Commons Sitting of 24 February 2004

Preamble
The House met at half-past Eleven o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Oral Answers to Questions
  DEPARTMENT OF HEALTH
  The Secretary of State wits asked—
  DEPARTMENT OF HEALTH

    Local Improvement Finance Trust Programme
    Tom Brake: If he will make a statement on the local improvement finance trust programme and general practitioner premises. [155718]
    James Purnell: What progress has been made on the local improvement finance trust programme; and if he will make a statement. [155720]
    The Secretary of State for Health (Dr. John Reid): The national health service LIFT programme is a means of improving primary care facilities to address a legacy of under-investment. It is making good progress. Contracts have been signed for six schemes and work has begun on the ground. By the end of 2003, 268 new one-stop primary care centres had been developed and almost 2,000 GP premises had seen refurbished or replaced. Most facilities will be provided through traditional procurement routes and such developments will continue.
    Tom Brake: I thank the Secretary of State for that response. For several years, GPs at the Shotfield health centre in Wallington have been pressing to renovate the facilities and the project appears to be about to take off. Will the right hon. Gentleman confirm that GPs will not be forced to follow a LIFT route and that there are concerns among health professionals about the longterm costs of LIFT projects? Does he accept that, provided that the GPs' proposal represents best value and is what patients want, it should be allowed to proceed?
    Dr. Reid: As someone whose party supports decentralisation of decision making, the hon. Gentleman understands that important decisions about the provision of local health care services should be taken locally by the primary care trust, obviously working with GPs. It is right that what happens at Shotfield should be decided locally.
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    On costing such schemes, the hon. Gentleman could look to the well-advanced LIFT scheme in his constituency. I believe that the south-west London LIFT scheme includes a project at Green Wrythe Lane clinic. The planned new one-stop primary care centre will be four times the size of the existing scheme and exhibit benefits, including the services that it will provide to some 6,000 patients, thereby enabling much better integration of health and social services. Such examples show how effective the refurbishments can be, but the decisions must ultimately be made locally. That is why 75 per cent. of our money is allocated in a decentralised fashion to primary care trusts.
    James Purnell: There was genuine enthusiasm at a recent meeting that the Tameside and Glossop primary care trust held about our local plans to improve GP services. Does my right hon. Friend agree that those plans offer an opportunity to examine the prevention of illness, keep people out of acute services and ensure that we can bring all the professionals together to work in one place and offer a one-stop-shop service?
    Dr. Reid: Yes, I agree with my hon. Friend. The NHS plan, which we published some years ago, promised new and improved premises. Since its publication, six new GP premises in the Tameside and Glossop area have been replaced or refurbished. The local primary care trust there intends to develop extended primary care services in three locations across Tameside and Glossop with a total capital value of approximately £15 million. It is currently considering the different methods of doing that, including NHS LIFT. My hon. Friend, like many people, has benefited from the £1.5 billion that we are investing through LIFT schemes to refurbish or replace GPs' or family doctors' premises throughout England.
    Mrs. Marion Roe: Will the Secretary of State tell the House whether he is worried that only two local improvement finance trust programmes have reached financial closure? What action are the Government taking to persuade, convince and reassure local banks that LIFT schemes are not risky investments?
    Dr. Reid: I am not sure about the premise of the hon. Lady's question, if I heard her correctly. I can tell her that, by the end of 2003, 268 new one-stop primary care centres had been developed and almost 2,000 GP premises had been refurbished or replaced. Most facilities will be provided through traditional procurement routes, but the LIFT programme involves more than £1.5 billion of capital investment. There are far more than two schemes currently under way, but if the hon. Lady has areas of special difficulty in her constituency and she writes to me, I shall be only too happy to respond.
    Mr. Ivan Henderson: I welcome the LIFT projects in my constituency, which include a new community hospital in Harwich and a new medical centre in Holland-on-Sea. Will my right hon. Friend keep a close eye on the primary care trusts so that when they introduce such valuable initiatives, they take note,

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    through consultation, of public concerns when they choose sites for them? What would happen to such initiatives if £2 billion of cuts were made, as the Conservative party proposes?
    Dr. Reid: I can confirm that, as my hon. Friend suggests, the proper way of proceeding involves maximum consultation and taking decisions locally. As he points out, a considerable amount of money—£1.5 billion—is being invested in this scheme alone. In addition, a further £195 million has been spent up front to help local projects to do the necessary preparatory work, such as buying sites, undertaking surveys and demolishing old buildings. If we add that £195 million to the approximate figure of £1.5 billion, we reach an amount not unadjacent to £2 billion, which is precisely the amount that would be taken away in any proposed patient passport scheme, which would subsidise the rich to jump the queue.
    Derek Conway: On a less partisan note than the Secretary of State has just employed, although both sides of the House support the new one-stop centres—he is right to praise his Department for them-may I ask him to address the question of the type of older property found in my constituency? Will he tell the House whether the scheme applies adequately to facilities for elderly and disabled patients, particularly in older surgery properties?
    Dr. Reid: Yes, indeed. I mentioned that by the end of 2003, almost 2,000 existing premises had been refurbished or replaced. In addition, extra money is going in as part of the new contracts for general practitioners. In general terms, we are carrying out the biggest building programme in the history of the national health service. I extend to the hon. Gentleman an unpartisan fact: in the year in which our Government came to office, almost half the premises in the national health service were older than the national health service. That was a disgraceful residue, but I can tell him that by the end of our third term in government, in 2010, almost half of NHS premises will have been built during the Labour Government's three terms.
    Mr. Kevin Hughes: I welcome the fact that three local improvement finance trust schemes are proposed in my constituency, at Askern, Thorne and Moorends, which will greatly improve the front-line delivery of health care services to my constituents. However, can the Secretary of State assure me that the red tape surrounding the LIFT arrangements will not stand in the way of early progress on those three schemes?
    Dr. Reid: I can assure my hon. Friend that everything possible will be done to expedite those three schemes. I am not aware of particular reasons why any of them should be delayed, but I will certainly try to ensure that they deliver the improvements in health care in the Doncaster area that are much deserved and needed. Just as the much-needed bridge in Doncaster, which was delivered under a previous Transport Minister, brought great relief to Doncaster's transport, so will these new premises bring additional relief in health care.
    Alistair Burt: Involving third parties with the NHS in the provision of health care is obviously a commendable principle. To encourage that still further, will the Secretary of State look again at the impact of VAT on charitable appeals aimed at providing further health care? That can tie up money that could be used for the development of health care in the primary and secondary sectors, as we found recently with the Primrose appeal in Bedford, on which the hon. Member for Bedford (Mr. Hall) and I wrote to the Minister of State, Department of Health, the right hon. Member for Barrow and Furness (Mr. Hutton).
    Dr. Reid: The hon. Gentleman makes his point skilfully but, as he knows, reconsidering tax matters is largely, although not exclusively, confined to the ambit of my right hon Friend the Chancellor of the Exchequer.

    Medical Engineers
    Dr. Richard Taylor: If he will make a statement on the provision of training for medical engineers for the national health service. [155719]
    The Minister of State, Department of Health (Mr. John Hutton): The Government are increasing the number of scientists and technicians, including medical engineers, employed in the national health service and the number of those people who are entering training. Last year, an additional 1,350 scientists and technicians entered training compared with 1999, an increase of 93 per cent. Over the same period, the number of qualified scientific and technical staff employed in the NHS increased by more thin 8,500, an increase of 16 per cent.
    Dr. Taylor: I thank the Minister for that reply. Does he recognise the good work that the Capital medical training centre is doing on the Kidderminster hospital site, in providing vocational training courses for NHS and Ministry of Defence medical engineers? If the Minister who has kindly agreed to visit Kidderminster next week has time, will he meet the manager of the centre so that he can hear more about this extremely successful unit? Will he also encourage local managers to allow this training centre to take over more of a block that might otherwise be demolished? If that block were used, it could produce useful income for the Worcestershire Acute Hospitals NHS Trust, which is labouring under a large debt at the moment.
    Mr. Hutton: I shall certainly recommend to the Under-Secretary of State for Health, my hon. Friend the Member for South Thanet (Dr. Ladyman) that, if he has time when he visits Kidderminster, he should visit the service to which the hon. Gentleman has referred. In general terms, we are interested in exploring all opportunities for further increasing the range of training opportunities available to this critically important work force. Obviously, however, such decisions are a matter for the local national health service.

    Ophthalmic Conditions
    Angela Watkinson: What his Department's strategy is to improve access to treatment for ophthalmic conditions. [155721]
    The Secretary of State for Health (Dr. John Reid): Our strategy began with reintroducing free eye tests for the over-60s, which had been abolished under the previous Conservative Government. We are building on that by increasing capacity, for example through new treatment centres, and by developing more efficient ways of treating cataracts and chronic eye diseases, thus providing more local and convenient services for patients and delivering greater choice, shorter waits and more consistent quality.
    Angela Watkinson: Does the Secretary of State agree that the role of optometrists in the NHS could be significantly expanded, in relation to the provision of clinical eye examinations, as opposed to general eye tests to determine whether people need glasses? In that regard, the early detection of ocular pathologies such as glaucoma is particularly important.
    Dr. Reid: The hon. Lady makes a good point. To complement the investment in the NHS, we are trying to carry forward a series of reforms that will allow people a far greater degree of flexibility involving working in partnership, and which will break down previously defined artificial demarcations. I can assure the hon. Lady that we are considering how people can contribute in that way to the maximum extent of their abilities and skills, and one of the areas involved would be the one that she has mentioned.
    Jonathan Shaw: One of the great concerns in my constituency has been the waiting times for people in need of cataract operations. I thank my right hon. Friend for coming to Kent to open a new mobile treatment centre that will enable the number of such operations to rise from 8,000 to 13,000 a year by November. Due to the £4.4 million investment involved, no one will have to wait longer than three months for their cataract operation. Is not this the kind of thing that people want to see from their NHS?
    Dr. Reid: Indeed, it was a great pleasure for me to visit the mobile unit in Maidstone on 9 February, where 300 of the extra procedures that my hon. Friend mentioned will take place. As a result of those procedures, the maximum waiting time for cataract operations in Kent will be reduced next month to six months, and to three months by December this year. I am glad to say that this is taking place four years ahead of schedule, due to the investment and reforms that have been put in place by the NHS staff themselves. At a time when every single thing that could go wrong in the NHS is being highlighted, we should mark our respect for the efforts of the NHS staff involved in a huge success such as this—which is resulting in so much pain being relieved—and for the alacrity with which treatment has been made available to so many people who previously had to wait up to two years.
    Mr. John Baron: The Secretary of State will be aware that, last September, he extended the
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    normal three-month implementation period for National Institute for Clinical Excellence guidance to nine months when photodynamic therapy to those suffering from wet age-related macular degeneration was involved. The Royal National Institute for the Blind estimates that, as a result, a further 2,800 people will go blind unnecessarily. Given that the institute also confirms that at least 50 centres across the country could provide extra photodynamic treatment from today, will the Secretary of State now scrap the July 2004 target for implementing this treatment and allow the NHS to deliver this important sight-saving service as a matter of urgency? If this is purely an issue of cost, I would remind him that the cost of blindness far exceeds the cost of treatment.
    Dr. Reid: On the latter point, we are well aware of the costs of blindness, pain and death, which is why we are investing so much in the national health service and doing it over such a sustained period. With regard to the hon. Gentleman's specific points, the timelines and flexibility that we sought on implementing the NICE guidelines were in full accord with the recommendations and advice from NICE. On implementation, it is not cost that prevents it—more money than ever before is going into the treatment of a range of eye diseases—but lack of trained personnel. We have made huge advances in that area, but the truth is that we cannot just conjure up trained personnel without forward planning and investment for their provision—[Interruption.] The hon. Member interrupts me from a sedentary position, but no Government who bring in 80,000 additional cataract operations, as we are doing, can be accused of not taking eye conditions seriously. I assure him that we take this matter seriously, and that as soon as we can get the trained personnel, we will expand the provision. That is a continuing process and it will not be achieved overnight, but development and expansion of the NHS will continue in this area, as in every other area, over the next five years.

    NHS Accountability
    Mr. David Chaytor: What plans he has to increase local democratic accountability within the NHS. [155722]
    The Minister of State, Department of Health (Ms Rosie Winterton): The Government are increasing democratic accountability in the NHS by giving elected councillors powers to review and scrutinise health services and establishing the direct elections of governors by local people, patients and staff in NHS foundation trusts.
    Mr. Chaytor: May I tell my hon. Friend about the excellent work done by the local authority in my constituency through its health scrutiny committee, which is now regularly interviewing senior management of the acute trust and primary care trust? Does she accept that scrutiny committees have a major role to play and that there is scope to increase their powers as time goes by? Does she further accept, however, that the effectiveness of those committees is variable in different parts of the country? Does she think that there is a case to review formally the functioning of scrutiny

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    committees after a suitable period of time—perhaps 24 or 36 months—with a view to improving further the democratic accountability of the NHS in the next Parliament?
    Ms Winterton: I am well aware of the work being carried out by the committee in my hon. Friend's constituency. I know that it has taken a particular interest, for example, in mental health services. The overview and scrutiny committees have real powers to require information from the NHS and to require attendance by senior officers at their meetings. What is important is that we make sure that the type of activity that is going on in his constituency is replicated elsewhere. That is why I announced recently something like £2.5 million for the Centre for Public Scrutiny, so that it can look at bringing together local councillors on the committees to examine how the activities that his committee may be undertaking can be used as examples elsewhere. In some areas, those Committees have not been as strong as perhaps they are in his area. We are therefore looking at how we can spread that power to make sure that all are able to take advantage of the new powers given to them.
    Mr. Nigel Evans: When will taxpayers in my constituency have a greater say over the level of services that they receive in their area? To give one perfect example, someone who has just moved back into my constituency after six years and has tried to register with an NHS dentist has been told that there are no NHS dentists in the Ribble Valley area and that he would have to do a round trip of more than 70 miles with his family to get one. What accountability will there be on behalf of those who provide such services to ensure that people who pay large, increasing sums of money for the NHS, including the 1 per cent. increase in national insurance contributions, get the level of service for which they are paying?
    Ms Winterton: Overview and scrutiny committees can look into the provision of dentistry at local level. Moreover, from next year we shall commission dentistry at local level, which means a radical overhaul of the current system. That will ensure that decisions on local priorities and local expenditure can be made by local people. All trusts will of course be overseen by patients forums.
    Roger Casale: Along with investment and reform, will not increasing the power of patients and the public and strengthening their voice in the reshaping of health services become one of the strongest drivers of sustained improvements in the NHS? Will my hon. Friend join me in thanking community groups, members of the public and Sutton and Merton primary care trust in my constituency? They have joined forces in an innovative way to reshape plans for the new Nelson hospital in the constituency. Will my hon. Friend confirm that that is the kind of work that she wants to see taking place throughout the country?
    Ms Winterton: I am extremely impressed by the work that my hon. Friend has helped to lead in his constituency, to bring about patient and public involvement. There is indeed an increasing demand
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    from local people for more information about why decisions are made at local level, and what priority is given to different funding streams. We are enabling that to become a reality for the first time, and we want what is happening in my hon. Friend's constituency to be replicated elsewhere.
    Mr. Patrick McLoughlin: What is the estimated cost of elections to foundation hospitals?
    Ms Winterton: That will depend on the number of people who sign up for the nomination process. In some areas at least 9,000, or 10,000, are signing up for the wider elections to each foundation hospital trust. The elections to the board of governors will then take place. It will be up to each area to decide how the elections should be conducted, and the proposals will be put to the independent regulator to ensure that the procedure is adequate and that enough funds are available.
    Helen Jones: Does my hon. Friend agree that proper democratic accountability must rest on the provision of accurate information? Will she give serious attention to the refusal of my local strategic health authority to release a document concerning the management of the Mersey regional ambulance service? How can we improve services if the NHS continues to rest on a culture of secrecy, and will not release documents concerning public bodies paid for with public money?
    Ms Winterton: My hon. Friend is right:information should be released whenever possible. That is important not only in terms of accountability to patients, but in terms of transparency when it comes to the way in which public money is spent. I understand that my hon. Friend will shortly be meeting the Under-Secretary of State for Health, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson). Perhaps she will raise the matter then.
    Mr. Andrew Lansley: The Minister will recall that during the progress of the Health and Social Care (Community Health and Standards) Bill, Conservative Members pressed for local accountability to be vested in primary care trusts. That is the obvious place to start in determining local priorities in response to local people. The Secretary of State has told us that 75 per cent of NHS funds are allocated to PCTs. When will the Minister and her colleagues, having previously resisted local ownership and accountability for PCTs, do a U-turn on that as well, and offer such accountability?
    Ms Winterton: We have already introduced one of the biggest shake-ups in terms of patient involvement in the NHS. Not only do we have the appropriate systems in the foundation trusts. but every PCT now has a patients forum. It is important to give them time to take root and work properly. We have also introduced patient advice and liaison systems, and an independent complaints system. This is not the time to shake all that up. We want to ensure that it beds down and that the patients forums work effectively, as they have already begun to do. We can then consider any further changes that may be necessary in the future

    Delayed Discharges (York)
    Hugh Bayley: How many York Hospitals NHS Trust beds an occupied as a result of delayed discharge of a patient to a care home; and how many were occupied a year ago for this reason. [155723]
    The Parliamentary Under-Secretary of State for Health(Dr. Stephen Ladyman): York Hospitals NHS Trust has reported 12 delayed discharges for patients awaiting a care home place, compared with 32 a year ago.
    Hugh Bayley: Delayed discharge has been a persistent problem in York, affecting at its peak well over 100 people. 1 have raised this problem with successive Conservative and Labour Ministers, so I congratulate my hon. Friend on getting on top of it and bringing it under control, because it is distressing for the patients involved and their families. Will he continue to monitor the availability and cost of care home beds local authority by local authority, in order to ensure that there are sufficient resources for those numbers, now that they have come down, to be kept down?
    Dr. Ladyman: I can assure my hon. Friend that I will keep on top of this problem, and I am delighted that we are having such success in reducing delayed discharges and providing extra capacity in the York area. That has happened not by accident, but as a result of substantial extra investment and the assistance of an expert team of change agents, all of which have been provided by this Government.
    Miss Anne McIntosh: Will the Minister tell us to which period the figures he has just announced relate, given that the latest figures that I have show that 24 beds were in fact blocked? Can he also give us the number of care home places that have been closed in the York district, which also serves the Vale of York, in the past year? Is that figure not a source of concern to him?
    Dr. Ladyman: I can assure the hon. Lady that the figures I have just given, as reported by the local trust, are accurate, and are the up-to-date figures for the number of people blocking beds in respect of a care home place. Perhaps she has a different basis for her figures. The simple fact is that across York—throughout her constituency, as well as throughout that of my hon. Friend the Member for City of York (Hugh Bayley)—care home capacity is available as a result of the building care capacity grants that we have made available. There is substantial extra funding for social services to ensure that they Can manage delayed discharges; indeed, the entire delayed discharge system is working very well. If the hon. Lady wants further advice on the buoyancy of the nursing home sector, she might like to refer to her right hon. Friend the shadow Secretary of State. The annual stock market reports of the company of which he is chairman describe how buoyant the industry currently is
    Mr. Speaker: Order. These matters are out of order. I expect better from the Minister.

    NHS Dentistry
    Mr. Desmond SwayneWhat plans he has to improve access to NHS dentistry. [155724]
    The Minister of State, Department of Health (Ms Rosie Winterton): In the past year, we have announced £90 million of investment to improve access to NHS dentistry. In the short term, we are providing support to primary care trusts where there are acute shortages of dentists, and in the long term we are radically overhauling the system so that the commissioning of dentists takes place at local level.
    Mr. Swayne: It is now virtually impossible for an adult to secure NHS dental treatment in my constituency, and those who are fortunate enough to be registered are being deregistered as dentists abandon the NHS. Will the Minister consider providing patients with the subsidy that would have been paid had the procedure been available on the NHS, so that they can at least defray the bills that they will incur through having to secure such treatment in the private sector?
    Ms Winterton: The hon. Gentleman is right, in that there are particular problems in his constituency, and as he may be aware, we have set up specialist support for areas such as his. The support team has had two meetings with his local PCT, and a follow-up meeting is planned for March. The PCT has been asked to produce a dental action plan to ensure that it is taking steps to rectify the situation. I also undertake to discuss NHS dentistry provision in the hon. Gentleman's area with the strategic health authority chief executive, whom I shall meet next week.
    Lawrie Quinn: I thank the Minister for recognising the acute problems of oral hygiene in my constituency of Scarborough and Whitby. However, all my constituents recognise that the problem lies in the wreckage of the NHS dental service that was the legacy of the previous Conservative Government. What more can she do to recognise the strategic problem of the number of new dentists emerging from our dental schools and ensure that people have smiles on their faces because they have a sustainable dental service not only in Scarborough, but in the rest of the country, too?
    Ms Winterton: My hon. Friend is right to say that we are suffering from the problems arising from the closure of two dental schools under the previous Administration. We have conducted a dental work force review to ascertain where the shortages are, and we will publish the results in the near future. We are also looking at how, in the short term, we can secure international recruitment and get some dentists to return to work. We have 12 advisers to examine how we can best encourage people, particularly women, who have taken time out from dentistry, to come back to it. That amounts to a whole series of measures to ensure that we can deal with the issues. I pay tribute to my hon. Friend's hard work in drawing to my attention and that

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    of the strategic health authority the problems in his constituency, and I am glad that we have been able to help put some of them right.
    Mr. Paul Burstow: More than half the population of England is not registered with an NHS dentist, and the position has not improved since 1999. The Government tell us that they are keen to promote dental treatment centres as the answer to the problem, so can the Minister tell us just how far people will have to travel to such centres? Currently, people have to travel many miles to do so. Indeed, we heard earlier that 70-mile journeys are sometimes required for people to get access to NHS dental treatment. Will the Minister tell us the maximum travel distance that an NHS patient should expect to reach a dental treatment centre?
    Ms Winterton: We have more dentists than ever before, having increased the number by about 2,000 since we came to power in 1997. The hon. Gentleman mentions dental treatment centres. We have tried to assess where there are particular problems and to provide facilities for emergency treatment. However, we are well aware that that is not the long-term solution, which is to take steps radically to overhaul the system so that the money held centrally is sent down to local level, so that local commissioning can take place. We certainly want to increase the number of dentists in training and international recruitment. As to the specific mileage, guidelines are laid down and I will write to the hon. Gentleman about them.
    Mr. Mark Todd: While the opening of a new NHS dentistry in Swadlincote did not attract quite the queues that newspapers revealed in Scarborough, it still produced many dissatisfied residents who could not register. Even when the list was expanded, some people remained unable to register. Is not the long-term solution to review the contractual relationship between the NHS and dentists to make it more attractive to retain them within the NHS? Currently, temporary fixes are available, but a permanent arrangement surely lies within our grasp.
    Ms Winterton: My hon. Friend is right. One of the basic causes of the problem was the new contract introduced by the previous Government, which was followed by a 7 per cent. cut in fees to dentists. That is when dentists started walking away from the NHS. The problem is not the number of dentists in training, but the number who are prepared to commit to the NHS. We need to change the contract, which is exactly what we are doing. Instead of being paid in the current item per fee way, they will be paid on a per patient basis. As I said, that will be combined with commissioning dentistry at local level, so that the money remains at that level and does not return to the centre, as happens at present when an NHS dentist withdraws from NHS activity.
    Mr. Tim Yeo: In 1999, the Prime Minister turned up at the Labour party conference and promised that everyone would have the chance to see an NHS dentist. In 2000, the Government published the NHS plan, which stated that NHS
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    dentistry would be available to everyone by 2001. Both those promises have been spectacularly and shamelessly broken. Will the Minister apologise to those patients who cannot see an NHS dentist and admit that, when it comes to dentistry, people cannot believe a word that the Prime Minister, or any other Minister, says?
    Ms Winterton: We certainly know that there is a problem, but we also know its cause. As I said, the previous Tory Government closed two dental schools, imposed a new contract on dentists, and cut their fees by 7 per cent. That was bitterly resented, and it started the trend for dentists to walk away from the NHS. It is no good the Opposition pretending that they have no responsibility for the problem. This Government have increased fees by 26 per cent. We have also increased the number of dentists by nearly 2,000, and next year we will introduce a radical overhaul of the way that dental health is delivered in this country. The Opposition cannot deny their responsibility for starting the problem:we are having to put it right.
    Mr. Yeo: Is the Minister aware that, seven years after Labour came to power, the numbers of adults and children registered with NHS dentists have fallen? Is she aware that the British Dental Association has confirmed that the number of dentists in training has remained static throughout the period in which Labour has been in power, and that dentists are moving from the NHS into the private sector at the rate of 1,000 whole-time equivalents every year? Do not all those trends show not only that the Government have broken their promises shamelessly, but that they never intended to keep them in the first place?
    Ms Winterton: There are more dentists than ever before. We have increased the number in training from something like 630 in 1997 to 710 last year. We have undertaken a review of the dental work force, and will publish the results soon. However, we know that the situation at present is a direct result of the actions taken by the previous Government, who drove dentists out of the NHS. The problem now is that, even though there are more dentists, more of them are undertaking private work. We have been working with the BDA to change that by introducing a new contract that will overhaul radically the way that dentistry is delivered. However, it is breathtaking arrogance for the Opposition to pretend that somehow they have no responsibility in this matter.
    Dr. Phyllis Starkey: Most people in Britain understand very well that the Government inherited an NHS dentistry system that was in crisis. However, is the Minister reviewing the effectiveness of the NHS walk-in centres, such as the one at Westcroft in my constituency? Might not the added flexibility that those centres give offer a way forward in the current crisis, until we manage to redraw the contracts and tempt dentists back into the NHS from the private sector?
    Ms Winterton: With the dental access centres, we have made sure that emergency treatment is available. We recognise that, in areas, where there are acute shortages, it is important that people who need emergency treatment can get it as quickly as possible. In almost all

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    cases, they can get such treatment on the same day. Of course, we keep under review all the different provision that exists at the moment, from dental access centres and from personal and community dental services.

