winter fuel allowance, but also free eye tests for the over-65s. Furthermore, next year, we shall introduce the pension credit, which will reward the savings of low-income pensioners. I take my hon. Friend's question as a Budget representation and as my eight hon. Friend the Chancellor is here, I am sure that he will have listened to it.

Mr. Stephen O'Brien (Eddisbury)

How can the Minister claim that the pension dividend tax has nothing to do with pension scheme closures? When Labour came into office, no large company schemes were closed to new entrants, but only five years later—a short time in the long-term business of pension provision—we have moved to a situation where the main pension schemes of fewer than half our largest companies are open to new entrants. How can the Chancellor and the Minister claim that those two events—the Chancellor's largest-ever stealth tax and the rapid closure of schemes—are not related? Is he the only person in the country who does not understand that if one takes £25 billion from pension funds and continues to take money at the rate of £5 billion a year it will have an effect on pension funds and schemes?

Ruth Kelly

Let me take this opportunity to put the facts that the hon. Gentleman mentions in context. The abolition of payable tax credits, for example, was equivalent to the difference of a tenth between the best and worst pension fund providers. I hardly think that he can criticise that measure when he knows that it is also being offset by a huge package of corporation tax cuts. He points to the closure of final salary schemes. Clearly, changes are taking place right across the world, partly as a result of changing work patterns, which mean that the structure is changing, but what really matters to people is the level of pension contributions going into pension funds. That is why we are working in partnership with the industry, employers and individuals to ensure that people can have the security of knowing that they have secure income in retirement.