    Small Acute Hospitals (Anaesthetic Provision)
    Andrew George: What recent assessment he has made of anaesthetic provision in small acute hospitals. [155725]
    The Minister of State, Department of Health (Mr. John Hutton): There are 1,250 more consultant anaesthetists working in the national health service than was the case in 1997—an increase of 45 per cent. The figures do not distinguish between anaesthetists working in small or large acute hospitals.
    Andrew George: Although I am grateful to the Minister for his support in planning for a new model for the delivery of acute care at the small West Cornwall hospital in my constituency, and while that good work is continuing, anaesthetic cover is being withdrawn in the evening and at night. As such cover is a cornerstone in the maintenance of acute and emergency care, can he help me to ensure that West Cornwall hospital's acute status can be sustained by providing anaesthetic care, so that my constituents are not dangerously exposed—particularly in the evening and at night—and that the NHS is kept local?
    Mr. Hutton: I am grateful to the hon. Gentleman for his appreciation of my work. The problem at West Cornwall hospital has been caused by the long-term sickness of two anaesthetic operating assistants and it is difficult for Richmond house in Whitehall to legislate for that type of eventuality. I understand that that difficulty, which is for local managers to address, is being dealt with effectively. The new NHS terms and conditions package, "Agenda for Change", will make it more likely than not that we will be able to offer attractive recruitment and retention premiums for hospitals such as West Cornwall where there might be difficulties recruiting specialist staff. There is no magic solution to the particular problem at West Cornwall but I am looking at the situation carefully to ensure that we meet our commitment to the widest possible access to services locally.
    Rev. Martin Smyth: While I understand the Minister's explanation in respect of West Cornwall hospital, is he satisfied that enough people are coming forward to train as anaesthetists? How will that affect the overall provision of health care throughout the kingdom?
    Mr. Hutton: We would like as many additional anaesthetists as possible for the NHS and are rapidly expanding training opportunities for precisely that reason. That aim is particularly important in the context of the European working time directive, as anaesthesia is a specialism that presents particular difficulties. We are working closely with the medical royal colleges, including the Academy of Medical Royal Colleges, to find effective solutions.

    Mid Yorkshire Hospitals NHS Trust
    Mr. Bill O'Brien: What role the West Yorkshire strategic health authority plays in securing the new hospital development in the Mid Yorkshire Hospitals NHS Trust; and if he will make a statement. [155726]
    The Parliamentary Under-Secretary of State for Health(Miss Melanie Johnson): West Yorkshire strategic health authority is working closely with Mid Yorkshire Hospitals NHS Trust and local primary care trusts on plans to redevelop Pinderfields general hospital in Wakefield and Pontefract general infirmary to the maximum benefit of patients.
    Mr. O'Brien: The Mid Yorkshire trust provides services at three sites—Dewsbury, Pinderfields general hospital in my constituency and Pontefract general infirmary. There are extenuating circumstances affecting funding and, as the primary care trusts are limited in the contributions that they can make, the strategic health authority should contribute substantially to safeguard the business plan put in place following an assurance by a Labour Minister that new facilities would be provided at Pinderfields and Pontefract. Will my hon. Friend give an assurance that the strategic health authority will provide the resources to ensure that plan goes ahead?
    Miss Johnson: I can assure my hon. Friend that the trust's private finance initiative remains on schedule and will provide an improved physical environment and better health services. The strategic health authority is closely involved in resolving the financial difficulties of which he is aware. A recovery plan is being put in place and a fundamental financial stocktake has been undertaken. I further assure him that the Government, together with the SHA, will keep in close touch with the progress of those plans.
    Jon Trickett: May I say that the recovery plan was explained to hon. Members with constituencies in the Wakefield area just the other day? The population is particularly ill as a result of the area's mineworking history, and it is impatient to see the investment that we desperately need and the fruition of the plan, which has been wisely and patiently constructed under the chairmanship of Lord Lofthouse of Pontefract in partnership with the strategic health authority and the Department.
    Miss Johnson: I assure my hon. Friend, as I have already assured my hon. Friend the Member for Normanton (Mr. O'Brien), that we take a close interest in the matter. I understand the deprivation in the communities that he represents and the issues that arise. Forward work on the PFI and the regeneration of services at primary care level are crucial in substantially improving the health of the local population.
    Mr. David Hinchliffe: As a child in the 1950s-I hasten to add that I was a very young child—I remember visiting a family member at Pinderfields hospital, Wakefield, who was accommodated in a hut built to hold casualties of the

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    second world war. Two weeks ago, I was in the same hut visiting another family member. The hut—a temporary building constructed during the second world war—is still in use. The third-world conditions at Pinderfields hospital are totally unacceptable, and I want to reinforce the points made by my hon. Friends the Members for Normanton (Mr. O'Brien) and for Hemsworth (Jon Trickett) about the urgent need for the capital scheme. I welcome the Government's support, but can we have further support to ensure that the scheme moves ahead as rapidly as possible?
    Miss Johnson: Indeed. I reassure my hon. Friend that the scheme is on schedule, and I expect the strategic health authority to approve the full business case in September with the aim of starting work during 2005. I appreciate his points, which highlight the lack of investment in the NHS for many years under the previous Government. We are radically increasing investment, and I point out to him the massive decrease of almost one quarter in heart disease and strokes in his constituency during the past few years of the Labour Government. The investment is already making a difference on health issues in his community.

    HIV/AIDS
    Sir Teddy Taylor: What the change has been in the incidence of HIV/AIDS over the last 12 months; and what the reasons are for the change. [155727]
    The Parliamentary Under-Secretary of State for Health(Miss Melanie Johnson): There have been 5,047 new cases of HIV infection reported in the United Kingdom so far in 2003. That is a 20 per cent. increase on the 4,204 cases reported at the same time last year. The main contributory factors are more people getting tested and the ongoing transmission of HIV infection in the UK, particularly among gay men.
    Sir Teddy Taylor: There are wide regional variations in the incidence of the disease, which imposes an enormous burden on health service provision. Will the Minister take account of the incidence of HIV/AIDS in assessing health service funding?
    Miss Johnson: That is reflected in a variety of ways. Unless the hon. Gentleman has some new evidence, there is no indication that there is a problem with funding for treatment or diagnosis. All the evidence shows that the funding of treatment for HIV is working well.
    Tony Lloyd: Will my hon. Friend accept that those who are HIV-positive or AIDS sufferers almost inevitably tend to congregate in certain large cities or towns, where the incidence of HIV/ AIDS is greater than that in the general population? Is she certain that funding properly meets both the health needs of those people and the general requirement to fund health authorities in the wider community?
    Miss Johnson: We always try to ensure that distribution reflects need. Obviously, the formulae that are used help us to do that in terms of the resources that
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    are made available at primary care trust level. There is separate funding for work with African communities, for example, and for work being done with the Terence Higgins Trust, which reflects some of needs of the southeast and one or two other centres in the UK.
    Tim Loughton: The Minister is being unduly conservative because, while the total figures are not in yet, it is estimated that HIV cases for last ye ar will be more than 7,000, which is well above a 20 per cent. increase on 2002. Is she happy that today there are 208 genito-urinary medicine clinics, exactly the same number as in 1997? Despite the herculean efforts of greatly pressured staff, services are deteriorating and waiting times have doubled since 2000. Why is there still no national service framework for sexual health and why has she not taken up our idea of appointing a public health commissioner with a brief to tackle the crisis?
    In the midst of all that, last Christmas, the Department of Health spent £60,000 on a website carol entitled, "The 12 STIs of Christmas", with a chorus of dancing stick figures graphically suffering assorted sexually transmitted infections and displaying their inflamed genitals, with such lines as:
    "On the fourth day of Christmas my true love gave to me…genital herpes, syphilis, chlamydia, and a discharge that is hourly."
    It does not even scan. Is that the best that the Government can do?
    Miss Johnson: To start with, we believe in acting on facts. The facts are important. The hon. Gentleman tries to make a point about investment. One of the points that he makes is about targets, but the Conservatives have complained repeatedly about targets—[Interruption.] He mentioned an NSF, which involves the use of standards and targets. In terms of the national strategy—[Interruption]
    Mr. Speaker: Order. Mr. Loughton should allow the Minister to reply.
    Miss Johnson: Thank you, Mr. Speaker.
    For the first time, there is a national strategy to improve sexual health and to modernise services. We have backed the strategy with initial investment of £47.5 million, plus a further £40 million over the next two years. In addition, a further £11.4 million was announced in response to concerns raised by the Health Committee and stakeholders, and a further £15 million of capital has been provided to modernise GUM premises. That is the record on which the Government will fight. The hon. Gentleman fights on a record of disinvestment in health services and would do well to bear that in mind in his questioning.

    Hospital Infections (Greater London)
    Simon Hughes: What the (a) figures for and (b) rates of hospital infections in Greater London were for the years (i) 2000–01, (ii) 2001–02 and (iii) 2002–03 and if he will make a statement. [155728]
    The Parliamentary Under-Secretary of State for Health(Dr. Stephen Ladyman): In 2001–02, there were 1,571 reports of methicillin-resistant Staphylococcus aureus bloodstream infections in the London region and 1,655 reports in 2002–03. The rates for those years are 0.23 and 0.25 cases per 1,000 beds respectively. Earlier data and data for other infections are not available.
    Simon Hughes: Can the Minister tell us what that means in crude terms in London, which is the region with the highest rate of infection, in deaths and other illnesses caused by hospital-based infections? A commission will be set up in April. Will it provide an annual report, region by region, on deaths and illness from hospital-based infections?
    Dr. Ladyman: It is not possible to give precise information about how many deaths result from hospital-acquired infections, because they are acquired by people in a weakened condition as a result of other illnesses and death usually results from the other illness. I cannot give the hon. Gentleman the figures that he requests, but I can assure him that the chief medical officer is leading our campaign to drive down the rates of hospital-acquired infections and that is as applicable in London as anywhere else.

    Urgent Referral Guidelines
    David Taylor: What guidelines are given to primary care trusts
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    about acceptable levels of general practitioner patient urgent referrals to acute hospitals; and if he will make a statement. [155730]
    The Minister of State, Department of Health (Mr. John Hutton): It is the responsibility of primary care trusts to put in place their own arrangements for reviewing levels of referrals, taking into account the requirements of national and local policies.
    David Taylor: Last month, a widely respected, well-loved general practitioner, in a practice covering my home village, committed suicide during the lengthy investigations by the local primary care trust into his rate of urgent referrals of patients to acute hospitals. Does the Minister agree that public organisations that exercise an overview of primary care should ensure that that role is undertaken with sensitivity, and that holistic, clinical judgment is never overridden by spreadsheet-driven targets?
    Mr. Hutton: Yes, I agree with both the points that my hon. Friend made. The death of Dr. Farley was a terrible tragedy for his family, as well as an enormous loss to the community that he served for more than 25 years—I know that my hon. Friend knew Dr. Farley. In the light of Dr. Farley's death, I think that the PCT has taken the right course of action. An independent inquiry team is being assembled as we speak, to be chaired led by Dr. Paul Cosford. The inquiry will look into all the relevant events leading up to the death of Dr. Farley. I hope that it will be able to conclude its work by the end of May and publish its findings as soon as possible thereafter. In the light of that ongoing work, it is probably best that I say no more about it at the moment.

British Detainees (Guantanamo Bay)
12.31 pm
The Secretary of State for Foreign and Commonwealth Affairs(Mr. Jack Straw): With permission, Mr Speaker, I should like to make a statement about the British citizens detained at Guantanamo Bay.
Agreement with the United States Government on the return of five of the nine UK detainees was reached on Thursday last, 19 February. Although the House was in recess, I judged that it was only fair to the families of all nine detainees that they should be informed immediately. We therefore made every effort to contact the families and their parliamentary representatives, and I made a public announcement late on Thursday afternoon. I could not report to the House yesterday, as I had to attend a European Union General Affairs Council in Brussels.
The attacks of 11 September 2001 were the most appalling terrorist atrocity the world has ever seen. The terrorists killed more than 3,000 people, including 67 British citizens. In response to those attacks, a coalition of countries came together to launch a military campaign against al-Qaeda and its Taliban supporters to remove them from their strongholds in Afghanistan.
In those operations, thousands of individuals believed to be al-Qaeda or Taliban fighters, or their supporters, were detained by coalition forces. The vast majority of those individuals were released, but those who were deemed to pose a substantial risk of returning to the conflict—to date about 800—were sent by the United States to its naval base in Guantanamo Bay, there to be detained and to be questioned about their knowledge of al-Qaeda's activities. As a result, valuable information has been gained, which has helped to protect the international community from further al-Qaeda and related terrorist attacks.
The Government have been in frequent and regular contact with the United States authorities concerning the British detainees at Guantanamo Bay. From the outset, the British Government have sought to ensure their welfare and have actively encouraged the US Government to resolve the position of the British detainees. British officials have visited Guantanamo Bay six times. We have kept the detainees' families and Parliament informed of their circumstances and of other related developments.
In July 2003, two of the British detainees were designated by the United States authorities as eligible to stand trial by the United States military commissions established to prosecute the detainees. The British Government made it clear straight away that we had concerns about the military commission process. Consequently, the Prime Minister asked the Attorney-General to discuss with the United States authorities how the detainees, if prosecuted, could be assured of fair trials that met international standards.
The Attorney-General therefore held a number of discussions with the United States authorities about the future of the detainees. In parallel, the Prime Minister has talked to President Bush; I have discussed the matter on many occasions with US Secretary of State Colin Powell; and extensive discussions have been held between British and United States Government lawyers and officials.
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Those discussions have involved many complex issues of law and security, which both Governments have had to consider carefully. Although the discussions have made significant progress, the Attorney-General's view was that the military commissions as presently constituted would not provide the process that we would afford British nationals.
Our discussions with the United States authorities are continuing. In the meantime, as I announced last Thursday, we agreed that five of the British detainees would return to the United Kingdom. The five are Rhuhel Ahmed, Tarek Dergoul, Jamal al-Harith, Asif lqbal and Shafiq Rasul. Those men will be flown home to the United Kingdom in the next few weeks. The House will understand that it would not be right to disclose the operational details at this stage. The police have, however, established links with the families so that they can be informed of developments.
The police have confirmed that, once the detainees are back in the United Kingdom, where there are grounds under the provisions of the legislation, the five men may be arrested under the Terrorism Act 2000 for questioning in connection with possible terrorist activity. Any subsequient action will be a matter for the police and the Crown Prosecution Service. It would therefore not be appropriate to comment further on their particular cases, but I should like to emphasise two points.
First, the police have said that they are investigating all the detainees thoroughly and individually, in the normal way, which includes considering the circumstances that led to the men's detention. Every necessary step, including prosecution if appropriate, will be taken to protect national security. Secondly, the detainees will be treated in the same way as anyone else suspected of committing a criminal offence and, obviously, in accordance with UK law. Our processes have built-in safeguards and are subject to independent scrutiny to ensure that all individuals are treated fairly and properly. Those processes include access to lawyers.
We shall continue our discussions with the United States authorities on the situation of the other four British detainees. They are Feroz Abbasi, Moazzam Begg, Richard Belmar and Martin Mubanga. There are a range of security and other issues that we and the Americans are considering in respect of those four men. As a result of our talks, US legal proceedings against Mr. Abbasi and Mr. Begg were suspended in July and the US said that the men would not be subject to the death penalty. That remains the case.
Our overall position remains that the detainees should be either tried in accordance with international standards or returned to the United Kingdom. We shall continue to work to resolve their positions, and I will, of course, keep the House informed.
The Government remain determined to work with our allies around the world to defeat the scourge of global terrorism. Terrorism seeks to deny the most basic of human rights—to life,to security and the right to go about our daily business free from threat and harm. We will continue resolutely to defend those rights through a

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robust and determined approach to combating terrorism and its networks of support wherever they are to be found.
Mr. Gary Streeter: May I start by thanking the Foreign Secretary for his statement and for early sight of it?
The Conservative party welcomes the fact that some progress has now been made— after two years—in resolving the prolonged incarceration of five of the nine British detainees held at Guantanamo Bay, but does the Foreign Secretary accept that his statement today raises as many questions as it answers?
Although we recognise the uniqueness of their interim status as unlawful combatants, we have consistently called for the British detainees to be subjected to due process, rather than being held in a legal limbo land. They should be either brought back to this country to face a fair trial, or if there is no evidence of wrongdoing against them, set free. Although we obviously assert that national security has the highest priority, we do not believe that to be inconsistent with a proper and timely assessment of each case and a consequent decision to prosecute or release.
Given the strength of the relationship between the British and US Governments, can the Foreign Secretary explain why it has taken nearly two years to get this far? Does he now accept that one of the reasons why that stalemate has taken so long to overcome has been the failure of the British Government to make a clear decision on how to treat the detainees in this country on their return? Can he tell us what the difference is between those who are to be released and those who are not? Does he believe that the four who will remain constitute a threat to national security, and how much longer is it likely to take until their future is resolved? Is it now likely that they will face trial before one of the military commissions that the US seems to favour? Given what the Foreign Secretary said about the advice that the Attorney-General has given, what will be the Government's response if that is the case?
The Home Secretary, in one of his now infamous preemptive judgments on innocence and guilt, informed the world's media that none of the five who are to be released
"represents a security threat to the British people."
Does the Foreign Secretary agree? Given that we are talking about individuals who more than two years ago left this country to go to Pakistan or Afghanistan—allegedly to explore the possibility of fighting alongside the Taliban and/or al-Qaeda against British interests—how does the Home Secretary know that they will now pose no such threat? If proceedings are to be brought against one or more of the released detainees in this country, how will the Home Secretary's comments help them to obtain a fair trial?
The Foreign Secretary said that on the detainees' return, the police and the Crown Prosecution Service would look at each case dispassionately to decide whether there was sufficient evidence to place a person on trial in this country. Will he confirm that evidence obtained from the detainees during their time in Camp Delta will be made available to the police and the CPS to help them to assess the case for a fair trial? Has he received any legal advice on admissibility and, if so, will
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he place a copy in the House of Commons Library? Will he confirm whether the Attorney-General has actively considered whether, if the evidence so provides, an action for treason could be brought against any of the released detainees? Will the Foreign Secretary say a little more about the circumstances in which the five will be held in the UK on their return? Will they be at liberty to return to their homes, or will they be held in custody—if so, on what basis?
We strongly support all measures to protect our national security, but this country rightly prides itself as a true champion of the rule of law and the rights of the individual. In the Government's continued handling of the nine Britons currently in Guantanamo Bay, the whole nation will rightly expect them to uphold those enduring British principles.
Mr. Straw: I rather got the impression that the hon. Gentleman was agreeing with the position taken by the British Government, but that he then had to invent several differences to nuance his position compared with ours. The context of the detentions was well illustrated by one word that he used: he said that the detainees' position was "unique". Let us be clear that 11 September 2001 was not only absolutely terrifying, but unique due to the nature of the threat that it posed and because it exposed western democracies and the whole of the civilised world to threats of a kind that we had never previously had or properly anticipated. That creates the context in which those people and the other detainees at Guantanamo Bay have been held.
The hon. Gentleman asks about the difference between those who are to be released and those who will remain in Guantanamo Bay. I do not wish to prejudice in any way the positions of either, except to say that there have been fewer difficulties with negotiations in respect of those who are to be released than of those who will be detained.
The hon. Gentleman asks whether the individuals will pose a security threat. That is a matter for the police, in the first instance, acting under powers that they have generally and also under powers that the House recently gave them through the Terrorism Act 2000, as amended. As I made clear in my statement, the police have it open to them to detain and interview the individuals when they arrive. There is a short time for which they may be detained at the behest of the police, and a longer period—up to a total of 14 days—if that is approved by the court on application. Any further question of proceedings will be a matter for the Crown Prosecution Service.
The hon. Gentleman asks about the admissibility of evidence. One does not need advice from the Attorney-General about rules on evidence in the British courts because they are available to anyone who cares to read them, and well understood. I did not ask for that advice, and neither did I receive it, because I did not need it.
The hon. Gentleman asked me about the hare that has been running about charges of treason against these individuals. As with any other charge against them, that is a matter for the Crown Prosecution Service, and I think in respect of treason it is also a matter for the Attorney-General. I merely place on record that I think

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the last time there was a successful prosecution for treason was getting on for 60 years ago, against Lord Haw Haw.
Sir Menzies Campbell: The Foreign Secretary is entitled to claim that his announcements today and last week are evidence of progress, but not a solution. So far, the Government have, with some success, put their trust in patient diplomacy, but I hope that the Foreign Secretary will not rule out rightful indignation if that becomes necessary, because if the situations were reversed and the United Kingdom proposed to deal with American citizens by way of military commissions, without due process, the outcry from the White House and from Capitol Hill would be prolonged and deafening, and rightly so.
The Foreign Secretary says that it is not appropriate to comment on individual cases, and as a matter of principle, of course he is correct. When the Home Secretary said that the five being released were no threat, did that represent the considered view of the Government? Even if the Foreign Secretary is unwilling—or perhaps, more correctly, unable—to answer that, does he accept that it raises very sharply this question: if they are no threat, why have they been incarcerated for so long?
Finally, if the United States Government persist in putting United Kingdom citizens on trial in circumstances unacceptable to the Foreign Secretary, the Prime Minister, the Attorney-General, Parliament and the British public, what then is the Government's solution?
Mr. Straw: First. I accept that we have made progress but have not resolved this matter. As I made clear, and as my right hon. Friend the Prime Minister has repeatedly made clear, we want those individuals to be subject to a trial that meets internationally accepted norms and standards, or we want them brought home. That applies to all nine, regardless of the allegations against them, and not just to the five.
The right hon. and learned Gentleman commented on patient diplomacy. I believe that that is the way to resolve these matters. The House is very alert, as it should be, to our standards of justice, as I have to say generally the Americans are, too, but we have to take account of the context in which the detentions took place. That context was that a terrorist organisation of a sophistication and ruthlessness never previously seen in our history, and without any political programme with which one could negotiate, decided effectively to start a war, not just against the United States, but against the whole of the civilised world. Although colleagues may not necessarily agree with the approach of the United States, it is understandable that it has taken the action that it has. Our discussions with the United States Government have borne fruit so far with progress, but not with a solution.
The right hon. and learned Gentleman asked about the remarks of my right hon. Friend the Home Secretary. I think that my right hon. Friend sought to clarify those remarks on the radio this morning, when he
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pointed out that he was talking about what in his judgment had been assessed so far as regards the past, and that he was not seeking to make a judgment about decisions by the prosecuting authorities or the police on the arrival of those concerned.
Finally, the right hon. and learned Gentleman asked what would happen if those people were put on trial under unacceptable conditions. I hope that we do not come to those circumstances, because we have made it clear that we believe that any British citizen—we believe this generally, but I am speaking now of our immediate responsibilities—should be tried only by internationally accepted standards and norms.
Geraint Davies: I very much welcome my right I hon. Friend's statement and his previous statement, and the efforts of the Attorney-General and the Prime Minister to ensure both a fair trial for, and the return of, British detainees, while guarding our national security.
My constituent, Feroz Abbasi, will not be sent home. Can my right hon. Friend confirm that the reason is perceived risks to the public interest, based on intelligence reports? If that is the case, does my right hon. Friend accept that new powers available to the Government to protect people under the Terrorism Act 2000 and, indeed, the Anti-terrorism. Crime and Security Act 2001, mean that if Feroz Abbasi were on the street and put a foot wrong by association or sympathy, whether direct or indirect, with future or past terrorist acts through, for instance, a phone call or wearing a badge, he could immediately be arrested, charged and imprisoned? If he were released, he would be better off, as would the other detainees, writing his memoirs of Guantanamo Bay. That would be much more in his interest and that of al-Qaeda than posing a future risk to the British public.
Mr. Straw: I should like to applaud the assiduous way in which my hon. Friend has sought to represent the interests of his constituent and his family, who are understandably concerned about Mr. Abbasi's future. As I have already told the House, I am not going to offer views about the perceived risks posed by any of the individuals concerned because, by definition, that could have the effect of prejudicing future proceedings. As for new powers under terrorism legislation, the Terrorism Act 2000, which I introduced as Home Secretary, strengthened police powers, and legislation passed in 2001 by the Commons and the House of Lords has strengthened them further. However, to make a general point to my hon. Friend without specific reference to the detainees, those powers apply only where the police have evidence against individuals. It is the nature of terrorists, even more than ordinary criminals, to go to the most extensive lengths to avoid detection, not just at the point of committing acts of terrorism but prior to that by avoiding coming to the notice of the intelligence community. That is a basic challenge that the intelligence community and the police face in fighting terrorism.
Sarah Teather: My constituent, Martin Mubanga, is one, of the four remaining detainees in Guantanomo Bay, and I met his family last night. Is the Minister aware of their distress? They have had no

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information about why he was detained, they have received very few letters, and those that they have received have been censored. Indeed, they have received no information at all about his basic well-being since the Foreign Office visited in September, and their pain has been compounded by the welcome; homecoming of the initial five. Most damningly, perhaps, they told me that they find it easier to get information about their son's well-being and his case from the newspapers than from the Foreign Office, which is worrying. What are the Government doing to ensure that families such as Mr. Mubanga's receive basic information about their relatives' well-being? Can letters be transmitted to the family, and can basic information about why Mr. Mubanga was detained be made available to the family ahead of the newspapers?
Mr. Straw: Of course I understand the families' distress. As negotiations reached a final stage last Wednesday and Thursday, I was all too conscious of the fact that five sets of families and a wider group of relatives and friends would be very pleased about the announcement, but that four sets would be distressed. It was for that reason, among many others, that I ensured, as far as was humanly possible, that the families and the Members representing them were contacted before I made a public announcement.
I entirely resist the criticism that the hon. Lady made at the end of her remarks, when she sought to criticise either me, as the person responsible, or my officials. Foreign Office staff have made every effort to pass on in detail information to the families as soon as it arrives, and we will continue to do so. It has not been sufficient, but we have had more contact with our detainees than, as I understand it, any other Governments have had with their nationals who are detained.
The issue of letters is one of concern, and we will continue to take it up through the International Committee of the Red Cross. I am happy to meet the hon. Lady to discuss further what other measures we can take.
Mr. Adrian Bailey: May I reiterate our thanks to the Foreign Secretary for his efforts to secure the release of the five detainees, three of whom are from my constituency? I thank him, too, for informing the families beforehand, as that was very much appreciated.
I welcome my right hon. Friend's comments that on their return the detainees will undergo a thorough police investigation and that any subsequent trial will conform with internationally accepted standards of justice. That is necessary both to reassure the public in this country and to give the detainees an opportunity to answer properly any charges against them.
My right hon. Friend will be aware, however, of the acute anxiety that the families have experienced over the past two years. They are obviously desperate to see their relatives again. Can he assure me that every effort will be made to keep the families informed at every stage of the proceedings, and that they will have the earliest possible access to their relatives, commensurate with national security?
Mr. Straw: I commend my hon. Friend for all his efforts on behalf of Mr. Ahmed, Mr. Iqbal and Mr.
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Rasul, who were resident in his constituency. He, too, has been careful and assiduous in his representation of those individuals, who are three of the five to be released. As I told the hon. Member for Brent, East (Sarah Teather), of course I understand the distress and anxiety of the families. It would be astonishing if they were not distressed and anxious about their loved ones in the circumstances. That is why we have made every effort to maintain welfare visits to the individuals and keep the families informed.
As for the future, there will be a period before the releases. I am sorry, but I cannot say exactly when they will take place. I said on Thursday, and it remains the case, that they will take place within a few weeks. Within that time scale, I hope that it is sooner rather than later. As information becomes available and we can release it, we will make it available to the families first.
Mr. Douglas Hogg: I am sure that the right hon. Gentleman will accept that I am a long-term friend and admirer of the United States, a country with which I have close family ties. However, I regard the detention and treatment of the detainees in the Guantanamo Bay camp as a lamentable departure from the rule of law and wholly inconsistent with the fine traditions of the United States. Does the right hon. Gentleman accept that that view is widely shared in this country and, if he does, will he ensure that the United States Administration understand that and recognise the damage that they are doing to their reputation?
Mr. Straw: The right hon. and learned Gentleman's opinions on this matter are well known, and although such feelings are not nanimous—opinions differ greatly—I assure him that the United States Government are fully aware of the strength of opinion on the issue.
Tony Lloyd: May I, too, pass on my thanks to the Foreign Secretary for the keen attention that he has given the matter over the past two years and his courtesy last week in making sure that the families and their Members of Parliament were informed? As he is aware, my constituent, Jamal al-Harith, is one of those who, happily, will be released, but I share concerns expressed by Members on both sides of the House about the events of the past two years and, indeed, the future facing the four who will not be released. Such action may be understandable in emotional terms, but it is not acceptable in terms of legal propriety. My constituent experienced a form of kidnap, and naturally the family were extremely unhappy about that.
I know that my right hon. Friend will not want to go into great detail, but there are issues about, for example, access to legal representatives, to the families, which is important, and perhaps to qualified medical staff. Can he assure me that those will be immediately available to individuals on their return to the United Kingdom?
Mr. Straw: I am grateful to my hon. Friend for his remarks about the way in which the matter has been handled. It is a difficult situation, and again I would like to put on record my appreciation for the way in which he has performed his duty in representing his constituent and his family.

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My hon. Friend asked me about access to legal representation, the availability of qualified medical assistance and—a point that was also raised by my hon. Friend the Member for West Bromwich, West (Mr. Bailey)—access by families when they arrive here. The Terrorism Act 2000, as amended, provides powers to the police, where they have grounds for doing so, to detain terrorist suspects and to interview them for an initial period of two days, which can be extended, through successive applications to a court, to 14 days. However, as is absolutely right, subject to what is laid down in law, individuals have access to lawyers, as well as to their families. There are constraints on that, but they are the normal constraints for suspects who are suspected of any terrorist-related activity under the Terrorism Act, as amended.
On medical assistance, we shall make sure that that is available.
Mr. Richard Shepherd: I am sure that the Foreign Secretary is aware that there is also concern in American legal circles about the treatment of people in Guantanamo Bay. Some feel a sense of rage that within great democracies that generally obey the rule of law, individuals can be locked up for two years, during which time the authorities have been unable to formulate charges or the basis of a trial that would sustain itself in front of what we recognise as proper legal process.
Mr. Straw: I understand the hon. Gentleman. We must appreciate, however, that the United States saw itself as literally in a war situation—as, indeed, did the rest of the civilised world. In such situations, people are detained without trial. We did that ourselves during the last world war. These matters are difficult and uncomfortable, but they occur where civilisations and countries feel themselves to be under great threat. That is simply a reality.
That said, we have made progress in respect of the detainees, five of whom are being transferred to the United Kingdom to be dealt with in accordance with the normal processes of the law. I can promise the hon. Gentleman and the House that we will continue our efforts satisfactorily to resolve the position of the other four, although I cannot say when that will happen.
Mr. Gerald Kaufman: While I welcome the extremely belated forthcoming release of these men, is it not a fact that the United States has no jurisdiction whatever by which to have detained them, or anybody else, in Guantanamo Bay; that it is utterly characteristic of the Bush regime to behave in any manner that suits it, regardless of international law; and that my right hon. Friends must not allow this Government to be tainted by association with such conduct?
Mr. Straw: I understand my right hon. Friend's remarks, but he will forgive me if, in the interests of what the right hon. and learned Member for North-East Fife (Sir Menzies Campbell) described as patient diplomacy, I do not fully subscribe to them.
Mr. Henry Bellingham: As the Foreign Secretary rightly pointed out, nearly all
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the detainees were apprehended in the war zone, some were with armed groups, and some were actually putting at risk allied coalition soldiers. However, as the main coalition partner of the United States, surely this country could have been trusted to have the nine British detainees brought here in the first place. After all, in 1945 all French citizens fighting in German uniform, particularly those in SS units, were processed in France, not in Britain or America. There must be a lesson to be learned from that.
Mr. Straw: The hon. Gentleman echoes my point about war situations. However, what happened in France in 1945 took place after a war had finished. Let us be clear that so far as the United States is concerned—and us, too—this has been verging on a war situation with al-Qaeda and its related terrorist organisations. Let it not be forgotten that less than three months ago, at the end of November, both the British consulate general and the HSBC bank in Istanbul were bombed, with a severe: loss of life among British citizens and representatives, as well as Turkish citizens and others. That was a result of terrorism by al-Qaeda and its related organisations.
We are therefore in this very difficult, unique situation, and in such circumstances new measures are likely to be used. Our view is clear, and we have made it clear all the way through—it is that of course people should be detained in accordance with international law. The United States Government are clear in their own mind that there is a legal base for the detentions at Guantanamo Bay. Our position is also clear in that any trials that take place must take place in accordance with internationally accepted standards and norms.
Mr. Kevin McNamara: Is my right hon. Friend aware that although the United States accepts that there is a legal position for these people to be in Guantanamo Bay, no other country in the world accepts that situation? It has created a new class of people captured on the battlefield-unlawful combatants—that is not recognised in any of the international agreements.
Does my right hon. Friend accept that while he may find the attitude of the United States understandable, many of us find it, if understandable, unacceptable? The Government must vigorously pursue this important matter. Although I welcome the release of the five prisoners, it has taken us two years to free people who have been held with no legal status, contrary to all the rules of international behaviour.
Mr. Straw: Of course I understand, to use the same verb, the very strong feelings of my hon. Friend on this issue and the fact that he does not accept the position as described by the United States Government. There is a great debate about the international legal basis for the detentions at Guantanamo Bay. I simply remind the House that the situation was not unusual: it was unique. Therefore, it is not surprising if the conventions and treaties that are the basis of much international law did not anticipate such circumstances.
Mr. Elfyn Llwyd: I very much welcome the forthcoming repatriation of the five detainees in the next few weeks, which I suspect is

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to do with the possible involvement of the police and the Crown Prosecution Service. One has to say, however, that if they did have any relevant information or evidence, surely it would have been elicited from them by now. Will the Foreign Secretary redouble his efforts to ensure that the United States is aware of the concern on this side of the pond about the other four detainees and the need for them either to be charged, to be put before a properly constituted court recognising international standards of law, or to be released? It is a disgraceful situation, because these men have already served the equivalent of a four-year sentence without trial.
Mr. Straw: The United States Government are very well aware of the strength of feeling of the British people—although that varies—and of the different strains and strands of that opinion. I have discussed the matter on numerous occasions with United States Secretary of State Colin Powell and with many others inside the United States system. My right hon. Friend the Prime Minister has discussed the matter on several occasions with President Bush and the United States Government. It has been discussed at every level between Governments. The United States Government are aware of the feeling that exists, and I am sure that they will become more aware of if when the contents of this statement and my answers are drawn to their attention.
David Winnick: In order to keep a sense of balance, does my right hon. Friend agree that we should always bear in mind the shock that was felt throughout the whole of the United States—it was certainly not confined to President Bush and his circle—over the outrage on 9/11? On the Friday of that terrible week, I went to a huge demonstration in Philadelphia, where political views of all kinds were expressed over the terrible and wicked events that had occurred.
In welcoming what my right hon. Friend has said about the four detainees, is it not important for the United States to appreciate that those of us who do not minimise the dangers of terrorism, and who understand only too well the constant danger to all the democracies, remain very uneasy over the way in which these detainees, not only those who are British, are being held; and that domestic and international law should always be applied, even when it is dealing with those who are responsible for the most terrifying crimes against humanity?
Mr. Straw: My hon. Friend puts his view in a balanced and measured way.
Mr. Edward Davey: The Foreign Secretary should know from correspondence with me about the case of my constituent Mr. Bisher Al-Rawi who is detained in Guantanamo Bay. He had lived in the United Kingdom for 19 years, from when he was a child. His family are all British citizens but he holds an Iraqi passport. So far, the Foreign Office has refused to make any representations for Mr. Al-Rawi. Will the Foreign a Secretary reconsider that? Does he recall that Mr. Al-Rawi was not arrested as a combatant but detained while on a business trip to the Gambia? Given the unusual circumstances, is the
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Foreign Secretary prepared to meet me and the Al-Rawi family to ascertain how the UK Government could assist my constituent?
Mr. Straw: I am happy to see the hon. Gentleman. There are five individuals in Guantanamo Bay who are not British citizens but were British residents before their detention, and his constituent is one of them. Their legal position is difficult. We simply do not have a right in international law to make representations on behalf of those who are not British citizens. That is standard and accepted practice. [Interruption.] Well, that is the case. Although I understand the point that is being shouted at me from a sedentary position, I have outlined what happens to be the case. That standard is accepted in all diplomatic relations. However, some organisations, including the International Committee of the Red Cross and the United Nations High Commissioner for Refugees, may be able to help. I am willing to meet the hon. Gentleman and, following that meeting, to decide what further action we can take.
Mr. Clive Soley: Extreme forms of terrorism pose a serious and complex problem to democratic societies. To impress on the United States the dangers of its Guantanamo Bay policy, will my right hon. Friend remind that country that, in the 1970s, as a good friend of this country, it warned us of the dangers of internment in Northern Ireland? It was right to warn us then and we are right to warn it now.
Mr. Straw: My hon. Friend makes an interesting and nice point.
Mr. Andrew Tyrie: A moment ago, the Foreign Secretary prayed in aid the internments that took place at the beginning of the second world war. They were subsequently widely held to have been a mistake both in the United States, where Japanese were detained, and the United Kingdom. I hope that the right hon. Gentleman keeps that point in mind when he talks to his American counterparts.
Have the Government assessed the effect of Guantanamo Bay on global public opinion and the damage that it does to the values that we are seeking to export? Will the Foreign Secretary state unequivocally that the Government consider Guantanamo Bay to be contrary to international law? What representations to that effect has he made to the United States Administration?
Mr. Straw: I made the point about internments in the second world war to remind the House that in war situations—and quasi-war situations—otherwise unacceptable and uncomfortable measures sometimes have to be taken. It is all very well for the hon. Gentleman to say that the internments in the second world war were later regarded as a mistake. That is true of their scale but not necessarily of everybody who was detained. However, I put that to one side. I simply wanted to bring out the point that we must better understand why the United States felt it necessary to take such action.

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Let us be clear: the information that has been obtained from a good many detainees in Guantanamo Bay has helped to make the world a safer place—safer for us and our constituents as well as for the United States and those in other countries. That is the position.
Mr. Mohammad Sarwar: Does my right hon. Friend agree that the detention of 2,000 prisoners for two years without trial cannot be justified or condoned in any circumstances? Does he also agree that the imprisonment for 14 months of three Afghan children, who were afterwards given one football each as a gesture, is a blatant violation of international law?
Mr. Straw: I am afraid that I have not had sight of the case of the detention of the three Afghan children. I am happy to follow it up with my hon. Friend.
On the wider question, it is obvious that the sentiment of the House is as stated. It is similar to that of the Government: individuals who are detained should either be brought to trial in accordance with internationally accepted standards or returned, in this case to the United Kingdom. We shall continue to follow that policy.
Ross Cranston: I congratulate my right hon. Friend and the Attorney-General on all their efforts behind the scenes to achieve the result so far. However, there is considerable disquiet about the four young lads from Tipton and separate arrests in my constituency under the Terrorism Act 2000. The majority sentiment—a view that I share—is that when offences have been committed, people have to account for them. However, given the disquiet, will my right hon. Friend talk to colleagues so that decisions can be made and resources allocated to enable the police and the prosecution authorities to fast-track those cases if there are to be proceedings under the Terrorism Act against the returnees and more generally?
Mr. Straw: I am grateful to my hon. and learned Friend for his thanks and I shall ensure that they are drawn to the attention of the Attorney-General, who has played an important part.
Of course, there will always be concern among those who are arrested under the Terrorism Act 2000 and their families about their nature of their arrests, but the Act was approved in the House four years ago on an all-party basis because of the emerging threat that we assessed. Prevention of terrorism legislation at the time was defective because it was only effective in protecting our communities against Irish terrorism, not the new forms of international terrorism. Individuals suspected of terrorism correctly have clear rights under the legislation.
I accept my hon. and learned Friend's point about resources. If the individuals come back and are subject to prosecution, it would be reasonable for their cases to be fast-tracked, given the lengthy detention that they have already had to endure. I will draw that suggestion to the Attorney-General's attention.

Schools (Vending Machines)
1.17 pm
Mr. Jon Owen Jones: I beg to move,
That leave be given to bring in a Bill to prohibit the sale of high fat and high sugar content food in vending machines in schools.
I appreciate that I am not the only parliamentarian who is this week seeking to curb children's consumption in schools, but I hope to persuade the House that my proposals are well researched, evidence based and have widespread support. Indeed, the Bill has the support of the National Union of Teachers, the British Heart Foundation and the Royal College of Physicians and is the product of my conducting a lengthy investigation into obesity with the Select Committee on Health. Other countries have tried similar measures or variants on it.
Only last week, a joint working party of the Royal College of Physicians the Royal College of Paediatrics and Child Health and the Faculty of Public Health called for the
"replacement of sugar drinks and high-calorie snacks with healthy alternatives in schools"
and warned that
"failure to act now will have severe consequences for millions of individuals, for the nation's health and for the health service."
The can that I am now displaying is familiar to everyone since it is the most famous brand in the world. I am sure that all Members of Parliament know that its contents are carbonated water which contains sugar. However, I doubt whether hon. Members realise just how much sugar is in that can. Depending on whether we use American or British teaspoons, it contains seven to 10 teaspoons of sugar. We know that many children drink three or four such cans in the course of a day. What responsible parent would permit their child to take 28 teaspoonfuls of sugar in one day? Yet in our schools, children are given the means, the opportunity and the time to do just. that.
There is evidence that parents are worried about this. An ICM poll in The Guardian last year showed that 70 per cent. would support the banning of fizzy drink vending machines in schools. In an era in which parents and health professionals are increasingly worried about obesity and nutrition. junk food in schools is rapidly becoming an anachronism.
The past 20 years have seen a startling rise in the proportion of children 1 who are overweight or obese. Since 1982, the number of such children has more than doubled, and 10 per cent. of today's six-year-olds are obese. The chief medical officer for England has called childhood obesity a "public health time bomb". If present trends continue, at least one fifth of boys and one third of girls will be obese by 2020. According to experts, that is the conservative estimate.
Children who are overweight or obese tend to become overweight or obese adults, leading in the long run to high blood pressure and other health problems. Obese children are far more likely to develop type 2 diabetes. An American survey has shown that severely obese children have a 93 times greater chance than average of developing diabetes. A long-term study of 51 Canadians who were diagnosed with that type of diabetes before the age of 17 showed that by the age of 33, seven of them

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had died, three were on dialysis, one was blind, one had had a toe amputated and out of 56 pregnancies in those people, only 35 had resulted in live births. Those statistics should be sufficient to Show that childhood obesity must be taken very seriously.
I do not claim that vending machines in schools are the only, or even the primary, cause of the problem. The rise in childhood obesity clearly reflects broader changes in lifestyle and diet in our society. However, vending machines whose primary products are fizzy, sugary drinks, crisps and chocolate—which the Americans describe with the term "foodstuffs of no nutritional value"—are a clear example of how schools, and by extension the state, allow the problem to go unchecked and are seen to promote and encourage those products. The fact that we cannot do everything to solve the problem at once does not mean that we should do nothing.
I have just mentioned America. Several US states and school districts have proposed or passed legislation similar to this Bill. I hope that the problem of childhood obesity in Britain will not have to reach US proportions before we take such measures here. All over the world, people are considering such proposals. In Canada, from September this year Coca-Cola and Pepsi will remove all their fizzy drinks from vending machines in schools and replace them with healthier products. I am sure that they are doing that to pre-empt legislation. In this country, Coca-Cola has just announced that it will remove all advertising on its vending machines in schools. It is clearly worried about what the Government might do, and I hope that it has good reason to be.
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The food and drink industry does not make sizeable profits from vending machines in schools, but those machines raise the profile and familiarity of the industry's products with children and adolescents. Children are already disproportionately targeted by advertisers of fatty, sugary and unhealthy foods. Indeed, 40 per cent. of all adverts shown to children on television are for those products. Whether such adverts should be banned is a matter for another day, but to allow those brands into our schools—to allow the work done in the classroom to be undone in the corridor—is to take a desire to avoid accusations of nanny statehood to a ridiculous extreme.
Banning junk food in school vending machines will not turn us overnight into a nation of superhuman children, bursting at the chance to win Olympic golds; if only things were so simple. However, it is a step that we can take. When I was at school, I was exposed to much old-style Welsh nonconformism. To paraphrase what I was told then, just because we have junk food sellers does not mean that we have to have junk food sellers in the temple. It is time to throw them out.
Question put and agreed to.
Bill ordered to be brought in by Mr. Jon Owen Jones, Mr. David Amess, Paul Flynn, John Austin, Ms Debra Shipley, Dr. Richard Taylor, Mr. Win Griffiths, Mr. Bob Blizzard, Mrs. Jackie Lawrence, David Taylor and Chris Ruane.

SCHOOLS (VENDING MACHINES)
Mr. Jon Owen Jones accordingly presented a Bill to prohibit the sale of high fat and high sugar content food in vending machines in schools: And the same was read the First time; and ordered to be read a Second time on Friday 30 April, and to be printed [Bill 58].

Social Security and Pensions
1.26 pm
The Secretary of State for Work and Pensions(Mr. Andrew Smith): I beg to move,
That the draft Social Security Benefits Up-rating Order 2004, which was laid before this House on 4th February, be approved.
Mr. Speaker: With this it will be convenient to discuss the following motion:
That the draft Guaranteed Minimum Pensions Increase Order 2004, which was laid before this House on 22nd January, be approved.
Mr. Smith: I am satisfied that the orders are compatible with the European convention on human rights.
On uprating, I can confirm that national insurance benefits will rise in line with the retail prices index, which is 2.8 per cent. Most income-related benefits will rise by the Rossi index—1.8 per cent.—in the normal way. That will add more than £2 billion of extra Government spending to help those in most need and to tackle poverty. Of the £1.2 billion extra for pensioners, £140 million is above price inflation, as is £180 million of the extra for children.
In 1997, we said that we would cut the costs of economic and social failure—and we have. Despite the downturn in the world economy, employment in the United Kingdom has continued to grow. We have more people in jobs than ever before and, for the first time in nearly half a century, the highest employment rate and lowest unemployment rate of the major industrialised countries.
Through our investment in the new deal and Jobcentre Plus, we have tackled the legacy of mass unemployment that we inherited from the Conservative Government, whose leader, when masterminding their employment strategy, increased unemployment by more than 1 million. Since 1997, we have increased the number of people in jobs by more than 1.5 million, and we have invested to tackle poverty the £5 billion that has been saved from the cost of unemployment.
Combining that amount with the savings from tackling benefit fraud and error—overpayments alone now cost £400 million less a year than was the case in 1997—we can ensure that more money is available to invest in services. Staff working for the Pension Service, the first ever dedicated service for pensioners in this country, have made more than 300,000 home visits and held more than 220,000 community-based surgeries. Our investment in Jobcentre Plus is helping to deliver the lowest unemployment in the G7. Each day, our offices receive 13,000 vacancies, conduct 36,000 work-focused interviews and help 4,700 people into jobs, including more than 400 lone parents and more than 120 incapacity benefit clients. So we are not only uprating benefits but upgrading the service that we are able to give to our clients.
Our tax and benefit measures, combined with our successful employment policies, are helping to get more parents into work. We have reversed the generation-long trend of rising child poverty, which more than doubled during the 18 years when the Conservatives were in power. Since 1997, we have reduced the number
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of children living in low-income households by more than 500,000, and we are determined to do more. From April, the child element of the child tax credit will rise by £180 to £1,625 a year equivalent to a weekly increase of £3.50. That will benefit 7.2 million children, including all families on income support and jobseeker's allowance.
Building on these measures, I announced in December how we would judge longer-term progress towards our ambition to eliminate child poverty altogether. The new measure recognises that poverty is about more than money. We will strive to eliminate material deprivation entirely, but we are also firmly committed to keeping up the drive to increase the incomes of the poorest children right through to 2020. Let us remember that in 1997, the Tories left us bottom of the European child poverty league table. As a result of the measures this government have introduced, the UK has already moved four places up that table, and we are committed to go further so that we move beyond the EU average to be among the very best in Europe.
What of the Conservatives? We need to know whether they share our ambition that no child should be left behind, or whether they plan to repeat their performance of the 18 long years during which child poverty more than doubled.
On pensions, we are taking action to tackle pensioner poverty, boost security and provide people with more choice about when they retire. This year the basic state pension—the foundation of pensioners' incomes—will rise by a further £2.1 5 a week. That is £111.80 a year, which more than meets our guarantee that future rises will be at least £100 a year for single pensioners.
Mr. Jim Cunningham: On pension increases, can my right hon. Friend make a comparison in monetary terms and percentage-wise between 1997 and now so that the House can get a good idea of the increases since then? How do they compare with the record of the previous Conservative Government?
Mr. Smith: The truth is that the Conservatives increased the real value of the state pension only once. That was at the time when they put VAT on fuel. If ever there was a case of giving with one hand while taking away with the other that was it. In total, the real increase in the state pension since we came to office is now more than £5 a week for a single pensioner and more than £8 a week for a couple.
Mr. Steve Webb: The Minister has moved on from his laudable aim of ending child poverty by 2020 to talk about pensioners. Is it his aim to end pensioner poverty, and if so, by when?
Mr. Smith: We have already set out our ambition to erode and remove those aspects of pensioner poverty that we inherited from the Conservatives, and we are making enormous progress in that endeavour, thanks to increases in the real value of the basic state pension and to the introduction of pension credit, the impact of which I shall come to in a moment. The hon. Gentleman will know from the statistics that we have already cut the pensioner poverty that we inherited by some 60 per cent. in absolute terms. Even in relative terms, at a time when

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median incomes have been growing quite rapidly—so this is quite a demanding test—more than 500,000 pensioners have moved out of relative poverty. Of course we are committed to driving that forward.
Mr. Patrick McLoughlin: The Secretary of State is telling us how the Government wish to treat pensioners and about their laudable aim in that regard. Can he tell us how many pensioners were threatened with prison sentences under the previous Government —[HON. MEMBERS:"Hundreds."] How many does he anticipate being threatened with prison sentences for not paying their council tax under this Government?
Mr. Smith: My hon. Friends suggest that hundreds, if not thousands, of pensioners were threatened with prison when the hon. Gentleman s party imposed the poll tax on them. If he is alluding to recent reports in the press, I am sure that he will understand that I am not at liberty to go into the individual circumstances of any recipient of pensions or benefits, no matter how much publicity those circumstances have received. I can assure him, however, that in that particular case, as in others, every endeavour is being made to ensure that the pensioner in question receives in full the entitlements that are her due. If some reports are to be believed, that has clearly not yet happened, for whatever reason. I am sure that the hon. Gentleman would agree with me—I see him nodding—that pensioners should gain their pension credit, their council tar benefit and their housing benefit whenever they are entitled to do so.
Mr. Nigel Waterson: Without my going into that individual case in any more depth than the Minister for Local and Regional Government already has, if it is right, as has been suggested, that that pensioner would not have had to pay any council tax, or would have had help with it, through council tax benefit, does not that underline the massive failure of council tax benefit having the lowest take-up of any means-tested benefit, and the underlying problem of the growth in mean-tested benefits under this Government?
Mr. Smith: I have already said how important it is that all pensioners and others get the help to which they are entitled. This time last year, Opposition Front Benchers questioned us about the work of the local Pension Service, asking whether people who needed a home visit would be able to get one. They have gone quiet on that now. There have been 300,000 home visits, and more than 220,000 surgeries. Never has so much effort gone in to raising the take-up of people's entitlements. When the Conservatives were in Government, they seemed to operate an effective target of keeping take-up as low as possible. There is a big contrast between that and the effective that we are putting in and the impact that they are having.
We have recognised that more needs to be done to improve the take-up of council tax benefit. That is why an information and advertising campaign is due to start shortly, as well as the extra advice being given through the local Pension Service. Thanks to the introduction of pension credit, 1.9 million pensioners are receiving help with housing benefit and council tax benefit for the first
160
time, or getting significantly more than they were before. We recognise that more needs to be done, but we are making good progress.
Mr. Clive Soley: The case to which my right hon. Friend referred, which has received so much publicity, needs to be spelled out in a bit more detail so as to alert people to the need to read more carefully what is in their newspapers. The story sounded largely untrue when I saw the figures involved, and it transpires that the lady involved is withholding her council tax because of an objection to certain aspects of the European Union. She has been supported in that by the United Kingdom Independence party, which has involved Max Clifford in handling the publicity. She is also receiving £10,000 from the Daily Mail for her story. Had the story in the press that she was receiving only £312 a month been true, she would clearly have been receiving less pension than she was entitled to, and would also not have had to pay any council tax anyway. So nearly all that story was untrue—
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The hon. Gentleman is an experienced Member of the House. This is becoming a statement rather than a question.
Mr. Smith: I, like the rest of the House, got the thrust of what my hon. Friend was saying. I am not in a position to comment on some of the alleged aspects of the circumstances that he has drawn to our attention, but what 1 said previously still stands. Notwithstanding all that, and whoever is representing or supporting that pensioner, she is entitled—like anyone else—to the entitlements that are properly her due.
Mr. David Willetts: The Secretary of State said that he would not comment in detail on that case. We have just heard the hon. Member for Ealing. Acton and Shepherd's Bush (Mr. Soley) claim that that woman has received £10,000 from the Daily Mail and that she is employing Max Clifford. The hon. Gentleman made a variety of allegations about an individual pensioner facing a problem with her council tax. Does the Secretary of State agree that it is most regrettable that those remarks have been made about an individual who, as far as we understand it, is wrestling with council tax demands that she finds it difficult to meet?
Mr. Smith: I wonder whether it is wise for the hon. Gentleman to repeat the circumstances that he said should not be aired in the House, and whether the deputy Chief Whip of the Conservative party should have raised the matter in the first place. It would be best to get back to pension credit and its uprating.
Mr. Soley: On a point of order, Mr. Deputy Speaker. I am sorry to intervene, but I must make it clear that what I said was not in any way a criticism of the

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pensioner, because she wanted it to be known that her objection was to paying towards an aspect of the European Union. That is the issue.
Mr. Deputy Speaker: That is not sufficiently a point of order for me to comment on the matter. The hon. Gentleman has put his point on the record.
Mr. McLoughlin: Further to that point of order, Mr. Deputy Speaker. I ask you to invite the Secretary of State to reflect on the words that he has just used, and on the fact that I talked about pensioners in general. I never mentioned a specific pensioner. It was the Secretary of State who referred to individuals.
Mr. Deputy Speaker: That was no more a point of order than that of the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley). It is on the record, however.
Mr. Smith: I have taken careful note of what the hon. Gentleman has said, Mr. Deputy Speaker, and I am confirmed even more in my judgment that it would be wise to get on with the more general subject of the uprating of pension credit.
In April, in keeping with the Government's earnings link for poorer pensioners, the guarantee will rise again by more than £3 a week so that no pensioner need live on less than £105 a week and no couple on less than £160 a week. Already, more than 2.6 million people receive pension credit, with an average household award of £43.50 a week. That number is growing with every passing day. It is worth reminding the House that the poorest pensioners were expected to live on just £68.80 a week in 1997, and under this Government they will get an extra £36 every week. From April, the Government will spend £9 billion extra on pensioners as a result of measures introduced since 1997. That is almost £6 billion more than if we had just linked the basic state pension to earnings.
Our policies have not only been more generous than the earnings link, but also more progressive £7 of every £10 of pension credit goes to helping women, many of whom have been penalised by a basic pension that short-changed them on the time taken out of work to bring up children. With the introduction of pension credit, almost 1.9 million pensioner households will qualify for more help, or qualify for help for the first time, with their council tax or rent.
The poorest are gaining more under our plans. Those who urge us to scrap pension credit and use the funds to increase the basic pension must realise that their plans would cut the incomes of poorer pensioners by £30 every week. The progress that we are making stands in stark contrast to the Opposition's approach. Our approach is fair and fiscally prudent. Theirs is unaffordable, unsustainable and, above all, unfair.
We will also give people more choice about when they retire, by giving a much better deal to those who choose to take their state pension late. For the first time, people will be given the chance to build up a lump sum by deferring their state pension. I can tell the House today that that will be calculated using an interest rate at least

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two percentage points above base rate, which would mean 6 per cent. today. Therefore, from next year, a woman with just the basic state pension of £77 a week could start building up a lump sum worth £8,500 if she kept working at 60 and drew her pension just two years later, or a lump sum of £23,000 if she put off retiring until 65.
Most people have higher state pensions than that thanks to the state earnings-related pension scheme and the state second pension, and could therefore build up even bigger sums. On average, men retire with £100 in state pensions, which would allow a man working until 70 to build up a lump sum of more than £30,000, or for a couple, a lump sum of more than £48,000. In the past, lump sums have been the preserve of the fortunate minority with good occupational pensions. These proposals make them an option for everyone. As well as the lump sum, our reforms will offer those who take their pensions late the alternative of a pension for life that is very significantly higher. Someone working an extra five years with typical weekly state pension entitlement of £100 will be able to increase that to £152, with inflation additions on top. The whole thrust of the proposals is therefore to give people new and attractive options to work beyond 65 when they want to.
Mr. Willetts: Will the Secretary of State clarify whether the lump sums that he has just described will be taken into account if pensioners claim means-tested benefits, or whether they will be wholly disregarded?
Mr. Smith: As we have made clear, the principle behind the policy is that people will not be disadvantaged throngh taking the lump sum rather than the increment. The detail by which we will do that on pension credit will be set out in due course, just as the detail of how we will meet the goal on taxation will be set out by my right hon. Friend the Chancellor of the Exchequer. I hope that the hon. Gentleman and his party, and other parties in the House, will see the merit of these proposals in extending the opportunity of genuine, worthwhile choice to people, and in giving a much fairer deal to those who choose to defer taking their state pension. I emphasise choice—that is what this must be about. Together with our plans to stamp out age discrimination and to allow people to work part time while drawing a pension, these initiatives will encourage many people to work into later life, and all of us will benefit from their contribution.
I stress, however, that working beyond 65 must remain a matter of choice. It is not something that can be forced on the least well off. We therefore reject calls to put up the state pension age. Instead, we want to give everyone the choice to boost their pension by working for longer when it suits them to do so.
The measures before the House will benefit a large number of children, parents and pensioners. They carry forward our reform of the welfare state and our mission to tackle all forms of poverty. Through investment and reform, getting record numbers into jobs and tackling fraud, we are able to target extra resources for children and pensioners who need help most. The orders help us build a Britain that fulfils potential, opens up opportunity and tackles poverty, and I commend them to the House.
1.48 pm
Mr. David Willetts: I am sorry to take away some of the drama from this potentially very significant debate, but let me begin by assuring the Secretary of State that it is not the Opposition's intention to vote against the proposed uprating of benefits. We all still remember the year when the Liberal Democrats did that, trying to deprive their constituents of any increase in their benefits, and we will not make that mistake. Of course, we welcome the uprating that is being proposed, but I want to ask the Secretary of State some specific questions about what he has just said.
First, the Secretary of State talked about poverty and the Government's proposals on child poverty. Is he at all embarrassed, however, by the evidence from the Government's own report, "Opportunity for all: fifth annual report", of the incredible stability in the number of people facing persistent low incomes? Between 1994 and 1997, 16 per cent. of children in low-income families faced persistent low incomes, defined as being below 60 per cent. of median income in three of the past four years. Between 1998 and 2001, the figure was also 16 per cent.
Sadly, there is similar evidence relating to people of working age. Between 1994 and 1997, 7 per cent. of working-age people living in low-income households faced persistent low incomes; the figure was also 7 per cent. in 1998 to 2001.
Why do the much-vaunted increases in benefit expenditure, and all the other measures described by the Secretary of State, seem to be having no impact on one of the things that the right hon. Gentleman says that he cares about, and which the Government have set as one of their objectives —the elimination of the persistent poverty in which people are currently trapped? This is the fifth annual report on poverty, but as yet there is no sign of any movement whatever. Conservative Members would like to hear from Ministers—instead of the usual propaganda—an honest explanation of why they are apparently not moving out of persistent poverty those who have been stuck in that position for far too long.
I can offer the Secretary of State a possible explanation. Many of the benefits for families have been lost to his budget, and are now pact of the Chancellor's tax credits. We find ourselves in an odd position: the structure of the tax credits for families does not match the measurement of poverty that the Secretary of State's Department used for the purposes of this document.
Paul Flynn: Given the definition of poverty with which we are saddled, if everyone in the country became a millionaire tomorrow the proportion of people in poverty would be the same as it is now. Can the hon. Gentleman exercise one of his many brains and suggest a better definition that would reflect the real situation?
Mr. Willetts: I am not sure whether that follows, but I agree that if everyone had an extra £1 million, the proportion of people with below 60 per cent. of median income would remain the same. I am happy to accept the general, conventional assumption that that is the relevant measurement. There are many others—there are relative measures, absolute measures, measures that change over time and measures that do not—but the
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central measurement that the Government set when they first identified their child poverty target was 60 per cent. of median income. We will not allow Ministers to get away with changing the target: they should be judged in terms of that 60 per cent. measurement.
In what was perhaps a fruitless endeavour, I was trying to take the House through the finer points of equivalence scales in the measurement of poverty. This, in my view, is one of the problems faced by the Secretary of State. I am pleased to observe Ministers' rapt attention. The measurement of poverty used in the document reflects changes in family structure. If, for example, a household contains two adults rather than one, the income that it will need to achieve a given standard of living will be greater than that of a household containing one adult. Similarly, a household containing three children will need a greater income than a household containing only one. Equivalence scales are needed for the measurement of poverty. However, the structure of the child tax credit introduced by the Chancellor does not match the pattern of equivalent scales used by the DWP to measure poverty. The Chancellor is not using instruments that can tackle poverty as the Government measure it in their annual report.
Mr. Andrew Smith: I hesitate to interrupt the hon. Gentleman's lecture, but as he will have noted from our December publication on the measurement of child poverty, it has been proposed that we move to the OECD's basis for the equivalent scale. Does he agree with that, and what does he expect its impact to be?
Mr. Willetts: I am happy for the Government to adjust their equivalence scales in line with international standards, provided that the Secretary of State undertakes to urge on the Chancellor that the structure of child tax credit, and the other tax credits he has introduced, also reflect more clearly the way in which all Members understand poverty and its effects on households with different structures.
One of the main reasons for the failure of the Chancellor's measures to reduce poverty is the fact that the Chancellor takes no account, in his structure of child tax credit, of the second adult in a household that contains a couple. Two adults receive no more child tax credit than one. When the Secretary of State for Work and Pensions measures poverty, he naturally expects a family containing two adults to need a higher gross income in order to achieve a given living standard than a family containing only one adult. Will he tell the Chancellor that his tax credit should reflect more accurately the way in which all of us here measure poverty? I should welcome an intervention from him if he wishes to respond.
If that change is not made, the Chancellor will not be able to meet his own child poverty objectives because he will be using instruments that do not reflect the way in which the Secretary of State's Department measures poverty. I should have thought that the Secretary of State would be able to stand up for the measurement that he has deployed for the past five years.
Mr. Waterson: Get on with it!
Mr. Willetts: I hope that the Secretary of State will indeed get on with it, and offer us some assurance. If he

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does not, he will not be able to abolish child poverty and the Chancellor's instruments will not achieve his objective.
The fact that the Secretary of State does not wish to intervene suggests to me that he knows there is a problem, but is not willing to assure the House that he will raise it with the Treasury and the Chancellor so that something can be done.
Mr. Webb rose
Mr. Willetts: We are fortunate enough to have with us the author of a valuable book on the whole subject of poverty and the measurement of child poverty. I should welcome an intervention from him.
Mr. Webb: I shall scrap the rather partisan intervention that I had planned and suddenly become statesmanlike.
The English translation of what the hon. Gentleman has just said is that the war on lone parents is back on. He says that the tax credit system does not provide extra money for the second adult in a two-parent family, and that the Chancellor should give more to two-parent families than to one-parent families; but he has also made an important point about persistent child poverty. I genuinely do not know the answer to this question: is persistent child poverty, which is the most worrying sort, more concentrated among one-parent families? If so, would not his proposed system give less priority to the severe and persistent poverty faced by children in one-parent families?
Mr. Willetts: It is true that the problem of persistent poverty is more concentrated among lone-parent households. But it is also true that although lone parents are more likely to be poor, in absolute terms a majority of the 3 million-plus poor families are headed by couples. One of the Chancellor's problems is that his child tax credit is extremely harsh on families headed by couples. That is why he is making so little progress with his child poverty target.
Mr. Andrew Smith: May I return the discussion from its present academic level to a level that actually means something to people in communities? If the hon. Gentleman accepts, as he did in replying to the hon. Member for Northavon (Mr. Webb), that the problems for lone parents are more severe, how can he imagine for a moment that the Conservative party's commitment to abolishing the new deal for lone parents can do anything other than make that poverty worse?
Mr. Willetts: I am pleased that the Secretary of State has mentioned that, because it gives me an opportunity to move from the measurement of child poverty to a second subject that I wanted to raise with him: the performance of the new deal and, more widely, the problem of economic inactivity. This is one of the paradoxes of the current Government. We remember all the arguments about the problem of worklessness when they were in opposition; there has been very little progress in reducing the number of workless households
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since 1997. We remember being accused of taking people off unemployment benefits and putting them on to disability benefits—but what do we see now? We see an increasing number of people on disability benefits and an increasing number claiming incapacity benefit. I have seen the figures
Mr. Smith: The hon. Gentleman should check his figures. If he does so, he will find that the inflow of people receiving incapacity benefit has fallen by a quarter since 1997.
Mr. Willetts: The Secretary of State has made a serious mistake in raising this issue. The big problem that we face is people being trapped on incapacity benefit for longer and longer periods, and that is happening because the Secretary of State changed the rules in order to means-test incapacity benefit. As a result, if someone leaves incapacity benefit under the old rules, holds down a job for a while and goes back on to incapacity benefit, they do so on the new, means-tested basis. His changes have created a new obstacle to people leaving incapacity benefit because they are afraid that they will return to it on that new basis. We warned about that at the time, and I am afraid that the figures have borne out that warning.
Miss Anne Begg: How will the Conservatives' plan to abolish all new deals help people on incapacity benefit to get back into work?
Mr. Willetts: I regard the new deal for disabled people as one of the more effective new deals. We have not said that we will abolish the new deal for disabled people. However, the Government's welfare-to-work programmes simply have not delivered what the rhetoric claims. Indeed, as recently as a few days ago, yet another report showed exactly how ineffective they are. The Policy Studies Institute's evaluation of work-focused interviews for lone parents showed that less than 1 percent. of lone parents taking part in that scheme had exited income support as a result of doing so. Page 12 of the report states that
"the introduction of Lone Parent Work Focused Interviews brought about no detectable change in exit rates from IS"—
income support—
"for eligible new or repeat claimants".
The Department for Work and Pensions' evaluations of new deal projects and compulsory interviews regularly show that many such interventions have minuscule, and occasionally even negative, effects. However, instead of learning the lessons and redesigning his policies, the Secretary of State endlessly repeats the same rhetoric. He ought to discuss with the House why, for example, many of these compulsory interview processes are simply not getting lone parents into work and improving their performance. That would be a valuable debate, in which we would be very happy to participate.
Perhaps I might ask the Secretary of State about a third issue—housing benefit. I have some sympathy with the aim of reforming housing benefit. I shall watch with interest the results of the pilot projects that have already been launched. However, it is a pity that we have heard so little from Ministers about how those pilots are

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going, and I should be very grateful if the Minister for Work could say something in his wind-up about the envisaged future shape of housing benefit reform. I also wonder whether he has anything to add to what we have heard, for at least the past two years, about the piloting of schemes for standard payments. Housing benefit is crying out for reform and it is time that the Government gave us a progress report on their thinking on the subject.
I invite the Minister for Work to tell us a little about the state of Child Support Agency work. We have read reports of continuing problems with the new computer system; indeed, it was even claimed—I am not sure whether the claim was based on an accurate interpretation of what the Secretary of State said to the Select Committee—that the Government had encountered such problems with it that they might have to abandon it entirely. Will the Minister say how well the system is working and whether there is any prospect of transferring the existing case load to the new computers? We need to know whether that it feasible, and whether the Government are still committed to doing so.
I also want to ask the Secretary of State about pensions and pensioners. We are proposing to increase the value of the basic state pension because we do not want to live in a country in which more than half of all pensioners are dependent on means-tested benefits. The evidence of the low take-up of means-tested benefits shows that most people remain uncomfortable about claiming such benefits, however much the Secretary of State's Department spends on advertising them. The take-up of means-tested benefits is still shockingly low. Indeed, the Secretary of State hat had the honesty to admit that council tax benefit take-up is too low, and that he wants to raise it. The take-up rate for the old minimum income guarantee was just over 70 per cent. This is not good enough. It is extremely risky for the Government to put increasing weight on means-tested benefits to try to help poor people, given that the evidence shows that it is very difficult to increase take-up, despite Ministers' best efforts.
We are proposing to help take pensioners off means-tested benefits by increasing the value of the basic state pension. That would tackle a widespread grievance among pensioners and provide a solid basis for the savings industry to sell its products to future generations of pensioners. The industry says that it cannot encourage people to save because many are worried about being caught out on means tested benefits when they retire. Our proposal would offer a better deal for pensioners, and it would provide a better way of encouraging people to save for the future.
Mr. Bob Blizzard: Is the hon. Gentleman therefore telling the House that he would simply take money away from the poorest pensioners in order to redistribute it to the better-off ones?
Mr. Willetts: I am happy to reassure the hon. Gentleman that I am not saying that at all. We have no wish to abolish the pension credit—I think that the Secretary of State used that expression, although he did not attribute that wish to a particular person—but we propose to replace it over time with the state pension as it increases in value. No pensioners will lose as a result of our policies, and the poorest pensioners, who are not
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claiming the means-tested benefits that they are entitled to, will manifestly gain from our policies. It is very important that they get the help that they are currently not receiving.
Mr. Blizzard: Is the hon. Gentleman therefore saying that under his proposal, the pension credit would be frozen, the poorest and middle-ranking pensioners would get no uprating, and that that money would be spread among those who are not getting pension credit?
Mr. Willetts: We are not proposing to make any changes to the pension credit. We are simply proposing to increase the value of the basic state pension in line with earnings, which would gradually ensure that an increasing number of pensioners became free from means-tested benefits.
There is a crucial point on which I have previously asked the Secretary of State for clarification, and the intervention of the hon. Member for Waveney (Mr. Blizzard) gives me another opportunity to do so. It would be extremely helpful, particularly for pensioners and those who represent them, if we knew whether the Secretary of State-assuming that there is a third Labour term and he is re-elected to office-intends to increase the value of the pension credit by earnings or by prices. When we know the answer to that question, we can put further flesh on our proposals for pensioners. But the Secretary of State has never told this House that he is committed to increasing the pension credit by earnings in the next Parliament. Again, I invite him to the Dispatch Box, should he wish to give that assurance today. He seems unable to give it, and our assurance in respect of an earnings link for all pensioners and the basic state pension is a manifest improvement on anything that pensioners have received through the previous proposals of either of the two main parties.
The Secretary of State has again failed to take the opportunity to tell us that he is going to increase the pension credit by earnings in the next Parliament. If he will not do so, it is absolutely clear—[Interruption.] A Labour Member shouts "cop-out" from a sedentary position, but the cop-out is the Secretary of State's. The cop-out is that of a Government who still will not tell us what their intentions are for the pension credit in the next Parliament. However, we have set out our proposals for the basic state pension.
Sir John Butterfill: Does my hon. Friend agree that one of the problems—it is particularly apparent in my constituency—is that many of the people who are entitled to benefits do not claim them because they have no experience of doing so? Many of those who are in the most deprived state are widows who have no experience of claiming benefits. Not only are they intimidated by the paperwork that they must complete—it is very intimidating, as anyone who examines it will see—they are too proud to claim and feel that they should not do so. However, others who have claimed various benefits virtually throughout their lives find it much easier to do so. It is that first group who often constitute the very poorest in our society.
Mr. Willetts: My hon. Friend is absolutely right. Although I do not have the figures to hand, this is an

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important aspect of the council tax problem with which the Government are wrestling. The evidence of the take-up of council tax benefit among owner-occupiers—they have probably not been on income support or the minimum income guarantee in the past—is, from memory, about 30 per cent. I would be happy if Ministers want to intervene to correct me, but the take-up is very low among people who have not previously claimed any means-tested benefits. That is why there is such a problem with council tax at the moment.
Mr. McLoughlin: Do not the Government send out mixed messages when they say that they are trying to target help on the most vulnerable rather than give general increases, yet they have granted a general increase in heating allowances to every pensioner irrespective of income and a free TV licence to people over 75? They cannot argue both ways and claim that they are targeting help on the most vulnerable when they give out extra benefits across the board.
Mr. Willetts: My hon. Friend makes a good point. As I hear the different arguments from Ministers about why the winter fuel allowance is right for everyone; why older pensioners who tended to be poorer should be helped by a free TV licence for over-75s; and why means-tested benefits are also important, I detect completely different arguments in different contexts for different benefits.
Mr. Andrew Smith: For the sake of clarity, is the hon. Gentleman seriously proposing that a Conservative Administration would have no means-tested benefits?
Mr. Willetts: Conservatives are realists. I am a realist and I know that there will always be some means-testing. What we object to is the Chancellor of the Exchequer putting more and more people on means tests, when that should be a necessary but modest part of the benefits system. Means-testing should not be a central part of the Government's policy for tackling poverty and improving living standards. Under the present Government, what has happened—contrary to what the Chancellor said in opposition—is that we have become increasingly dependent on means-tested benefits as the Government's way of trying to help people, but they are simply not working. With more than half of all our pensioners on means-tested benefits, this is not the sort of country in which I wish to live.
Mr. Blizzard rose—
Kevin Brennan rose—
Mr. Willetts: I have already accepted two interventions from the hon. Member for Waveney, so I give way to the hon. Member for Cardiff, West (Kevin Brennan).
Kevin Brennan: If I understand correctly, the Conservative party proposes to reduce the proportion of gross domestic product spent by central Government,
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and in doing so to ring-fence the amount spent on education and health. So how will the hon. Gentleman pay for his pension funds?
Mr. Willetts: My right hon. Friend the shadow Chancellor made it clear in his authoritative statement the other day that his public expenditure proposals include our plan to increase the value of the basic state pension in line with earnings rather than prices. We have set out a very carefully costed programme to be financed by a combination of offsetting savings in means-tested benefits, which will gradually be displaced, and the abolition of the now deals, particularly for young people, which are not helping. What we are proposing is a much better system than the one it will replace.
The Minister for Work(Mr. Desmond Browne): In reminding the House: of what the shadow Chancellor said, will the hon. Gentleman also remind us that he said that in order to pay for the policy, a Conservative Government would have to take some "painful" decisions. Perhaps the hon. Gentleman could tell us precisely who would suffer that pain? On the new deal, can he explain the arithmetic whereby moneys are released to pay for the policy when the independent evidence shows that the new deal for young people alone saves the Exchequer s significant amount?
Mr. Willetts: The research to which the Minister refers was an extremely sloppy piece of work. [HON. MEMBERS: "Why?"] It was sloppy because it took the receipts from the windfall tax, put them all into a bank account and counted the interest earned on the unspent windfall tax receipts as one of the ways by which the Exchequer benefited from the new deal. That was a ludicrous way of assessing whether the scheme would help young people into work. That is why it is a sloppy piece of research.
We know from the National Audit Office that about 8,000 young people have been helped into work by the new deal for young people—a tiny figure in comparison with the figures that Ministers use. The new deal for young people has not been a good use of public money because most of the young people who got into work would have got into work anyway and they were doing so before the new deal came along. The fallacy of the Labour party is the claim that everyone who got into work since the arrival of the new deal for young people did so because of it. As I said, young people were getting jobs before that:80 per cent. of young people were leaving benefits and getting into work before the arrival of the new deal for young people. That is why it is a bad deal.
Mr. Blizzard rose—
Mr. Willetts: I have given way several times to the hon. Gentleman and I want to move on to my final point, which is another question for the Minister for Work to deal with when he winds up the debate.
I have read the document before us, and I was rather surprised by what has happened to the administration costs of the national insurance fund. Will the Minister explain why the accounts before us—provided by the Government Actuary 's Department—reveal

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"a large increase in the administration casts: the final costs for 2002–03 were almost 40 per cent. higher than the provisional estimate given to us by Inland Revenue al this time last year and the current 2003–04 provisional estimate is 40 per cent. higher than that."?
Given that we are all committed to reducing the overhead costs of Government, and that Conservative Members are serious about reducing them, can the Minister explain why the Government Actuary has been caught out by two successive 40 per cent. increases in administration costs? I greatly look forward to the Minister's response and I hope that he will tackle the points that I have made in my contribution to today's debate.
2.16 pm
Paul Flynn: This is an annual ritual in which social security nerds get together and speak to each other in a language that no one else in the country understands. I feel that I have to contribute for the sake of tradition.
I have a few minor quibbles against Government policy, but I am certainly against the policy of Conservative Members, who constantly amaze us with their brass neck after years of ravaging the social security system, cutting the benefits of the poorest people and 17 continuous years of salami cuts to the basic pension. I believe that we can say to the country that the Labour Government have, provided the best period ever for social security benefits and imaginative changes, and that for pensioners this has been the best period in recent history, in which benefits have increased by substantial amounts.
One of my regrets about the basic state pension—I raise the old chestnut again—is the link to earnings. If the uprating had been linked to earnings, the basic state pension for a single person would be 40 per cent. higher and for a couple 65 per cent. higher than now. It is a shame that we did not do so over a period in which the Government have engineered low interest rates and a steady economy, because we could have taken on the role of linking the basic pension to earnings with very little effect on the finances.
The hon. Member for Havant (Mr. Willetts) outlined the Conservatives' policy, which seems to be to link the basic pension to earnings. I believe that that is an admirable aim, for which many hon. Members on both sides of the House have asked over many years, but the downside is that the increase in the means-tested minimum would be at the level of prices. That is an extraordinary position, and for us old lags in the business it is so reminiscent of what happened throughout the 1980s when the link was broken. It would be a return to the Thatcher Government policy of allowing pensioners on income support to fall further behind the income levels of working people each year.
Getting people off means-tested benefits is a fine aim. We all want that to happen, but the Opposition proposals would make recipients of means-tested benefits relatively poorer, year by year. That is entirely morally indefensible. The hon. Member for Havant (Mr. Willetts) has presented a programme that would be aimed at that group of poorest pensioners. It is a cynical move: the Opposition want to grab a headline by saying that they would restore the link, but they do not make it
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clear that the other side of the coin is that they would cut what means-tested pensioners receive. People must not be taken in by what the Opposition say on this issue.
Another old favourite topic is the state of the national insurance fund. Its administrative costs might have increased for many reasons, but the fund is one of the Government's most successful enterprises, despite this year's seemingly disastrous news. It continues to be very profitable, even though income from contributions in the current year is expected to be £31.4 billion less than the Government Actuary estimated a year ago. That may be a surprising figure, but even so the fund's income is expected to exceed expenditure by a healthy £35 million. The balance in hand at the end of the year will be nearly £27.3 billion—three times the minimum working balance recommended by the Government Actuary.
To put it another way, the fund is supposed to operate on a pay-as-you-go basis, but it has an unneeded balance of some £18 billion—money that contributors have paid to meet the current costs of benefits, but which has not been used for that purpose. A written answer from my right hon. Friend the Paymaster General on 6 February showed that the whole of that £18 billion unneeded surplus had built up since 1997.
What will happen in the coming year, 2004–05? The Government Actuary's estimates show an increase of 5.6 per cent. in the fund's income, but an increase of only 3 per cent. in its expenditure. That produces another massive surplus of £32.4 billion. By the end of the year, the accumulated balance will be £1 billion more than the Government Actuary recommends.
It is often suggested that that is not real money, and that the fund does not really exist. It certainly does exist, however: nothing could be further from the truth than to suggest that it exists in some sort of parallel financial universe. The fund does exist, and an account of its investments is presented annually to Parliament. Those investments could be realised at any time if the money were needed for the payment of pensions or other benefits.
Although the fund exists, the Treasury treats it as an undifferentiated source of Government revenue. It is obvious that, in fixing benefit rates for the coming year, no account has been taken of the almost £20 billion needlessly held in the fund, although those who contributed the money assumed that it would be used for that purpose. Neither has any account been taken of the annual loss of £2 billion suffered by the fund as a result of reductions in employers' contributions to compensate them for the climate change levy and other "green" taxes.
That sum of money is rapidly becoming forgotten. I raised the matter in the Select Committee with one of the Treasury Ministers. I said that the climate change levy and other environmental taxes are being paid by the national insurance fund, through the reduced contributions for employers. Although those taxes are necessary and beneficial, why on earth should pensioners—the major beneficiaries of the national insurance fund—be the main payers? The fact that they are doing so is extraordinary, and a distortion of the fund's proper use.

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In another written answer on 6 February, my right hon. Friend the Paymaster General said:
"The UK national insurance scheme operates on the "pay-as-you-go" principle so that the contributions paid by people of working age fund the benefits of people who are currently claiming benefit."—[Official Report, 6 February 2004; Vol. 417, c. 1082W.]
That is true, as far as it goes, but it would have been more accurate to say that part of the contribution income is used to fund the benefit, and that the rest is used to help the Chancellor meet his fiscal targets. That is a long way from the original purpose of the national insurance fund, which was introduced by the last Liberal Government—some time ago.
Introducing his pre-Budget report on 10 December, my right hon. Friend the Chancellor of the Exchequer referred to the cost of restoring the earnings link. He said that
"to revert to the pre-1980 position—an earnings link with pensions—would, by the end of the period"—
that is, by 2050—
"raise deficits by 3 per cent a year just to cover this one item, with the long-term sustainability of the public finances undermined."— [Official Report, 10 December 2003; Vol. 415,c. 1063.]
Few people will be neurotic about the possibility of our finances being undermined by 2050. There was no mention of the fact that the basic pension is an insurance benefit, financed by contributions to the national insurance fund. If contributors are prepared to meet the cost from year to year, the sustainability of the public finances will be entirely unaffected.
What we really need is a radical review of the financing and control of the whole national insurance system, so that contributions can be seen to be used for the traditional purposes stated throughout the fund's history. In that way, account could be taken of all the principles on which the fund was based.
A paper entitled "Better Pensions" from the think-tank, Catalyst, proposed the establishment of a national insurance commission consisting largely of representatives of contributors and pensioners. Such a commission would provide a very good starting point for reform of the system.
The question of means testing has been raised already, and will probably run throughout the debate. We are told that it is no longer the means testing of old, and that we now have a new and cuddly version. That is fine, and there is some truth in that statement. People no longer have to supply details of their income on a week-to-week basis, which is a welcome change. We should also pay tribute to the unprecedentedly energetic and resourceful work of the pension services in tracing all those people who are entitled to means-tested benefits. However, the great condemnation of such benefits is that a huge number of people do not claim them.
My right hon. Friend the Secretary of State rightly referred to the poorest pensioners, but the poorest of all are those who are entitled to means-tested benefits but do not claim them. The problem has persisted under all Governments. The Government's target is to get at least 3 million households on pension credit by 2006. That will be an enormous undertaking, given that the number of pension credit households was little more than two
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thirds of the target figure. Ambitious as the target is, it would still leave 1.4 million pensioners not receiving the credit to which they are entitled.
It is not true that we have solved the take-up problem. We must do a great deal better in that respect, and I look forward to what my hon. Friend the Minister for Work has to say when he responds to the debate.
I turn now to the savings disincentive. The prospect of more than half the pensioner population being entitled to pension credit, not just in the short term but for the foreseeable future, poses a more fundamental problem. Those in receipt of the credit will find that its value is reduced by 40p for every £1 of income that they receive from an occupational or stakeholder pension. What sort of message will that convey to people of working age who are wondering about saving more for their retirement?
The problem is a growing one. I wonder whether those who push pension policies acknowledge that and make it clear that that is what will happen. As long as means-tested benefits exist, it will be hard to avoid the twin problems presented by low take-up and the incentive to spend rather than to save. However, we can stop the problem from spiralling out of control by keeping the gap between universal and means-tested benefits as narrow as possible, or at least by preventing it from widening. The simplest way to achieve that is to restore the earnings link, so that the basic pension rises in line with the means-tested minimum. That is a familiar plea in the House, but it is always valid.
Mr. Willetts: I invite the hon. Gentleman, who might have more success than I did, to ask the Secretary of State whether the value of means-tested benefits for pensioners will rise in line with earnings in the next Parliament, if the Government are re-elected.
Paul Flynn: I am touched by the hon. Gentleman's faith in my ability to persuade the Government. For about five years, I got up at an ungodly hour to table early-day motion I, urging that the link between the basic pension and earnings should be restored. Despite all my endeavours and those of the 100 or so fellow Members who signed those early-day motions, I failed so to persuade the Government. It is dishonest of the Conservatives to propose a programme that clearly would relatively reduce the income of the poorest pensioners. They suggest that the basic pension should be increased by earnings, which is fine, but increasing the means-tested pension only by prices would guarantee an increase in the disparity of incomes between better-off pensioners and the poorest pensioners.
If the Government cannot state their policy today, we must not gaze into a crystal ball but study their record, which is one of fairness, generosity and innovative policies that, as a pensioner of some four years' standing, I know people of my age greatly appreciate.
2.31 pm
Mr. Steve Webb: This annual debate affords the House the opportunity, which the Secretary of State and the spokesperson for the Conservative party took, to examine in detail benefit rates throughout the social security system and to reflect

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on Government strategy. I propose to follow them in doing so, but first I want to don my anorak—having been goaded by the hon. Member for Havant (Mr. Willetts)—and refer to article 20(3) of the regulations, which is obviously a contentious subsection:
"In regulation 16(3)(a)(k) (applicable amounts) '20 per cent.' remains unchanged."
The explanatory notes state, in the context of housing benefits for pensioners:
"Article 30(3) sets the percentage by which benefit is reduced after a period in hospital".
There is a corresponding section about council tax benefit.
Will the Minister explain the Government's thinking? Following pressure from others and us, there have been some welcome concessions on benefits for people in hospital, but are such people able to pay council tax any more than those living at home? Why should anything in the regulations cut council tax support for pensioners just because they are ill? Their other bills will continue. When will that provision cut in, and what effect will it have? Do the Government have any plans to review that arrangement? I cannot see any justification for reducing that support. I give the Minister notice of that detailed point, so that he will have a chance to respond.
The Secretary of State referred to the proposal to defer a lump sum for five years, which is an interesting notion. I have no problem with the idea of new options, but I must admit to some concerns. The hon. Member for Havant queried whether that money will be disregarded for the purposes of pension credit—one of two key questions. I was dismayed that the Secretary of State was unclear, saying that the principle is that the recipient will be no better but no worse off. What will that mean in practice? A man of 65 needs to know unambiguously whether the lump sum will count towards pension credit. If it does, that will change the entire calculation and it will become excruciatingly difficult. Although a 6 per cent. gross allowance might be achieved by deferring, which would probably be subject to tax, would the individual lose all future entitlement to pension credit, or lose it only until they had run down some of their capital stock? Some existing capital stock from another source might count, whereas new capital would not. Unless that scheme is implemented simply, pensioners might be asked to make complicated calculations. The Government's record on simple implementation is not particularly strong.
I understand that that proposal has been associated with the Pensions Bill, but I am not sure whether it requires legislation. I hope that the Government will soon be a good deal clearer on how that provision will work. Presumably the typical £100 that rolls up would be taxable, so one supposes that the lump sum also would be taxable. Would it be taxable only at the basic rate—the rate at which it would probably have been taxed when it accrued—or, because the £100 would grow into a socking great sum that would take someone way into the higher rate band, would there be some special tax rate? Would a person at the age of 65 be offered £26,000, or whatever the sum is at age 70, or £26,000 gross, which turns out to be £20,000 net? If so, the individual might have achieved the same return by putting their pension into an ISA. The Government talk about simplicity in pensions but are creating something that is not nearly as simple as has been suggested.
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Although some of the Government's ideas are not bad, they have been grossly overspun. The option of going without a pension for five years is not one that the masses will go for. The people to whom the Government want the scheme to appeal will predominantly be part-time workers. I do not believe that the Government have in mind people who work full time until age 70. People in good full-time jobs and on high incomes are probably well placed to sort themselves out anyway.
The Secretary of State mentioned women. The suggestion that women on modest part-time earnings would defer their pension for two or five years is farfetched and fanciful. I hope that the Secretary of State will not oversell the proposal. We do not have a problem with people being offered new choices, provided that they are simple and will not place them at risk of making the wrong decision. I hope that the Minister will not pretend that the proposal is some sort of revolution, because most people cannot afford to do other than take their pension as soon as it becomes available.
The main national insurance benefits for non-pensioners are linked to the retail prices index, excluding housing costs—and because of real increases in rents and housing costs, the rate is lower than inflation. The money spent on schemes such as the contributory jobseeker's allowance is now pathetically small—60p per week for under-25s and 80p per week for over-25s. An unemployed 25-year-old with a good contributions record receives £55.65 a week, whereas average earnings must be approaching £400 or £500 a week. When such allowances were created, they were meant to serve as earnings-replacement benefits. If they continue to be linked to a low measure of inflation year after year, their potential for serving as earnings-replacement benefits must have disappeared long ago. Do the Government plan to permit such allowances to wither, dwindle and become an anachronism, because they cost a lot to administer—money that could be spent helping unemployed people who need support. The Government have an interest in permitting such benefits to wither, but is any systematic policy in place to re-examine the role of benefits, rather than let them die from natural causes?
The age addition for the over-80s remains at 25p. It has stayed at that level for nearly a quarter of a century. Five shillings was once a lot of money, but it is not today. There is a fundamental difference between the Government and us over the potential for using that money to reach the most needy pensioners. There is some common ground between the official Opposition and us in respect of persons who do not receive pension credit, the majority of whom are elderly pensioners. The Government have missed the opportunity to do something with the age addition, rather than let it wither. The length of the regulations is testimony to the complexity of the entire system, which contains all sorts of bits and pieces that do not do what they were originally designed to do but that nobody will sort out. One occasionally wishes that, instead of producing the same document setting the figure at 1.8 per cent. practically every year, someone would take a strategic look at the system rather than let it drift on with bits falling into disrepair. The social security system is like a house that nobody has lived in for many years—things are gathering dust because they have always been there.

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I want briefly to raise three strategic issues. First, we have not touched on the transfer responsibility for poor families with children from the social security system to the tax credits system. When I first saw the regulation, I rang the Library and asked whether there had been a typing mistake because the rate for children is £42.27, which is a strange number that looks a bit odd. It became apparent that the figure is not actually a social security rate; it is a tax credit rate per year converted into a weekly amount.
Whereas last year's transition from supporting families through the social security system to supporting them with tax credits was a mess, at least the people covered by that system were generally workers who had some other source of income. This April, people who are wholly dependent on the social security system will transfer to the Inland Revenue's clutches. Most of their money will come from tax credits rather than from social security, and it is vital that the process is right. When the Department for Work and Pensions says on day one, "You are not our responsibility any more. We will give the amount for the adult, but it is over to the Revenue", the Revenue must not say, "We will get it right in July." Such families cannot be put in that position.
I asked the Paymaster General for information on the transition, and she promised the House a statement, which we have not yet heard. It is nearly March and the transition occurs in April. What is going on? Why have we heard nothing from the Government about how the transition will happen? Are low-paid families on income support confident that support for their children will seamlessly—that adverb is not often used in the context of the tax credit system—continue the day after the DWP pulls out? I hope that the Minister for Work can reassure us that he is actively ensuring that such people, for whom his Department is currently responsible, will have their welfare protected and that the transition is already being properly planned. The people involved with the dreaded computer systems that lie behind the transition say that they are behind schedule on the testing, and one's heart sinks at the prospect of the mayhem that might arise.
Mr. Willetts: I entirely agree with the hon. Gentleman's concerns. Does he agree that although we have been told that the new system is seamless, unemployed families will find themselves dealing with two different agencies and trying to receive money from two completely different sources? It is absurd to regard the transition as simplifying the system for adults who will continue to receive benefits or for children who will need help from the Inland Revenue or tax credits.
Mr. Webb: I sympathise with that point, because I have tried to help constituents to sort out their child tax credits. The system has been running for nine or 10 months only, and my constituents raise concerns such as "My partner changed hours in July" and "I did some overtime in October". Such reporting and record keeping will be part of daily life for families across the land. Again, I am worried that the Inland Revenue is not geared up to act quickly. For all the failings of the benefit system. it was pretty good at responding quickly
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to emergencies. The Revenue must adopt that culture, and it must adopt it quickly. I am seriously concerned about the matter. Although it will by and large be the Treasury's problem after April, 1 hope that the DWP is throwing its weight 'around behind the scenes because I fear the worst. I am not scaremongering because last year we saw what can happen when the system goes wrong. The people affected last year had some income, but the folk whom we are discussing are wholly dependent on this money, so I hope that lessons have been learned.
Secondly, the hon. Members for Havant and for Newport, West (Paul Flynn) touched on the national insurance fund, and I want to pursue the issue of the report on the regulations. Appendix 7 compares the out-turn for 2003–04 with the estimate made one year ago. The hon. Member for Havant raised the issue of administration costs, which I want to pursue. One year ago, it was forecast that it would cost about £1 billion to administer the national insurance system, but the out-turn is £1.75 billion. In one year, the estimated cost of administration has gone up by £750 million, and a footnote lists two sources for that increase.
There has been a to-ing and fro-ing of funds between the national insurance system and the rest of the DWP. How can one work out how much it costs the DWP to administer its bit of the national insurance system? One must stick one's finger in the air and pick a figure, so the grey area surrounding that figure and the possible end of year adjustments is understandable.
The second reason is interesting:
"a one-off payment was made to the Welfare Modernisation Fund."
That sounds suspicious, so I tabled a written question to find out the size of the payment. The explanatory note does not state the size of the payments, which seems odd given that we are discussing £750 million. It would be reasonable to break that figure down, but that has not happened. The written answer was not helpful, apart from giving me a slight sense that the Department sees the national insurance fund as a cash cow, which is the point made by the hon. Member for Newport, West.
The DWP cannot get rid of the blessed money because it does not want to put it into national insurance benefits, but it can have £750 million for departmental running costs, which is a clever trick if one can pull it off. Once again, the House's scrutiny of the expenditure of such vast sums of money is pathetic, and I take as much responsibility for that as anyone else. I hope that the Minister will tell us more about the £750,000 in his winding-up speech because it is not small change—one could build the dome for such a sum. What is the scrutiny process? I hesitate to say that £750 million has been pilfered from the national insurance fund, but there has been sleight of hand at the very least.
Thirdly, I shall discuss take-up. The benefits are great for people who get them, but they are less great for those who do not. We have heard that council tax benefit is the least well taken-up means-tested benefit—I used to make that kind of comment at dinner parties just to keep the conversation going, but now it is received wisdom. More than 1 million pensioners are not claiming their council tax benefit.
The hon. Member for Bournemouth, West (Sir John Butterfill), who chairs the all-party group on occupational pensions, is no longer in his place, but he

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pointed out a particular issue for owner-occupiers in an earlier intervention. Three quarters of the pensioners who do not take up their council tax benefit are owner-occupiers. Because they have reached the age to draw their pensions—perhaps they draw a bit of company pension as well-they are not used to claiming benefits and do not think that it has anything to do with them.
We are now seeing the political consequences of people not claiming the council tax benefit to which they are entitled. More than 1 million pensioners find it so hard to pay their council tax that the system puts something in place to support them, but they do not receive the help. The political point is that pensioners who claim their council tax benefit once are insulated from any future increase in council tax, which is slightly odd. In other words, the system works out what people can afford to chip in regardless of actual council tax— for example, the system might say that someone can contribute £5 a week regardless of increases in council tax. If council tax goes on rising at a far greater rate than inflation, all those people will be insulated. There is a huge political reward for the Government if they can get such people on council tax benefit.
Every year I ask the Government why they do not use the income information that they already collect? Hundreds of thousands of pensioners supply the Government with every single bit of information that the Government need to work out council tax benefit because they are claiming pension credit or housing benefit. That does not apply to owner-occupiers, but it still includes more than 333,000 people. Every year, I am told that there is a pilot, scheme or advertising campaign. We heard about another advertising campaign this afternoon—whoopee! The Government have not addressed the structural problem for seven years. I know that there have beets pilots, but I simply cannot understand why the Government are not just doing it. What is the problem? Will the Minister tell us why the Government do not regard a claim for pension credit as a claim for council tax benefit? Why do they not regard a claim for housing benefit as a claim for council tax benefit? If they did so, at least 333,000 pensioners would get the money to which they are entitled. The matter is not difficult and I do not understand the problem.
The system is fiendishly complicated and is becoming more so with every passing year. Any hon. Member who understands the child tax credit and working tax credit systems deserves enormous credit. The people who need the system most are not being helped because it is so complicated and they do not make claims. The transition from one scheme to another could leave far too many people in the lurch. The benefits may be all very well for those who receive them, but far too many people fail to receive them.
2.49 pm
Mr. Clive Soley: I wish to make two brief points and one slightly longer one. First, I agree with my hon. Friend the Member for Newport, West (Paul Flynn), who made the point in an intervention that the definition of poverty needs to be refined. It is absurd that an increase in the number of millionaires leads to an increase in the percentage of people in poverty without anybody getting any worse off. That is a statistical problem that needs to be addressed.
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My second point is addressed to the hon. Member for Havant (Mr. Willetts). The sentiment was expressed more eloquently in this House many years ago, but we do not need to look in a crystal ball to see what the Tory party would do: we need only look in the history books. Of course, the Tories cut the link with earnings for pensioners, and thus did more to keep pensioners in poverty than any other party in the 20th century. That is not anything to be proud of.
My third point concerns the fear of poverty and the presentation of it in the press, and it is related to the intervention I made earlier about the lady who was allegedly about to go to prison because she could not afford to pay the council tax. I thought that that story was wrong as soon as I saw it, because the press claimed that she received only £312 a month in pension. I do not know who her MP is and I make no criticism, because we can all let things slip by, but my immediate reaction was that if she had been my constituent I would have tried to find out why she was receiving so little when she would be entitled to at least £400 a month, if not more. In any event, she should probably not pay the council tax or should receive a significant rebate, unless she had substantial savings.
Editors and sub-editors should know, given that many junior reporters will know, that someone on such a low income would normally get benefits. In other words, someone should have recognised that the story was seriously wrong. The hon. Member for Havant appeared to misunderstand me—and if he consults Hansard, he will see why—when he suggested that I was criticising the lady involved. In fact, in some ways, I made her point for her. She objected to the use of her council tax to fund a part of the European Union regional government structure. I make no criticism either of the United Kingdom Independence party or of Max Clifford. All three co-operated on a legitimate campaigning point, although the lady was unwise to say that she would go to prison for the cause.
I do, however, strongly object to the press using the story to present the lady as being in poverty, and that is related to my wider point about the fear of poverty among pensioners. One result of the story was that people sent cheques to the local authority to pay the lady's council tax bill—I do not know what the local authority will do with the cheques that were paid anonymously—but she was trying to make a political point. She said that she was prepared to go to jail because she objected to one aspect—or perhaps the whole—of the European Union, but she was not making a point about poverty
I remember that in 1997, when this Government were elected, some0 pensioners—especially women who had not paid any contributions during their working life —received only some £60 a week. That quickly went up to more than £90 a week and then to more than £100 a week, but—as ever with means-tested benefits—the problem was getting the message over. Some people did not receive the full amount and it was necessary to draw their entitlement to their attention. That is why I think the newspapers could have made a good story out of the lady's example. They could have said, "Look: pensioners who are getting only this amount need to put in a claim, either for council tax rebate or exemption, or for the increased pension that they are owed." The newspapers did not do that, and that was unfair of them.

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Paul Dacre, the editor of the Daily Mail, who was very keen on the story, awarded himself £80 million a couple of years ago and presumably does not have to worry too much about paying the council tax. He will probably also accept his state pension in the normal way. I would have been more impressed if he had used his power, knowledge, position and influence to draw to the attention of pensioners their entitlement to those allowances. That would have been a good story and one that the papers could have been proud of.
Pensioners are not a timid group as a whole, but there are some timid people among them. However, the fear of the means test is no longer the main issue. It has a terrible reputation from the period of mass unemployment in the 1930s, but it no longer holds the same terrors. I do not claim that it is easy or has no problems associated with it, because it has, but I have noticed that pensioners who are entitled to council tax rebates or exemptions do not claim them. They assume that they have to pay the council tax whatever their income. The headlines in the press said that the lady in question had to pay or go to jail, so it is not surprising that some pensioners are fooled into believing that if they do not pay they will go to jail. It is irresponsible of the press to use such stories to scare people. We should have no illusions about it: that is what they are trying to do. I do not mind the press making political points, but they should not use vulnerable people to do so.
My ministerial colleagues are doing a good job on pension and benefit issues, but we must get over to people—the hon. Member for Northavon (Mr. Webb) also made this point—the fact that council tax exemptions and benefits are available. It is important to get that across to pensioners, because they are most affected by it. The newspapers could help in doing that. If they had used the story last week to get the message over, there would be many people feeling more comfortable and being slightly better off as a result. Instead, a person who set out on a road out of principle has had it turned into something else and, at the same time, others will have been made fearful about the dangers of going to prison if they do not pay their council tax.
2.57 pm
Mr. Nigel Waterson: It is a pleasure to be able to take part in this short but high-quality debate on the uprating orders. We have heard some interesting contributions—not least, the one from the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley). I always think of his constituency as including part of Hammersmith, having been chairman of the Hammersmith Conservatives many years ago and failing miserably to unseat him, to his no doubt considerable relief.
We started the debate with an orgy of self-congratulation from the Secretary of State about the benefits situation. As the debate has worn on, however, some of the gilt has come off the gingerbread. The Government now spend £125 billion a year on benefits and tax credits. Are they spending all that wisely, sensibly and effectively? Certainly not.
I turn first to the issue of means-tested benefits, especially council tax benefits, as that subject arises naturally from the previous speech. We know that
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council tax benefits have the lowest take-up rate and we know the reasons. I shall not repeat the good points that have already been made about that aspect of the debate. We also know the problems that have been caused by the recent shift in grant allocation from the south of the country to the north and midlands. We have also had endless debate about the case of the elderly lady, and I shall not dwell on it at any greater length. The hon. Member for Ealing, Acton and Shepherd's Bush has made his points.
As the Secretary of State recognised, however, there is a major problem in getting to claim that particular means-tested benefit. Within that problem is the even bigger problem of owner-occupiers; the hon. Member for Northavon (Mr Webb) touched on that important point. All too often in recent times, retired owner-occupiers, with major difficulties in making ends meet, have been faced with gigantic increases in their council tax and are either unable or unwilling to claim council tax benefit—in many cases, simply from ignorance that it even exists or that it would apply to them if they asked for it. I welcome the Government's publicity campaign, but that very campaign underlines the immutable problem with all means-tested benefits: there will always be a lack of take-up of those benefits, no matter how much any Government spend on advertising, television or writing to people
In my constituency last year, there was a 38 per cent. increase in the council tax element generated by Eastbourne borough council—the fourth highest in the country. The hon. Member for Northavon would be disappointed if I did not remind the House that Eastbourne is a Liberal Democrat-controlled authority. Locally, the Liberal Democrats are running their "Ax the tax" campaign, which is rather like a serial killer pleading, "Please stop me before I do it again". However, in reality the fact remains that many vulnerable elderly people, who have limited resources and have great problems in making ends meet, do not claim their full entitlement.
I shall return to means-tested benefits in a moment, but first I want to touch on the issue of economic inactivity on which there was some dispute between the Secretary of State and my hon. Friend the Member for Havant (Mr. Willetts). There is a growing and worrying problem, which David Smith set out well in an article in The Sunday Times only a couple of days ago. He said that, yes, the headline figures for employment look pretty good, on the face of it. Indeed, only the other day, the Minister for Work, who will be winding up the debate, was quick to issue a press release taking credit for what seemed to be relatively rosy figures, but as the article in The Sunday Times says—
Mr. Browne: Will the hon. Gentleman give way?
Mr. Waterson: Yes, although I should have liked to finish my point.
Mr. Browne: I am grateful to the hon. Gentleman for giving way in mid sentence, but it is important that he inform the House of two things. First, the press release was issued in response to the monthly labour market figures published not by my Department but by the

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Office for National Statistics. Every month from time immemorial, every Minister who has had my responsibilities has issued a press release on those figures, although they have not always been able to welcome the good news that I have been able to welcome so consistently. Secondly, the hon Gentleman should have informed the House of the fact that I drew attention in that very press release to inactivity. Indeed, I have done so in almost every public statement that I have made as Minister for Work.
Mr. Waterson: That is a helpful intervention. I was certainly not criticising the Minister for putting out a press release; that is one of the things that Ministers do. On the Minister's second point, I am delighted that the penny has begun to drop for Ministers and the Department and that they realise that there is a massive hidden problem—
Mr. Browne Mr. Browne rose—
Mr. Waterson: May I get to the end of this sentence? [Interruption.] Very well, I give way.
Mr. Browne: I do not know where the hon. Gentleman has been over the life of the Labour Government, but, if he does not already have them, I shall send him the documents we have published on the development of our policies to tackle inactivity. He must surely know about the "Pathways to Work" Green Paper, published about two year, ago, and about the pilots which have already taken place, and which will be taking place shortly across 10 per cent. of the country.
Mr. Waterson: In a sense, this argument is the wrong way round. The Minister was obviously so incensed by some of the comments made by my hon. Friend the Member for Havant and endorsed by The Sunday Times that he took the trouble of writing to my hon. Friend on 9 February to complain about the figures on which my hon. Friend has been relying, which I shall cite in a moment. The Minister cannot have it both ways. He cannot agree with what I have yet to say on the subject on the one hand while on the other violently disagreeing—albeit with his usual courtesy—with my hon. Friend in writing earlier this; month. Or are there two Ministers of the same name prowling the corridors of the Department for Work and Pensions? [Interruption.] The Minister says that he can have it both ways. Perhaps he can—at least for the next 15 months.
May I now make the point with which the Minister so violently disagreed before I could make it? The Sunday Times article states:
"A record 7.85m people of working age are economically inactive, 2.lm of whom say they want a job."
David Smith draws particular attention to men aged between 25 and 35—a point that my hon. Friend the Member for Havant has made more than once. One would expect that in any given scenario that would be the age group of young men who were most likely to reach full employment, yet the article notes:
"employment in this age group has dropped by nearly a quarter of a million to 3.4m over the past two years."
There are various possible explanations for that. My hon. Friend has talked about the "lost generation" of more than 1 million young people without jobs or
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proper education and training. That throws into stark contrast the headline figures comparing our rates of youth unemployment with those in countries such as Germany—[Interruption.] I can see that the Minister is gearing himself up for another intervention.
The youth unemployment rate in Britain is actually 12.3 per cent. compared with 10 per cent. in Germany. Is this a convenient moment for me to give way to the Minister?
Mr. Browne: No, carry on.
Mr. Waterson: The Minister is rustling his papers furiously.
My hon. Friend the Member for Havant has also drawn attention—in a pamphlet—to a further issue: jobs in public administration, education and health—that is, public sector employment—rose by 153,000 last year and that self-employment has risen by 294,000. There are two ways of looking at those figures. Self-employment is a good thing, because people are being entrepreneurial and running their own business; but there is also the problem of involuntary self-employment—people who have been made redundant or have lost their job and been forced to set up on their own to make ends meet.
It is, however, abundantly clear that there has been a significant drop in mainstream private sector employment. No less a person than John Humphrys put that point to the Chancellor on the "Today" programme recently, although the Chancellor flatly denied it.
At the end of David Smith's article he makes a fair judgment of the Government. He states:
"Full employment remains an ambition, not an achievement".
Mr. Browne: I am grateful to the hon. Gentleman for his generosity in giving way again. I read with interest the article to which he refers. If he quoted it all, he would be able to tell the House that the author gave the Government considerable credit for their achievements in reducing unemployment.
The issue is serious and important and we need to debate it, but the hon. Gentleman ought not to distort or misrepresent the figures. That was why I wrote to the hon. Member for Havant on 9 February. In fact, more than 1 million of the 1.7 million extra jobs in the United Kingdom today compared with 1997 are shown to be in the private sector.
Mr. Waterson: I shall not go back over the article or the pamphlet written by my hon. Friend the Member for Havant, but it seems clear that the current figures for increasing employment relate to the public sector and that the rate for the private sector is not increasing but falling back.
Another point that my hon. Friend rebutted in his response to the Minister's letter is that if we add the number of young people who are not in full-time education to the number of those who are economically inactive, the sum total is well over a million young people, which is a great worry. In fairness, the Minister has accepted that the issue is serious—[Interruption.] —as he repeats from a sedentary position. That is a further example to show that the headline figures on which the Government so often rely are only part of the story.

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I come now to the new deal, particularly the new deal for young people. The Minister may remember that, on 17 November, he described the new deal for young people as a "great success"—no, doubt, when taking a break between sending out press releases in similar terms—but recent figures show that only 35 per cent. Of all those starting employment under that new deal have entered unsubsidised jobs. As I have said, there are still well over 1 million young people who are either economically inactive or unemployed. Only 17 per cent. of those starting employment under the new deal for over-25s entered sustained, unsubsidised jobs.
My hon. Friend the Member for Havant touched on the new deal for disabled people. However, there seems to be some misinformation among Labour Members, so let me take this opportunity to make it absolutely clear that abolishing that new deal is not part of our policy, nor part of our savings to restore the earnings link, because that new deal has been relatively successful. A great deal has been spent on the other new deals to much less effect, but there is still a persistent figure of 1 million or so people with disabilities who, when asked, say that they would like to gain or return to employment.
Again, we can agree that that is a serious problem, but I urge Ministers to consider the point that my hon. Friend made so eloquently in his opening speech: there are artificial barriers—we have debated them in the past—to people returning to work. Of course, one of the main barriers, if not the main one, is simply the introduction of the means-tested benefit, whereby people feel that, if they get a job which, for any number of reasons, does not work out, they will be in a more disadvantageous position than they would otherwise have been. I urge the Minister to take that point seriously.
Mr. Webb: The hon. Gentleman makes a distinction between the new deal for disabled people, to which he is broadly sympathetic, and the other new deals, which he wants to scrap. What is different about the new deal for disabled people? Why does he want to keep that new deal and get rid of the others?
Mr. Waterson: I have made the point that the new deal for disabled people has been relatively—I stress that word—more successful. Although vast amounts more are spent on the other new deals, a significant proportion of those involved in the new deal for disabled people have been helped back into work. About 6.6 per cent. of participants in that new deal have found sustained employment under the scheme. Of course, that is nothing like enough—I concede that immediately—but it is at least something. Given the fact that those people have particular disadvantages, we have concluded that we would keep that new deal in more or less its current form for the foreseeable future.
Mr. Browne: I am extremely grateful to the hon. Gentleman for giving way again. On the disincentive effect of the requirement to recalculate benefits for disabled people who move into work, I was interested to hear the hon. Member for Havant developing that thesis during his speech, but I am certain that the reality does not sustain his thesis. The reality is that, for 52 weeks or
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up to two years, these who enter work through the new deal for disabled people will almost always be guaranteed to return to the same rate of benefit, because of the linking rules, if they lose their job.
Mr. Waterson: If the Minister is right, perhaps this is a matter of perception, but at the end of the day, the means-tested benefit is one of a number of artificial barriers to disabled people returning to work. I have not gone away and dreamt that up in a darkened room; it has been put to me by disabled people and groups that represent them. There is a major, perceived disincentive, but if the Minister is right, perhaps he and the Department should do more to make such things clear to those groups.
I shall now move on to the final issue on the uprating of benefits that I wanted to touch on: child poverty and the Child Support Agency. The Secretary of State for Work and Pensions has conceded more than once—he certainly did so when 1 last raised the issue back in December, and he has not tried to tap-dance round the problem—that there is a major difficulty with the computer system, with the migration of the 1.1 million old cases to the new system and with the date at which it will work properly. This is not some anorak, techie issue. A very large proportion of the people involved in those 1.1 million cases could be significantly better off on the new formula. Many of those families have modest means and are in vulnerable situations. So there is a real injustice, not least because there is no suggestion that they should be compensated ex post facto when they finally get on to the new system. Again, those vulnerable, poorer people's cash flow is being used to subsidise the Government, which is wholly unacceptable.
The initials EDS inevitably rear their head. When the Secretary of State gave evidence on this subject, he made the point that "significant payments" due to EDS had been withheld. Clearly, there is a major problem. Among other things, he said:
"We have been assured there is a recovery programme in place and that the system is retrievable-in other words, it can be made to work properly rather t Ian needing to be scrapped."
However, when pressed, he also conceded that
"it might have to be abandoned."
He went on to say:
"When you have been through the sort of experience … you ask some hard questions about whether it really can be made to work."
So let me ask one of those hard questions again today, for the Minister to cover in his winding-up speech.
Are the Ministers in the Department for Work and Pensions now confident about the long-term future of EDS's involvement in that project? Do they believe that the system is retrievable. or that it needs to be scrapped? I am happy to take an intervention to deal with that point—now or later, whichever is more convenient. I gather that the Minister has wisely decided to deal with it later.
I shall just touch on child poverty because my hon. Friend the Member for Havant went into that issue in some depth in dealing with the clash with the tax credit system. We all know about the problems that our constituents faced when the system was introduced and the hon. Member for Northavon eloquently dealt with

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the major unfairness involved, but there were two thunderous silences in the Secretary of State's speech. I shall come to the other in a moment, but the first occurred when he was pressed by my hon. Friend on that issue. Having reflected on that and having received inspiration from officials, the Minister may feel able to deal with that point in responding to the debate.
This is the bit where I put on my anorak—although little used—as I want to refer to the Government Actuary's Department document, Command Paper 6117, which accompanies the helpful bundle of papers on the uprating order. In my eternal attempt to be helpful, I remind the Minister of the point that has been made by my hon. Friend the Member for Havant and the hon. Member for Northavon about the apparent 40 per cent. jump in administration costs for 2002–03, and the fact that the estimate for 2003–04 is 40 per cent. higher even than that. We just want to know why.
I wish to make two other points about Command Paper 6117. First, according to the document, contribution receipts are up 5.5 per cent. —from £59 billion to £62.2 billion—but benefits, including uprating, are up only 3.9 per cent. Is that not an example of another stealth tax in operation? Finally on that document, the Government Actuary says:
"There is still uncertainly about the effect of contracting out on the financial position of the National Insurance Fund."
I think I am right in saying, although I was not in this august position last year, that that issue was raised in this very debate a year ago. The Government actuary says that he thought a year ago that we would have the information by now, but that does not seem to be the case. The last reliable data on the numbers contracting out relate to 1998–99—five years ago—and the only data on the ages of those contracted out date from 1995. Can the Minister explain that massive lacuna, and does he agree that the lack of data on contracting out means that policy making is being conducted in a vacuum?
May I touch briefly and separately on the pension uprating order? Means-testing is at the heart of all such debates—we will no doubt come on to it again in the Opposition-day debate later. The Conservative party fundamentally believes that growing means-testing is not only wrong and bad for society and the individuals involved but deters help from getting to those who most need help. We debate the roll-out of the pension credit endlessly in the House, but even after all the advertising, letters, home visits and surgeries. only about half of those who are entitled claim the credit. The Department's target—to use the word used by the Minister—means that 1.4 million people will never get round to claiming pension credit.
The second thunderous silence during the Secretary of State's speech came when he was pressed on his party's future plans to link pension credit either to earnings or to prices. The Government seem unable or unwilling to answer that enormously important question. Thus, our argument is that the only fair and sensible way of dealing with the problems, as set out by the hon. Member for Newport, West (Paul Flynn), is to restore
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the link with earnings. I know that we must be on strong ground because a range of older people's organisations and organisations such as the TUC support our policy.
Mr. Jim Cunningham: I must say that I find it strange that the Opposition now argue for the restoration of the link for pensions, given that they abolished it in the first place. Why the conversion?
Mr. Waterson: Talk about looking a gift horse in the mouth! The landscape in 1980 was different from that of today for all sorts of reasons. Why does the hon. Gentleman take umbrage with a proposal for which organisations have been calling for years and which is, in truth, what most Labour Members want? It can only be because it is a Conservative party policy.
Mr. Browne: May I bring the hon. Gentleman slightly more up to date? His colleague the hon. Member for Havant said only three years ago that restoring the earnings link would be
"a wild and uncosted policy"—[Official Report, 8 June 2000; Vol. 351, c. 440.1
Mr. Waterson: Let me then register the profound gratitude of Conservative Members to the Chancellor of the Exchequer, because no less a person than he has made the policy possible; first, by squandering, in many cases, so much money on the new deal and, secondly, by introducing the pension credit. As I have tried to explain—my hon. Friend the Member for Havant explained it better than I ever could—the answer is not to keep increasing the proportion of pensioners on means-tested benefits. We all know the horrific projections about the latter part of this century, but the proportion of pensioners on means-tested benefits is already approaching 60 per cent. That is wrong as a matter of principle, and it is also an extraordinarily inefficient way of delivering help to the poorest pensioners.
Mr. Frank Field: Why are the Opposition being so gentle on the Government on that point? The Government cannot maintain the policy. Does the hon. Gentleman recall that the introductory papers on pension credit showed that its final roll-out would put 11 p on the standard rate of tax? None of us wants to go into an election with policies that advocate raising income tax by 11p, so at some stage the measure will be scrapped. It is thus proper to discuss the alternatives.
Mr. Waterson: I am grateful to the right hon. Gentleman for his measured and sensible contribution—as usual. As my hon. Friend the Member for Havant and I have explained, it is not our policy to scrap the pension credit. Our policy is that it should wither on the vine as the state retirement pension rises to a proper level that is linked with earnings. That is important not only for the purposes of this narrow debate, but for the wider debate that we will have—especially during our consideration of the Pensions Bill—on whether there is a proper and appropriate platform for people who want to make further provision of their own for their retirement.
Mr. Jim Cunningham: I was not arguing against the link in any way during my last intervention—I am

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probably one of the few people here who support the link. I was saying that the Opposition's U-turn after two or three years is strange, in that they have undergone a great conversion on means tests. They are suddenly against them and want to restore the pension link, yet they introduced more means tests than anyone. To get some credibility, they owe us an explanation of their alternative policy.
Mr. Waterson: I thought that I was explaining our alternative, which is to restore the earnings link. If the hon. Gentleman wants to check the figures, an excellent pamphlet published by my hon. Friend the Member for Havant sets out exactly and clearly how our policy would be financed.
Of course, the pension credit changes everything. It would have been more difficult for us to do this U-turn, as the hon. Gentleman describes it, and produce the new policy if it were not for the pension credit. The pension credit rams home the message that it is the Government's firm intention to increase inexorably, year on year, the proportion of the population, especially older people, who are reliant on handouts from the state—it is as simple as that.
There is a further side issue to the point that I made about the platform for people's retirement provision: the amount that people must save during their working lives to be sure that they will not be subject to means-tested benefits. We produced an independently researched figure of £180,000. Ministers take every opportunity to rubbish it and say that it cannot be right, but—another thunderous silence—they have consistently failed to tell us their figure. Sooner or later, they will have to tell the financial services industry because it will want to be sure that it will not mis-sell products in years to come to people who will actually end up being the losers because they will miss out on means-tested benefits.
A fundamental issue underlies those points. The Government's policies create a massive disincentive to save for retirement. Their policies on pension credit and other means-tested benefits fatally undermine anything that they are trying to achieve through the Pensions Bill and other measures.
Sir John Butterfill: Has my hon. Friend heard that it has been estimated that an individual would need a savings pot of about £180,000 to avoid going into pension credit?
Mr. Waterson: That is exactly the figure that we have put into the public domain. Before I sit down and give the Minister every opportunity to respond to all these detailed points—he will have plenty of time—I put a question to him: if he does not accept the figure of £180,000, what is the Government's figure? They must have a figure for internal planning purposes, but they are unwilling to share it with us at the moment. May we know what that figure is?
3.29 pm
The Minister for Work (Mr. Desmond Browne): I thank hon. Members who have contributed to the debate, in preparation for which, in the absence of any
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anorak in my wardrobe, I took the opportunity to reread the reports of the equivalent uprating debates for the last three years: I may qualify for an anorak now. Consistent with tenor and content of those years, this has been a useful and interesting debate, and I am happy to admit thin it has been educational to some degree for me, for I never fail to pick up something in debates about social security and related issues. While I do not bring the stills of an anorak to debates of this sort, I try to brim i other skills to them and hope to contribute in that way.
It is my intention. so far as time permits, to answer the relevant points that have been made, but first I think I should make some key general points that set the context for the debate and which bear some repeating.
First, as my right hon. Friend the Secretary of State made clear in the early part of his opening speech, the estimated cost of uprating for 2004–05 is £2 billion. That extra Government spending means £1.2 billion for pensioners, £340 million for disabled people and carers, £360 million for people of working age and £240 million for children.
As my hon. Friend the Member for Newport, West (Paul Flynn) pointed out, this Labour Government have been able year on year to cut the costs of economic and social failure. As my right hon. Friend made clear, with record employment levels we have £5 billion of savings that can be invested to tackle poverty. We have been able to do that by a combination of sound economic management and policies to increase employment, key subjects on which the dogs did not bark among those on the Opposition Benches who are keen to point out in some detail some of the issues that those on our From Bench did not respond to. The combination to which I referred is why we are able to reverse the legacy of pensioner poverty and why we have made significant progress towards our long-term objective of ending child poverty within a generation and halving it within 10 years. In 1997 the Tories left us at the bottom of the European child poverty league table. We have started to move up significantly, already having moved four places up that table. But we have ambitions to move further, and quickly.
I turn to some of the issues raised in the debate. I shall endeavour to answer all the relevant points, but as I may not have the detailed information to answer all of them, particularly some of the detailed points about the national insurance fund. I undertake to write to hon. Members giving detailed responses. A copy of the letters will also go to the Chair of the Work and Pensions Committee, and a copy will be put in the Library.
I listened with interest to the discussion of the hon. Member for Havant (Mr. Willetts) with himself. The hon. Member for Ncrthavon (Mr. Webb) never ceases to stir from his chair in these circumstances. I suppose that that is the problem of the relationship of teacher and pupil on some occasions.
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): Which way round is it?
Mr. Browne: It is a sort of Protean relationship, and it changes on occasions depending on whether they think there is a decent point or not.
In any event, I listened with interest to the discussion by the hon. Member for Havant about measures of poverty and equivalence. I am sure that we will continue

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to have discussions as to whether the measure of poverty that the Department has chosen is supported by the policies emerging on tax credits. I know that we shall have debates into the future, because the hon. Member for Havant has got his teeth into the matter and he will not let go for a significant period.
The fact is that we are on course to meet or exceed our public service agreement target to reduce the number of children in low-income households by a quarter by 2004–05—of course, on a before-housing-cost basis. We could have had another discussion about that as a measure of poverty.
We are increasing the child element of child tax credit in these measures by £180 to £1,625 a year in April 2004. That is equivalent to a weekly increase of £3.50, benefiting 7.2 million children—more than half of the children in the United Kingdom. Nearly 20 million people, including 10.5 million children, are benefiting from the new tax credits. By 2004–05 total spending on financial support for children will have gone up by more than £10 billion in real terms since 1997, a rise of 72 per cent.
The national minimum wage arid the working and child tax credits have made work pay, with guaranteed minimum incomes for those in employment. There are now more than 1.7 million more people in employment than there were in 1997, and around 350,000 fewer children in workless households.
There has been excellent progress on the numbers below the absolute low income threshold: around 1.8 million fewer children are below the 1996–97 measure of 60 per cent median income after housing costs threshold, held constant in real terms, and there are half a million fewer children in relative low income than in 1997, even accounting for strong income growth. That does not seem to me a bad performance for people who may well have got their measure of poverty wrong.
I turn to child support. There is understandable concern across the House about our ability to deliver the necessary reform of the system of child support. One of the great ironies is that this was one area of social policy that was consulted on extensively, and the reforms in order to improve the system attained significant support across the House and in the other place. The hon. Member for Northavon narrows his eyes at me. As long as he does not move his feet, we shall be all right. He perhaps did not agree with that; in Fact, I now remember that he had another way of approaching the issue, but that is a debate for another day—or. rather, it was a debate for a past day, because the hon. Gentleman lost it. Anyway, the new scheme is simpler and will work better. The agency is now clearing thousands of cases each week.
I was asked for some information, and I shall give the information that I have. So far under the new scheme more than 100,000 cases have been cleared. Around 10,000 of the poorest families are benefiting from children maintenance premium. and maintenance has been paid in more than 17,000 cases. The poorest families are starting to benefit in real terms from the child maintenance premium:600,000 children in the poorest families stand to gain a total of more than £150 million a year. It is certainly easier to work out liability under the new scheme, which means that more time can be spent on collecting.
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Hon. Members were right to point to my right hon. Friend's candid and detailed evidence to the Select Committee on this issue less than a fortnight ago. He is entitled to credit for the fact that he answered candidly and clearly the questions put to him.
Mr. Jim Cunningham: Does my hon. Friend recall that the Opposition introduced the Child Support Agency when they were in Government? Its target was savings, and it did not necessarily go after the people it should have gone after. While we are on the Opposition's handling of pensions and payments, does my hon. Friend recall who introduced the Horizon project? We are still dealing with the aftermath of that project, which has affected our new approach to the CSA and the need to separate the wheat from the chaff.
Mr. Browne: My hon. Friend is quite right to remind the House that the motivation when the CSA was introduced was not to get benefit and support to children—the thrust of our child support policy and CSA policy—but to save money for the Exchequer. He is also right that although the system was flawed and difficult when it was introduced, part of the problem was that it changed significantly as it was developed, often in response to the demands of absent parents, who wanted it to reflect their lifestyles. It is accepted by Members on both sides of the House that the child support system that we inherited consequently allowed people, particularly absent parents, to devise a lifestyle that defeated the right of the child to be maintained. People were given advice by financial advisers about how to structure their debts or mortgage liabilities to defeat the right of their natural children to be maintained. The new method of calculation does not allow that, and it is far simpler. As I shall explain, when it works properly it will make a significant difference to the maintenance of substantial numbers of children and poor families throughout the country.
In favour of the Conservatives' introduction of child support is the fact that they moved forward significantly the debate about who had primary responsibility for maintaining natural children. I remember that when the new child support system was introduced, there was a debate about whether or not people should maintain their natural children or whether the state should pick up the cost. We no longer have such debates, and to some extent the Opposition, whatever their motives, are to be thanked for taking the issue up and moving social policy forward significantly.
To return to the functioning of the IT system, I have been asked whether I can give the House more detailed or candid information than my right hon. Friend the Secretary of State gave the Select Committee only a fortnight ago. He gave that evidence to put the record straight, and on the issue of transfer, which is the issue that, quite reasonably, exercises people, we have consistently made it clear that we will allow only those cases that are the stock of the CSA system to be transferred to the new system when we are certain that it is working properly and will not damage people's family incomes, as it would if it were not working properly. The House can rest assured that when we are satisfied that that is the case it will be told immediately, and arrangements will be made to make that transfer. If hon. Members would like more detail, I recommend that they

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read my right hon. Friend's evidence to the Select Committee when, after careful questioning, he revealed a significant amount of information. In answer to a question about whether he would contemplate cancelling the contract, he said that if things did not get any better, that would have to be considered. That is as honest as we can be—there is no point shirking our responsibilities.
Mr. Waterson: I do not want to press the Minister beyond what is appropriate in what is partly a commercial situation, but I would be grateful for clarification. Current thinking is that the migration will start in the autumn—[Interruption.] The Minister says that they have not said so, so I shall put it differently. Without my wishing to pursue the EDS point, does the Department have a working assumption about the date when either the migration will start or when it is minded to say that enough is enough?
Mr. Browne: I accept that the hon. Gentleman wants to get his question on the record, but he will not get an answer from me that is different from the one that he has already been given. When we are satisfied that the design and functioning of the system are robust enough to allow for migration, we will set a date for that migration. Until then, the Secretary of State, Ministers in the Department and senior officials will continue to work with the provider or contractor to ensure that they are sticking to their agreement that they will work to improve the system. I am not in a position to go into any more detail, but nothing has been kept from the House, which has been told candidly that there are difficulties with the system that are being worked on. When the work is complete and the system is robust enough to support migration, a date will be fixed for that. However, a date has not yet been fixed.
A substantial part of the speech by the hon. Member for Havant dealt with the alternative to our pensions policy—the restoration of the earnings link to pensions. It was said that he needs help to pay for that by scrapping the new deals. Indeed, it now becomes apparent that to do their sums on this policy, the Conservatives need to know whether we are committed to the uprating of pension credit by reference to wages. It is no wonder that the right hon. Member for West Dorset (Mr. Letwin) admitted that they would have to make some "painful decisions" in order to pay for their policy. I was disappointed that the hon. Member for Havant did not respond to that point. Perhaps he or the hon. Member for Eastbourne (Mr. Waterson) should do so at some time in the future, because a significant number of people out there want to know who will have to suffer the pain for that policy.
Let me deal with the reasons why we in Government think that it is the wrong policy and are not responding to the constant siren songs urging us to move in that direction. First, it is unaffordable; secondly, it is unsustainable; and thirdly, it is unfair. Although the pension credit had not yet been introduced in May 2002, the hon. Member for Havant knew full well that it was about to be. Did he have a Damascene experience in October 2003 when the pension credit appeared? It would be interesting to know why he did not anticipate
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that that was going to happen some time before when we discussed it in some detail and considered the White Paper and other papers that informed it.
In any event, in May 2002 the hon. Member for Havant said on "On the Record" that he opposed reintroducing the earnings link as it was "not affordable". Nothing has changed since then. Even if he took more than £200 million off pensioners in extra tax, as he would, there would be a £500 million shortfall by year 4 of a Tory Parliament.
Mr. Willetts rose—
Mr. Browne: Will the hon. Gentleman give me a moment? That shortfall assumes that there are savings to be made of hundreds of millions of pounds a year from scrapping the new deal programmes. I understand why he does not like the report by the National Institute of Economic and Social Research on the new deal for young people. but the evidence just from the new deal for lone parents says that it saves the Exchequer £40 million a year by getting people off benefits and into work. There are no savings to be made by scrapping the new deal, but there are significant other additional costs, as we already know from 18 years of Tory Government in which we saw growing numbers of young people in long-term unemployment.
Mr. Willetts: I am grateful to the Minister for giving way, although he did not do so as promptly as my hon. Friend the Member for Eastbourne (Mr. Waterson) did to him.
When the House debated the pension credit, I supported a reasoned amendment, which was also supported by the Liberal Democrats and by the right hon. Member for Birkenhead (Mr. Field), and which proposed that the money going into the pension credit should instead go into a higher pension for older pensioners. I continue to believe that that would have been a better way forward. We are now in a world where the pension credit has come into force, and where more than half of all pensioners will be on it. We are therefore tackling the problems of a world in which more than half of pensioners are on means-tested benefits. The question is: what is the best way forward in the world that we are now in? I think that increasing the value of the basic state pension by earnings is the best way of getting us out of the mess that has been created by the pension credit.
Mr. Browne: I am grateful to the hon. Gentleman for that, but he needs to explain why he has indulged in this significant U-turn. I have a whole page of quotations from him—[HON. MEMBERS: "Go on."] Well, 1 shall be persuaded, then. In 1993, he said, in relation to sustainability, that his Government had taken the crucial step of
"Ending the link between the basic pension and earnings"
and had resisted
"the seductive politics, but dangerous economics … which has bedevilled state pension arrangements in other countries."—[Official Report, 8 July 1943; Vol. 228, c. 516.]
No doubt those other countries did not have the pension credit at that time. Ht said that because, as he knows, restoring the earnings link will cost, in net terms,

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£4.6 billion more by 2010; it will cost £12.4 billion more by 2020; and by 2030, the extra net cost will be £25.7 billion. That policy is unsustainable, but also unfair.
It is interesting to note that in discussing taxing pensions the hon. Gentleman does not make great play of a part of his policy, about which al pensioners should know: under the Tory plan, nothing will be done to help the poorest pensioners. They will not only fall further behind, but any increase in their basic state pension will be knocked straight off their pension credit. Not only will the poorest be worse off, but any advantage that they could anticipate will be knocked off the pension credit.
We heard today that it is the Tory party's intention to allow the pension credit to wither on the vine. That would involve another significant on-cost, and the Conservative proposal that we are considering would cost £18 billion, and £12 billion after netting off the savings from income-related benefit. It would take 14 years to achieve that. All women who are watching the policy develop should be especially afraid of it. They will fare especially badly because half of them do not get the full basic state pension. They would be seriously short-changed.
David Taylor: Does the Minister know about the recent joint campaign by the Fawcett Society and Age Concern? It points out that one in four single pensioner women already live in poverty and that methods of ameliorating that—without relinking—include reducing the lower earnings limit to allow more people access to the national insurance fund, paying pensions to all those with NI contributions, making credit for caring periods more effective and making the state second pension more useful to women. Are not they all worthwhile means of tackling pensioner poverty among the oldest women?
Mr. Browne: I am grateful for that interesting contribution. Of course, my hon. Friend knows that we have extended greater cover to women through the state second pension. We shall keep all the other matters under review.
I am conscious of the time and that some issues will be burning in the minds of those who contributed to the debate. I shall try to deal with them. If I cannot do that because of time constraints, I shall write to hon. Members, as I said earlier.
Annabelle Ewing: Will the Minister give way?
Mr. Browne: I shall not give way to the hon. Lady, who made no contribution to the debate, although she was present for all of it. If I make some decent progress, perhaps I shall give way, but people are waiting for answers and I am happy to provide them.
The hon. Member for Northavon made the reasonable request that we should ensure continuity of payment as a priority for those who are transferring to the child tax credit. I assure him that that is our priority. He has been told that the Paymaster General will make a statement about that and its administration in due course. I assure him that there will be no withdrawal of
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benefits until the tax credit award is in place. All families will be informed of the transfer, and I hope that that provides sufficient reassurance.
The hon. Gentleman asked about deferring the state pension and the treatment of capital sums. He made some interesting points, but they were no more interesting than the questions that my right hon. Friend the Secretary of State was asked in an intervention when opening the debate. He said that he would make clear the way in which the sums would be treated in relation to other benefits and that the Chancellor would make a statement about the tax treatment. When a Secretary of State gives the House such information at the beginning of a debate, it is highly unlikely that a Minister of State will say anything different at the end. I therefore direct the hon. Member for Northavon to my right hon. Friend's comments.
Mr.Willetts: Consistency.
Mr. Browne: We are always consistent. Since the Government have a consistent preferential policy agenda for the poor and we consistently move older people and children out of poverty, there is a lot to be said for consistency in the context of the debate.
Let me deal with the reference to article 22 (3), which relates to council tax benefits for pensioners and why the figure of 20 per cent. remains unchanged. There are two aspects to that. First, I point out to the hon. Member for Northavon that the point relates to hospital downrating. He will remember that we changed that from last October so that pensioners and others in hospital would see no reduction in pension credit, council tax benefit and other income-related benefits for a full 52 weeks.
Mr. Webb: I have already said that.
Mr. Browne: Well, some things are important to repeat. That reduction does not kick in until after that period, and the 20 per cent. level is unchanged, because that is simply the amount by which council tax benefit is reduced after 52 weeks.
Secondly—I shall have to check this and write to the hon. Gentleman on it, as I do not want to be accused of accidentally misleading the House—my understanding is that it is highly unlikely that a council tax payer could be in hospital for 52 weeks without having the opportunity to benefit from some other reduction in council tax. As I recollect them, rules relating to council tax set out that when a house is unoccupied or there is a reduction in occupation for a period, there is a right to make an application for a reduction in council tax.
Mr. Webb: Those people still have to contribute.
Mr. Browne: They might not have to contribute the whole amount, only a comparatively small amount. They might not have to contribute at all, although there probably has to be some contribution, as the 20 per cent. must relate to something, as the hon. Gentleman has pointed out. I shall check the detail.
On the housing benefit reform pilots, we are making good progress in applying local housing allowance. All nine local authorities involved have begun

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implementation, which has been smooth to date. It is as yet too early to understand fully the response that tenants and landlords will make, and a comprehensive evaluation strategy will be put in place. Interim findings will be made early in 2005.
Several hon. Members referred to the need for the Government to encourage take-up of council tax benefit, and linked that in particular to pension credit. The Government recognise that there is more to be done. With the introduction of pension credit, almost 1.9 million pensioner households will get more help, or get help for the first time, with their council tax and rent. That is one of the significant consequential by-products of the Pension Service, which is reaching out to pensioners. As my right hon. Friend the Secretary of State said, we are launching a campaign to raise awareness of council tax benefit. As well as promotional material, we will provide guidance and advice to local authorities to help to ensure that they have procedures in place to handle inquiries about entitlement and to provide support for those making claims. The hon. Member for Northavon asked why we did not simply use the information that we have from pension credit for council tax benefit, which he said would be easy. I can assure him that it would not be easy, but would be quite complicated. That is not to suggest that the Government have not considered that possibility; we are constantly looking at ways in which we can increase take-up, and the hon. Gentleman can rest assured that we will do what we can on that.
The uprating order continues to deliver on our promises to help those who most need help. We are supporting families, and are continuing our action to tackle pensioner poverty and end child poverty. We continue to give help where it is needed most, and thanks
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to the increase in line with earnings of the guaranteed minimum and of pension credit from April, no single pensioner will need to live on less than £105.45 a week, or a couple on less than £160.95 a week.
Annabelle Ewing: I am grateful to the Minister for giving way, and I apologise for having missed the first 15 minutes of this interesting debate. The Minister is surely concerned about the current take-up of pension credit. Would it not be appropriate to consider putting hack the October deadline for the backdating of claims, so that all those currently entitled to receive pension credit receive their full entitlement at some point?
Mr. Browne: I am grateful for the hon. Lady's contribution, although it comes late in the debate. However, I should point out to her that we are not disappointed with take-up. The take-up process is moving very well. As we have not yet written to all pensioners who can entitled, it is premature to be discussing whether the October date is appropriate.
These orders confirm our conviction that it is essential to provide support, respectively, for those who cannot work or who are retired, while promoting the principle of work for those who can. I commend the orders to the House.
Question put and agreed to.
Resolved,
That the draft Social Security Benefits Up-rating Order 2004, which was laid before this House on 4th February, be approved.

PENSIONS
Resolved,
That the draft Guararteed Minimum Pensions Increase Order 2004, which was laid before this House on 22nd January, be approved. —[Mr. Andrew Smith.]

Opposition Day
[5TH ALLOTED DAY-SECOND PART]
Opposition Day

  Pension Scheme Wind-ups
  Madam Deputy Speaker (Sylvia Heal): We now come to the debate on the Opposition motion. Mr. Speaker has selected the amendment in the name of the Prime Minister.
  4 pm
  Mr. David Willetts: I beg to move,
  That this House condemns the Government's inaction in the face of the crisis in occupational pennons; regrets that the Pensions Bill will do nothing to encourage people to save for their retirement or companies to keep open existing defined benefit schemes, let alone start new ones; recognises with regret that the Pensions Bill will do nothing to help the estimated 60,000 members of schemes who have lost all or most of their pension entitlement; notes that the Government has twice reduced the minimum funding requirement as well as removing £35 billion in extra taxes from pension funds and has conspicuously failed to amend the priority order on wind-up, despite offers of co-operation from the Official Opposition; expresses its surprise that the Government has refused calls to instigate an independent inquiry into the extent of the problem; and calls upon the Government to take urgent action to tackle the current crisis in pensions and to mitigate the unfairness caused to thousands of current and future pensioners across the United Kingdom.
  I draw the House's attention to the interests that appear in the Register of Members Interests.
  This is our first opportunity in Opposition time to debate pensions since the publication of the Pensions Bill the other day. We look forward—the expression to use is "with relish"—to ranging widely on Second Reading over the many issues covered in that Bill. Today, however, we want to focus on one serious omission from the Bill, which it ought to have tackled. I refer, of course, to the problem facing the tens of thousands of victims of the winding-up of pension schemes. Those are the people whose houses have burned down, and to whom the Government are saying that the solution is fire insurance for the future. However desirable a fire insurance scheme might be, it is of no comfort to someone who has already suffered the losses that these people have suffered.
  Mr. Edward Garnier: Are there not two other related omissions from the Pensions Bill: first, a date set for the publication of the Penrose report; and secondly, a commitment from the Government to do away with the compulsory annuities rule? Both of those are extremely worrying matters for future and existing pensioners.
  Mr. Willetts: My hon. and learned Friend is correct. It is a great pity that the House has not yet had an opportunity to see the Penrose report, although we know that it has arrived in the Treasury. With regard to annuities, we continue to fight for the abolition of the pernicious rule that people are obliged to purchase an annuity at the age of 75. We hope that there may be a private Member's Bill before the House through which we can once more address that issue.
  Kevin Brennan: Does the hon. Gentleman accept that the Penrose report is nothing to
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  do with this motion and this debate? It muddies the water b cause the difference between the Equitable Life issue and this issue is that in this case people were often compelled to join occupational pension schemes and were given no health warning whatever that the schemes could go bust, particularly when the Pensions Act 1995 was passed.
  Mr. Willetts: Both Penrose and pension wind-ups involve serious financial distress for people, and I hope that Members on both sides of the House can cover both cases with sensitivity, recognising that we have constituents facing significant financial problems in both cases.
  Mrs. Gillian Shephard: I listened with care to the intervention of the hon. Member for Cardiff, West (Kevin Brennan), and of course there is a distinction, academically, between the appearance of the Penrose report and other sorts of distress for pensioners. The fact is that for a pensioner who is affected not only by the wind-up of a pension scheme but by the delay in the Penrose report, that distinction is indeed academic. We should be looking at the distress caused to the individual.
  Mr. Willetts: My right hon. Friend is absolutely right. The reason why we have called this debate, and why our hon. Friends are pressing vigorously on Penrose, is that in both cases there is serious financial distress under this Government and people are facing financial insecurity of a sort for which they did not bargain.
  Sir John Butterfill: With regard to the point made by the hon. Member for Cardiff, West (Kevin Brennan), is not it correct that in 1986 the then Government abolished the compulsion for people to join pension schemes and that anybody who had been compelled previously to enter into a company scheme was free then to leave that scheme?
  Mr. Willetts: My hon. Friend is right. The provision was changed in 1986.
  Mr. Oliver Heald: Does my hon. Friend recall that the Allied Steel and Wire workers suffered a double blow, because the additional voluntary contribution scheme was with Equitable Life? Is there not a link between the two in respect of the hon. Gentleman's constituents?
  Mr. Willetts: At least one person whom I have met had the misfortune both to lose his final salary pension as a result of the winding up of a pension scheme and to have put extra pension savings into an AVC scheme with Equitable Life. He suffered a double whammy—an appalling blow.
  Members on both sides of the House share the concern about pension wind-ups. It is reflected in two early-day motions, our motion 66 and motion 200, tabled by the hon. Member for Cardiff, West (Kevin Brennan). Between them, the two motions have been supported by almost half the total number of Members, which also reflects the extent of the concern that is felt. Motion 200 goes further than motion 66, which was

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  signed by me and by many of my hon. Friends. It implies that the Government should offer full compensation to victims of wind-ups.
  Mr. Douglas Hogg: Does my hon. Friend understand the reservations of people like me who strongly support the proposition that compensation should be given for loss if that loss was caused by the negligence, misconduct or other culpable fault of Government or Government agencies, but would find it difficult to support compensation in respect of loss that was not the fault of Government or those for whom Government are vicariously liable?
  Mr. Willetts: That is an important point, on which I intend to press the Minister later. We need much clearer information than we have had from Ministers so far about what they think their legal liabilities might be. We hear a variety of reports on the Government's legal position.
  Rob Marris: The Opposition motion refers to 60,000 people. Can the hon. Gentleman give us an idea of the cost of compensation? If possible, will he break his answer into two parts and tell us how much it would be when there has been culpable error and when there has been no such error?
  Mr. Willetts: These interventions have raised interesting points with which I hope to deal later.
  Mr. Jim Cunningham: Will the hon. Gentleman give way?
  Mr. Willetts: I should like to make some progress now.
  I want to explain to the hon. Member for Cardiff, West that we did not feel that, as a responsible Opposition, we could support an early-day motion that involved unqualified and uncosted obligations to pay compensation to all victims of the pension wind-up crisis. However, the fact that we did not feel able to go as far as he did does not mean that we agree with the Government that nothing can be done. Motion 200 calls for everything to be done; the Secretary of State and other Ministers are doing nothing. Conservative Members believe that something can and should be done, and I intend to set out what I consider to be a genuine and constructive approach to the problem affecting so many victims of the crisis.
  Unless the problem is tackled, the Government will not achieve their stated objective of restoring trust and confidence in our pension arrangements. It is impossible to envisage a world in which people once more have confidence in funded pensions when there are so many distressing stories of individuals facing financial disaster because they had funded occupational pension schemes. Conservative Members, who are strongly committed to the strength and vigour of funded occupational pensions, believe that the problem must be tackled.
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  First, I want to provide a little of the history, because it is important to all this.
  Mr. Cunningham: On the question of the history, the hon. Gentleman will doubtless remember that under the previous Conservative Government, and particularly during the 1980s, companies such as Rolls-Royce encouraged people to opt out of the state earnings-related pension scheme; in fact, they spent thousands of pounds doing so. Il he wants to have an honest debate on this issue, will he not accept that the origins of the problem lie in the 1980s, under the Thatcher Government?
  Mr. Willetts: No. I regret that intervention because it is not accurate. I skill take the hon. Gentleman through the history, which Will show why.
  The Pensions Act 1995, which is sometimes blamed for this problem, actually improved the degree of security available to members of occupational pension schemes through the introduction of the minimum funding requirement. It set out to strengthen the protection available to members of such schemes, and the formula on which the MFR was based was full protection for pensioners, and protection for at least the transfer values that would be available for workers who had yet to reach pension age.
  For a time, the MFR worked. When we lost office in 1997, the position was as follows. Actuaries advise me that the MFR would have provided 78 per cent. of the value of the pension that a 40-year-old man working for a company with an occupational pension scheme would have hoped to receive. Of course, back then company pension schemes were healthy and many companies had funds available that were in excess of that figure. Then along comes the current Chancellor, with his notorious £5 billion a year tax on pension funds that significantly weakened the finances of many company pensions. What was the Government's response to that weakening? They cut the value of the MFR to reflect the fact that companies were now distributing smaller dividends.
  I shall quote how Mercers, a senior and respected firm of actuaries, described the Government's 10 per cent. reduction in the MFR at that time:
  "The change is a consequence of pension schemes losing the benefit of advance corporation tax (ACT) tax credits in the July 1997 Budget, following which the gross dividend yield was no longer appropriate for pension funds."
  So the value of the MFR was cut by 10 per cent. in June 1998 in response to the change in the tax regime that the Chancellor imposed.
  Mr. Steve Webb: The hon. Gentleman has brought some new information to the House. In 1997, three quarters of a worker's pension would have been protected had the scheme been funded according to the MFR, but can he clarify what would happen when such a scheme winds up? Let us say that half the members are retired and half are still workers. Would the retired members get 100 per cent. and the workers 50 per cent., because the average is 75 per cent., and does he consider 50 per cent. protection to be adequate? Is that what the hon. Gentleman meant?
  Mr. Willetts: No, that is not what I meant. I meant that pensioners got 100 per cent. and people of working

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  age got 78 per cent. The basis on which the MFR operated was explained very clearly by my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) in a debate on this subject. He said:
  "In broad terms, the aim of the MFR test is to ensure a scheme has sufficient funds to keep paying benefits for members whose benefits are in payment, and to pay minimum transfer values for other members." —[Official Report, Standing Committee A, 25 May 1995; c. 1.]
  That was the philosophy and the basis on which the scheme worked—and it was indeed working—until 1997.
  Since 1997, there have been two reductions in the value of the MFR. There was the 10 per cent. reduction in June 1998 to which I referred, and a subsequent 8 per cent. reduction. The effect of that has been to lower the value of the protection that members of company pension schemes now enjoy. Indeed, the actuaries to whom I have referred advise me that a 40-year-old who works for a company that is compliant with the MFR will now find that the funds that so comply would secure him only 20 per cent. of the pension that he would otherwise hope to receive. So there has been a decline from 78 per cent. to 20 per cent. since 1997.
  Kevin Brennan: Does the hon. Gentleman acknowledge that, even if he were right about the reduction being the result of Government policy, the minimum funding requirement set out in the Pensions Act 1995 was wholly inadequate because the workers would still have received only a tiny proportion of their expected pension as a result of the MFR? Is that not correct?
  Mr. Willetts: I am not saying that the minimum funding requirement was perfect A proper balance always has to be struck, but it seems to me that the significant changes that have exposed so many of our constituents to the risks and concerns arising from the wind-up of pension schemes have occurred since 1997. That is the period in which the finances of company pension schemes deteriorated and in which Ministers twice deliberately cut the vain (of the protection provided by the MFR.
  As a result of a well-intentioned proposal to introduce insurance, I believe that we now face a further risk. Ministers intend to introduce insurance initially—we do not know how long the initial period will be—at a flat rate. Hitherto. many good employers tried to do better than the MFR. The danger of the current proposals is that they pose the question why any employer should now attempt to do better than the MFR. Why should an employer put more money into pension schemes than the minimum necessary? He might improve the position of his own employees, but with an insurance scheme in place with the same insurance premium for everyone, an employer could cut contributions to the bare minimum necessary to meet the MFR and still access the Government's insurance scheme. A new risk is therefore being introduced as employers will in future see no need to bother paying more than the statutory minimum because of the flat-rate insurance scheme. It makes no provision whatever for employers who are doing better than the MFR.
  We are told that at some point in the future we will move to a variable rate that reflects the quality of the funding of the company, but we have no information
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  about when or how that will he achieved. For a time, therefore, we will be in an extremely dangerous position in which companies do the bare minimum and rely on the insurance scheme to fall back on in the event of difficulties.
  The evidence is clear that in the past few years the world has become less secure for many members of company pension schemes, and hon. Members on both sides of the House are well aware of the consequences. We are aware that many of our constituents have been affected by a roll call of companies that have wound up their pension schemes. There is the example of ASW, of course, but also Blyth & Blyth in Edinburgh, Bradstock's, Dexion. Kalamazoo, Ravenhead Glass, Richards, United Engineering Forgings and many other companies have wound up without being able to offer anything like the full pension to their employees.
  One of my constituents who visited my surgery recently had been employed by Ballast UK. He will be 61 in April and had worked for his firm for 27 years. He had been hoping for a company pension of approximately £17,000 per annum, but was told that he was likely to receive perhaps 17 per cent. We are all aware of such cases and no hon. Member on either side of the House can look such a constituent in the eye and say, "Tough luck, but there is nothing we can do." We all have an obligation to think constructively about what can be done to help people in those appalling circumstances.
  Mr. Garnier: My hon. Friend mentioned a constituent who visited his surgery, and I, too, have had constituents visiting me for the same reason. One of my constituents, aged 60, used to work for British United Shoe Machinery and is now wholly dependent on what the state can provide. Throughout his 40-year working life he saved through the pension scheme but is now left effectively destitute—or, if not destitute, has to live a vastly reduced standard of life. Other British United Shoe Machinery employees will face the same, if not identical, difficulties.
  Mr. Willetts: My hon. and learned Friend is correct, and all hon. Members know of such examples. That is why it is reasonable for us to ask Ministers what they propose to do about the problem, as our early-day motion and early-day motion 200 both state.
  What do Ministers reply when they are pressed on this matter? The Secretary of State said:
  "I am sure that my hon. Friend will accept that it would be wrong for me to raise false hopes." —[Official Report, 11 June 2003; Vol. 406, c. 694.]
  Last October, he said that
  "it would be quite wrong for us to raise false hopes that those people can get extra help unless and until we know that that is the position." —[Official Report, 20 October 2003; Vol. 371, c. 411.]
  In January this year, he said that
  "the Government are carefully considering the plight of those affected while taking care not to raise false hope." —[Official Report, 12 January 2004; Vol. 416, c. 511.]
  In February, he said that the Government
  "have been examining whether anything might be done, without wanting to raise false hope, and as soon as I am able to report further to the House, I will do so." —[Official Report, 9 February 2004; Vol. 417, c. 1104.]

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  Moreover, the right hon. Gentleman was reported on the "Today" programme as saying that while the Government were sympathetic to the plight of the pensioners hit by the problem, he did not want to raise false hope that they could give assistance.
  I assure the Secretary of State that he has not been raising any false hopes. In fact, he has not raised any hopes at all among the many people affected by the crisis.
  The Opposition invite the Secretary of State today to look forward and to do better than tell us that he will not raise false hopes. Instead, he should make some constructive proposals. It may not be possible to do everything, but it ought to be possible to do something. I shall suggest, to the right hon. Gentleman and the House, what those proposals might be.
  First, as an absolute minimum, we need reliable estimates of the numbers of people affected by the crisis. It is shocking to discover how feeble and inadequate are the answers given to parliamentary questions or other inquires about how many people are affected. Ros Altmann, for whom many hon. Members have the greatest respect, is an expert in this field. She has produced estimates, as have other people. The figure of 60,000 people affected by the problem is in circulation, but we do not know whether it is correct.
  Ministers have all the resources of government at their disposal, and they should know the true figure. As a matter of urgency, they should compile reliable data. At the moment, the best list of companies affected by the crisis has been provided by The Mail on Sunday. I pay tribute to that newspaper for the work that it has done, but Ministers should be able to provide reliable information and answer a series of questions. How many schemes have been wound up, or are in the process of being wound up, that have not been able to offer full pensions to their employees? How many people are affected? How many pensioners worked for companies that have gone through the winding-up process? How many people who have not yet retired face the prospect of losing some or all of their pension? What scale of financial loss will they face?
  One reason why the Opposition did not feel able to support early-day motion 200 was that we did not know the amount of compensation that would be involved. I have heard estimates that the total cost will be £1 billion, or £5 billion, and I have even heard a claim that it could be as much as £50 billion. Ministers must come to the House and give hon. Members of all parties that essential information; otherwise, we will all be trying to make policy in the dark. Therefore, my first request echoes the request that has come from hon. Members on all sides of the House—that Ministers give out reliable information as a matter of urgency.
  Secondly, Ministers must give us their authoritative understanding of the legal position that we face. Many of us are being told that the ASW workers who are taking their case to Brussels have high hopes, on the basis of legal advice, of securing a victory and of defeating the Government. They are basing their hopes on the solvency directive, on the provisions of the Human Rights Act 1998, on contract law, and on the fact that they were compelled, at some point in the past, to join the scheme.
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  The Government are being taken to court on the matter. Ministers say that they are confident of winning the case, but why ate they so confident? Would not it be better to take an initiative to tackle the problem now, rather than risk a humiliating legal defeat in the future? The Government have never offered the House any reliable information as to why they are so confident that they will face down the legal challenges ranged against them.
  Thirdly, after years of endless consultations on various aspects of pensions security, Ministers should act. I tabled a written question asking Ministers how many consultation exercises they have conducted on pensions. The reply came that that as there had been so many such exercises that a full answer
  "could be provided only at disproportionate cost",
  which revealed the scale of the consultation. The Government have been consulting on replacing the minimum funding requirement for more than five years, which may be a record even for this indecisive Government.
  The Government have been consulting also on their proposals for the full fund on wind-up. When the original proposals were produced in June 2003, the Government said that they aimed at laying those regulations during the summer so that they would come into force as soon as practicable. Miraculously, a few days ago—after we announced the subject of this debate—and with snow falling, the Government finally produced their regulations on pension wind-ups. They nearly did something about the problem, announcing at one point that trustees may utilise the regulations so that they applied to schemes that wind up on, or start to wind up after, the date on which the draft regulations were issued.
  If the regulations had applied to schemes that were winding up last June. they would have had a significant impact. In practice, the Government rushed out a corrigendum stating that the provision was a printing error and that the relgulations did not apply to schemes that were currently winding up, but only to those that started to wind up after the date on which the draft regulations were issued. The Government announced a policy, then withdrew it on the basis that it was a printing error for which they could not take responsibility. The terrible thing is, that was probably true—but if the Secretary of State is to be believed when he announces that Government policy has been abandoned on the basis of a printing error, no wonder the right hon. Gentleman's credibility on his pensions policy is so poor.
  We have also been promised amendments to the priority order facing members of pension schemes. I accept that the order in the Pensions Act 1995 needs changing. I wrote to the Secretary of State in January 2003 assuring him of our support, as a responsible Opposition, for proposals to change the priority order to dispense with the cliff edge whereby there was almost 100 per cent. protection for pensioners and little for current employees. The Secretary of State could have changed the regulations in an afternoon. That does not require primary legislation and would be simple to do. Fourteen months later, we are still waiting for the Secretary of State to do anything. The Government

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  promised to lay the regulations to tackle the priority order by early 2004. Perhaps the right hon. Gentleman can say when the regulations will be tabled. Practical steps could be taken that have not been taken by Ministers, despite our offer of constructive support.
  Beyond that, I urge the Secretary of State to be bolder and to debate with the House—perhaps we might call it a big conversation, as that is a phrase on which the Government are rather keen—radical proposals for tackling the priority order problem. The right hon. Member for Birkenhead (Mr. Field) is occasionally a friend of Members on this side of the House because of his constructive suggestions on pensions. He has proposed using unclaimed assets as the basis for establishing a fund that could he used to tackle pension grievances. When the right hon. Gentleman submitted that imaginative idea in the form of a private Member's Bill last year, we supported its Second Reading. Practical points need addressing. but in principle that idea is worth investigating. The Government opposed that proposal when we supported it.
  There was a proposal also from Ros Altmann that because of the tough terms on which companies that wind up their pension schemes must purchase an annuity, they should be offered some prospect of delaying its purchase while the problem is investigated to ascertain whether a policy can be put in place to tackle it. Have Ministers considered that approach, and if so, what is wrong with it?
  Mr. Henry Bellingham: Is my hon. Friend aware that Ros Altmann's proposal would not cost the Government anything for five years, and that it would cost £100 million a year after that? When Ros Altmann carefully costed the scheme, one problem she faced was the lack of data on the number of people.
  Mr. Willetts: My hon. Friend is right that the crucial problem that she faced was lack of data. We must be careful, but those people are at least using their best endeavours to try to tackle the problem—Ministers have offered no constructive suggestions whatever. I must tell the Secretary of State that I do not believe, given the strong feelings on both sides of the House, that the current position is sustainable. He will not be able to hold his current position for mud, longer. A number of Government and Opposition Members have signed the two early-day motions on the subject, which is evidence of how strongly we all feel when people who have tried to do the right thing and put money into their company pension schemes find themselves facing serious financial distress.
  We are willing to be realistic about the matter. We are not absolutists and we know that it may not be possible to do everything, much as we would like to be able to do so. We know that we cannot do everything, but we must do something. The Government are doing nothing, which is why I urge the House to back our motion.
  4.31 pm
  The Secretary of State for Work and Pensions (Mr. Andrew Smith): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
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  "supports the Government's strategy to tackle pensioner poverty, and to deliver simplicity, security and choice in working and saving for retirement; condemns the pensions inheritance of 1997, with millions in poverty and the legacy of pension mis-selling; notes that the Government is spending £9 billion extra per year in real terms on pensioners compared with the 1997 system; condemns the unfair, unaffordable and unsustainable pensions policies of Opposition parties; expresses its sincere sympathy for those who have lost part or all of their pension as a result of their employer becoming insolvent; believes the Government should continue to look at all available options to help people affected, but that it would be cruel to raise expectations if no workable solution can be found; welcomes the publication of the Government's Pensions Bill; further believes that the Pension Protection Fund will bring real security for over 10 million defined benefit pension scheme members if their employer becomes insolvent and pensions schemes wind up in the future; further believes that firms should honour pension promises they have made; welcomes the Bill as a balanced package, with a new regulator and measures to simplify pensions legislation, making it easier for employers to run good schemes; further believes that pension reform should be a common cause; and calls on all Members of this House to support the Government's Pensions Bill.".
  I am more than happy to set the record and proposals of this Labour Government against those of the Conservative party any day of the week. The motions in these debates are often not referred to and are perhaps not read as closely as they should be. The Opposition motion this evening merits attention because it reveals the utter emptiness of the posturing by Conservative Front Benchers on these vital issues. It contains not one single positive proposal about what the Conservative party would do to help those affected by pension scheme wind-ups. As usual, Conservative Members allege that £35 billion has been removed from pension funds in taxes, but do they favour either the reinstatement or the reversal of that policy? No, they do not. They feign surprise at the Government's position on an independent inquiry, but do they propose one? No, they do not. They call for urgent action, but do they say what form it should take? No, they do not. The motion and the speech by the hon. Member for Havant (Mr. Willetts) were high on rhetoric, condemnation and regret, but utterly bereft of any positive proposal whatsoever.
  Mr. Garnier: The Secretary of State is reading a speech written before he listened to the speech made by my hon. Friend the Member for Havant. One disadvantage of that is that he is wholly failing to take into account what he heard. He mentioned emptiness; not far from this House, there is an empty dome wasting Government and public money. Why do the Government not sell it quickly and save the day-by-day revenue costs of keeping it open?
  Madam Deputy Speaker: Order.
  Mr. Garnier: They could use the money—
  Madam Deputy Speaker: Order. The hon. and learned Gentleman's intervention is going on far too long.
  Mr. Smith: On the hon. and learned Gentleman's first point, I was addressing the Opposition motion that we are debating, and I shall address each of the specific questions asked by the hon. Member for Havant. Conservative Members go on about these issues, but

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  their motion contains no proposal that would help the situation. Despite reports in The Daily Telegraph that they would call for compensation in this debate, the motion and the remarks of the hon. Member for Havant contain no such call. That is not surprising, because Conservative Back Benchers have been urged not to sign the early-day motion in the name of my hon. Friend the Member for Cardiff, West (Kevin Brennan).
  Mr. Jim Cunningham: Did my right hon. Friend notice that the hon. Member for Havant (Mr. Willetts) failed to mention the fact that the mis-selling of pensions occurred under the Conservative Government? The hon. Gentleman mentioned the Pensions Act 1995, but the Conservatives took no action to address the problem, despite the fact that Labour Members were tabling early-day motions calling for compensation for the people affected. The Labour Government took action when they set up the Financial Services Authority.
  Mr. Smith: My hon. Friend makes some good points and I shall come to the mis-selling issue later.
  Despite the measured tones of the hon. Member for Havant and his offers of collaboration and consensus, his speech was opportunist and opposition for opposition's sake; it was not a positive contribution to the pensions challenges facing the country. It was certainly no comfort to people who are worried about the security of their pension.
  Sir John Butterfill: The majority of Opposition Members have not signed the motion tabled by the hon. Member for Cardiff, West (Kevin Brennan) because it contains two fundamental inaccuracies. The first is that people were compelled to join pension schemes, whereas, as I said earlier, the previous Conservative Government abolished that compulsion in 1986. The second is that the motion asserts that the Government had guaranteed people's pensions, but neither the Labour Government nor any previous Government have given any such guarantee on private sector pensions.
  Mr. Smith: Given the hon. Gentleman's expertise and experience in these matters, I take careful note of his points.
  Sir Peter Tapsell: A few moments ago, the Secretary of State said that the Opposition fail to read the motions on the Order Paper in debates such as this, but may I draw his attention to a sentence in the Government's amendment? It states that they believe that
  "firms should honour pension promises they have made".
  I agree. Will the Government pass legislation to put that statement into effect?
  Mr. Smith: Yes, indeed. That is why we shall debate the Second Reading of the Pensions Bill next week; it is also why we laid the full buy-out regulations before the House yesterday.
  Sir Peter Tapsell: I am grateful to the Secretary of State for that reply, but I was referring not to the
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  minimum funding requirement, which is a snare and a delusion, but to the full pensions that people in final salary schemes confidently expected to receive when they reached retirement.
  Mr. Smith: I am grateful to the hon. Gentleman for his comments. I think that he is embarrassing his Front-Bench colleagues by referring to the MFR as a snare and a delusion; only a few moments ago, the hon. Member for Havant was telling us what a wonderful thing it was until the wicked Labour Government came along and made it all go wrong.
  There is serious content in the comments of the hon. Member for Louth and Horncastle (Sir Peter Tapsell). Like him, I believe that a pension promise made should be a pension promise honoured. That is why we introduced the full buy-out regulations, which will require solvent companies to meet their pension obligations in full, and it is why the Pensions Bill, which will have its Second Reading next week, includes a proposal for a levy-based pension protection fund to ensure 100 per cent. of pensions in payment, with 90 per cent. for those not yet receiving their pension, which is in common with other compensation schemes. The Government are acting in the spirit of the hon. Gentleman's request and in line with what the vast majority of workers and other people want.
  The hon. Member for Havant called for reliable information, but in this field that has been difficult to come by. The pensions scheme registry maintains a record of schemes in wind-up, but there can be delays in its receipt of that information and it does not necessarily know about the solvency of the reported schemes. The Opposition motion calls for an inquiry to establish the extent of the problem. Elsewhere in the motion, there is a stab at assessing the extent of the problem, which is estimated to affect 60.000 people. I must stress that data limitations make it difficult to be precise, but, on the evidence that I havekeen, 60,000 seems to be the right estimate of the scale of the challenge we face.
  Mr. Willetts: It is helpful to hear the Secretary of State's estimate—60,000—but will he also give the House some sense of the scale of financial loss, on average, that those people might face?
  Mr. Smith: As the House will understand, that is far more difficult. I am not able to give such an estimate, which is part of the ongoing work—the close examination—that I have repeatedly told the House we are undertaking. Our officials are working on it, and when I am able to report more fully to the House, I will do so.
  Mr. Hogg: The right hon. Gentleman must know when he will be able to communicate that crucial information to the House, because we cannot decide whether to pay compensation—if it is so called—until we know the sums involved. The right hon. Member for Birkenhead (Mr. Field) knows that, too. So when will we have information c n the sums involved?
  Mr. Smith: I should like to be able to do more and to say, "Yes, I will be able to make that statement on this date." I am not able to say when I can say that; when I can, I will. I am as anxious to resolve such things as

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  anyone else, not least because of the real suffering and worry that is afflicting all those affected by this dreadful crisis. No one would want to prolong that for those individuals and their families a moment longer than is necessary. I assure the right hon. and learned Gentleman that we are working to get to the bottom of this as quickly as we can.
  Kevin Brennan: In an earlier intervention, the hon. Member for Bournemouth, West(Sir John Butterfill) suggested that there are two flaws in early-day motion 200, the first of which related to whether firms and Governments had said that workers' pensions were guaranteed. The people involved have leaflets from various Governments and company pension schemes on which the word "guarantee" appears. He also said that people had not been compelled, but the early-day motion says:
  "in many cases having been compelled to join their scheme as a condition of employment".
  If the hon. Gentleman is denying that, is it any wonder that there was a pensions mis-sellirig scandal at the end of the 1980s?
  Mr. Smith: My hon. Friend is right: a number of members were compelled to join by their conditions of employment. The hon. Member for Bournemouth, West is also right to say that the Government changed the arrangements in 1986, which took effect in 1988. Of course it can also be argued that no one compelled the employers to include that condition. All those matters must be thought through very carefully before reaching a final judgment on these issues.
  Mr. Jim Cunningham: On the issue of compulsion raised by the hon. Member for Bournemouth, West (Sir John Butterfill), is my right hon. Friend aware that many occupational pension schemes included an element of compulsion because they were part of a wage deal? In relation to the point about 1986, there might not have been compulsion, but lots of companies were given tax incentives to encourage people to leave the state earnings-related pension and join private occupational pension schemes.
  Mr. Smith: My hon. Friend's points are well made and they further complicate the landscape, but no one would dispute the fact that a large proportion of those schemes' members were obliged to join under their conditions of employment. They were perhaps not even subsequently aware that they could opt out; nor, if they had sought advice at the time, would anyone necessarily have advised them to opt out. We all know that if they had had the good fortune to be in a sound scheme, rather than one that would later go under, they would have done better to stay in that scheme in any event. That gives this issue its particular poignancy, with the difficulties of identifying the challenge that we face and of being clear about what is the right thing to do.
  Mr. Frank Field: I apologise for not being here at the beginning of the debate; I was involved in another debate in Westminster Hall. Is not the point that my right hon. Friend is now stressing crucial in two respects? Not only are we trying to represent our constituents, but if we are trying to make
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  a case for the Government using other funds in compensation, the way in which we ring-fence the group involved is very important. We are talking about a group of people who had to join their occupational pension scheme as a condition of employment, so they are in a different position from me, for example. I voluntarily contributed to Equitable Life, so I could not expect the compensation that, if the Government were able to reach a decision on a compensation scheme, people in other schemes would expect to direct to his door.
  Mr. Smith: I take the point that my right hon. Friend makes. He mentions Equitable Life. I should make it clear that that is something on which I have always declared my interest in the register, which is consistent with the advice of the registrar given at the beginning of 2003. The matter is no longer registrable, but it is declarable when raised within my ministerial responsibilities. I have not had any dealings on Equitable Life at the Department for Work and Pensions or the Treasury, and my hon. Friend the Minister for Pensions would have to respond to any points about that.
  On the general point that my right hon. Friend makes, when issues of compensation or discretionary assistance—that is not the same thing—are raised, it is important to have a clear idea about how and where boundaries could be placed around those who would be eligible. We continue to examine such matters closely. I take the point behind the argument that he makes, but, equally, there would be those who would say that as a consequence of it, a distinction should be drawn between those who were in such schemes in 1988 and those who joined later. How fair that would seem to people who joined the schemes later and thus did not receive assistance illustrates the problem when drawing boundaries. There are also problems when considering time. Most members of the Maxwell pension scheme, thanks to the rescue plan introduced by Sir John Cuckney with the help of my right hon. Friend and other hon. Members, have received a large proportion of the pensions that they were expecting. As some schemes have not done well, it is not difficult to understand why members who had lost out would knock on the door to ask for assistance and compensation. I mention those points only because my right hon. Friend raised the valid issue of the importance of drawing a boundary and the difficulty of so doing.
  Kevin Brennan): When considering that boundary, would it be appropriate to examine whether people were given anything amounting to an adequate health warning about the pension schemes that they joined? Surely it is the case that no rational human beings would bet their retirements on a single share—namely, the share of their employer. People were not told that they were required to do that.
  Mr. Smith: I take my hon. Friend's point, but the whole House can appreciate how difficult it could be to establish whether people had received such advice. I am not erecting these problems as excuses for why we are

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  unable to announce an assistance scheme, but citing them as serious issues that must be thought through before we can reach a final decision.
  Rob Marris: At the risk of raising false hopes all over again, is my right hon. Friend saying that he does not rule out compensation and that he is still looking at the issues and statistics?
  Mr. Smith: My hon. Friend urges me to repeat that we are not raising false hopes, and I shall have to underline that at some point in my speech. As I have said in the House before, given all these workers' anxieties, which we understand, we must be able to look them in the eye. They must know that we have been absolutely straight with them all along. I say again that we must not raise false hopes, but it would be wrong to close off consideration of these issues until, or unless, we are absolutely certain that nothing can be done. That is the spirit in which I respond to my hon. Friend's point.
  Sir John Butterfill rose—
  Mr. Smith: I shall give way to the hon. Gentleman one last time.
  Sir John Butter fill: I was not entirely sure what the right hon. Member for Birkenhead (Mr. Field) said, and I did not want the Secretary of State to get too much comfort if he was inferring, as some of us might have thought, that the Government could have no liability arising out of Equitable Life. When they see fit to publish the Penrose report, we hope that it will be published in full. If it shows that Lord Penrose has decided that there was clear culpable behaviour by the Department of Trade and Industry and, perhaps, the Treasury, will the Government not rule out the fact that their culpability should give rise to compensation?
  Mr. Smith: For reasons that I made clear in my declaration a few minutes ago, my hon. Friend the Minister for Pensions will deal with that aspect of the hon. Gentleman's points in his reply to the debate.
  I return to the series of questions that the hon. Member for Havant—
  Mr. Frank Field rose—
  Mr. Smith: I shall give way one last time.
  Mr. Field: If we are to try to support Ministers in introducing some sort of scheme, it is very important that they do not think that, when we achieve that, if we do, we shall then pile in with the next one. Therefore, I was trying to say that if Equitable Life has a case it will be because of the report that is to be delivered. It should not be because the Government have met what I regard as the legitimate grievance of people who were made to join pension schemes and have now lost all or most of their pensions. I was trying to say that we shall ring-fence it in that way and not use as a battering ram any advance the Government make here to try to get every other old claim through as well.
  Mr. Smith: My right hon. Friend makes very succinctly the point about the importance of a firebreak
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  and avoiding a more general read-across or some sort of domino effect. Again, the whole House will understand why the Government have to examine that very carefully.
  Mr. Quentin Davies: Will the right hon. Gentleman give way?
  Mr. Smith: No. I wish to make more progress.
  The hon. Member for Havant raised the legal position. Again, the House will understand that, with the Government before the courts, there is a limit to how much I can say about this matter. He asked what made us so confident of the legal position. I can say only that it is on the basis of the advice that we have received. The claim being made against us is that we failed to implement the solvency directive. I am advised not only that we complied with it, but that the European Commissioner said that we had complied with it. That is the position in essence. The case has not progressed fully, and there may well be other dimensions of the claim yet to be made as well as other legal aspects that the House will understand we must examine very carefully.
  The hon. Gentleman asked about the full buy-out regulations applying to firms that started to wind up after 11 June. I do not think that I ever raised any expectations that it would have been appropriate or even possible to make them apply before 11 June. That would have been getting us into the area of retrospection, which I do not think we can enter.
  The hon. Gentleman also raised the question of the priority order. I can confirm that we shall move forward in the very near future to rebalance the order so that the basic benefits of those in the run-up to retirement and other deferred members take precedence over the indexation of pensions in payment. That will achieve a substantial rebalancing. Many members may gain 20 per cent. of their pension, so it is a worthwhile interim change before the pension protection fund comes into effect.
  I was of course aware of, and indeed shared, the enthusiasm of my right hon. Friend the Member for Birkenhead, echoed by the hon. Members for Havant and Northavon (Mr. Webb), for looking at a secondary rebalancing of the priority order among deferred members, to upgrade the rights of those deferred members with longer scheme memberships against those with shorter tenures. Those proposals had attractions, but we consult on regulations, and one of the things the consultation revealed was that that approach was impracticable, as many schemes do not keep the data needed 10 impose it. They do not hold the information on how long people have been members; they cannot tell the difference between someone who has been a member for a short time with a high rate of contributions and someone who has been a member for a longer time with a lower rate of contributions.
  It is worth reminding the House that all that the proposals to rebalance the priority order can ever achieve is some redistribution of losses, lessening them for some scheme members, but increasing pain for others. The real aim must be to cut, not redistribute losses for members of schemes in wind-up. That is what the PPF is all about. Conservative Members need to decide whether they are in favour of the fund or against it.

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  The final point made by the hon. Member for Havant was about unclaimed assets. The fact that assets are unclaimed does not mean that they do not belong to somebody. With electronic methods, it is becoming easier to trace assets and more people are doing so. Even if appropriating assets for public, Government or even charitable purposes, as happens in Ireland, were deemed appropriate, what gives that particular group of people who have been hard done by a prior claim to those assets compared with all the others who, I am sure, also want to make a claim? Again, it is a seductive idea, but I doubt whether it is right or practicable.
  Mr. Heald: I am grateful to the right hon. Gentleman for giving way, particularly as I attended the House every week that the Pensions (Winding-up) Bill introduced by the right hon. Member for Birkenhead (Mr. Field) was blocked. On the question of unclaimed assets, is it not right that there could be no higher public interest than to protect the public's confidence in pension saving? Surely, that is so important to the future of our country that using the unclaimed assets for such a purpose could not be said by any body to be anything other than a sensible ordering of priorities.
  Mr. Smith: The hon. Gentleman makes a persuasive argument. As the Secretary of State for Work and Pensions, I cannot say that I would not be tempted by such an argument to get more resources to help with an intractable problem in pensions. However, I do not believe that he is so naive as to imagine that if suddenly there were a fund containing millions or tens of millions of pounds there would not be a long queue of deserving causes knocking at the door. Indeed, to develop his point about the importance of confidence in pensions, there is another argument that would add to the weight of evidence—if the matter is so important, is there not a proper claim on public funds anyway? In other words, the case for using unclaimed asset. could apply equally powerfully to the use of public funds, if that were feasible and if and when we had explored all the issues.
  The hon. Member for Havant also spoke in detail about the minimum funding requirement. As he said, the MFR was set out in the Pensions Act 1995, and the secondary legislation that subsequently took effect in April 1997 requires MFR valuations to be carried out in accordance with a guidance note issued by the Faculty and Institute of Actuaries. Revisions to the actuaries' guidance note reflected professional judgments on a range of relevant variables that change over time, including some mentioned by the hon. Gentleman such as interest rates, annuity prices and demographic trends.
  Mr. Willetts: Was the Chancellor's change in the tax treatment of pensions one of those factors?
  Mr. Smith: To be honest, I do not know, but I shall go away and check. If the change had the impact claimed by the hon. Gentleman on any of the factors that I have listed, clearly that would be reflected. However, I do not subscribe to his argument, which treats the tax change in isolation. Whenever the Opposition raise that change, they fail to take account of the fact that it was part of a more comprehensive restructuring of corporate taxation, which cut the rate of corporation tax from 33
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  per cent. to 30 per cent., with great benefit for businesses large and small. We would have to factor in the effect on pension funds as well.
  When the MFR revisions were carried out in June 1998 and March 2002, I do not recall any Conservative Members lobbying the Government or making representations to override the professional advice that we were given at the time. It is easy for the hon. Member for Havant to say now that different decisions should have been taken. Ministers took those decisions on the basis of professional advice and in line with the secondary legislation specified by the Pensions Act 1995, which was passed by the Conservative Government.
  Sir John Butterfill: I suggest that if the right hon. Gentleman looks back over a series of debates taking place at that time, he will see not only that I was an original critic of MFR, but that I consistently said that its composition needed to be reviewed because it was not working in the best interests of scheme members.
  Mr. Smith: I acknowledge the hon. Gentleman's remarks about his contribution to those debates, but I cannot recall the Opposition in general arguing that what was being done was wrong.
  I have dealt as thoroughly as I can with the points made by the hon. Member for Havant, by his colleagues and by my hon. Friends.
  Mr. David Watts: All Labour Members welcome my right hon. Friend's suggestion that he will carry out a full assessment of the cost of any compensation package. Will he net off any savings that might be derived from benefits? When the figures are published, we should like to be able to see the cost to the Exchequer, and we need to know what the likely savings would be in benefit terms.
  Mr. Smith: It always makes sense to take as rounded and comprehensive a view as possible of the relevant factors in cost-benefit analysis, but I would not want to set off another complicated exchange with Conservative Members about the assumptions that we are making about pension credit in 20 years' time.
  Mr. Willetts: The Secretary of State is doing a brilliant job of not raising any false hopes. As he has been speaking for half an hour and is coming to an end, may I invite him to say something constructive about what the Government will do about this problem?
  Mr. Smith: I have been saying a great deal that is constructive about the careful and principled way in which we are approaching this very difficult challenge. We owe it to those affected to do that without raising false hopes. If it is not possible to do anything, as might ultimately be the case, they need to know that that has been the position all along. At the same time, we should not prematurely close off the opportunity of assistance if we can identify a proper basis on which it can be done.
  I stress the distinction that I made a few minutes ago between the possibility of assistance and the question of compensation. I am not a lawyer, but I take the point that was made by the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg):

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  compensation has implications of legal liability, which, for reasons that I explained, I do not accept. There is no doubt, however, that these workers and their families have a compelling case on human grounds. That is why it would be wrong to close off the possibility of assistance while there is any chance that that might be made available through their existing deemed buy-back rights, improved procedures or other means.
  Looking to the future, the lesson that we should all draw from this is that a pension promise made should be a pension promise honoured. That is why it is right that we have implemented the full buy-out regulations. That is why it is right to introduce the Pensions Bill, which establishes the pension protection fund. It will ensure that such a position cannot arise again and I therefore hope that hon. Members of all parties, whatever their other reservations about Government policy, the state pension system and so on, will support the Bill and get the pension protection fund in place so that scheme members have the protection that they deserve.
  5.4 pm
  Mr. Steve Webb: I must confess that when I found that we had a debate on winding up occupational pension schemes approximately a week after the publication of the Pensions Bill and a week before Second Reading, I was slightly bewildered. I tried to work out why we were holding a separate debate about issues that we shall discuss again next Tuesday and, I suspect, for the next happy couple of months.
  I admit that an unworthy thought crossed my mind. The Conservative motion contains a great deal that is sympathetic, but it does not take us any further-indeed, it more or less says, "something must be done." It
  "calls upon the Government to take urgent action"
  but does not define the "urgent action." I was concerned that the debate essentially represented the Conservative party covering its back. The shadow Chancellor's statement about public spending identified health, education and state retirement pensions as priorities, but also suggested that no other spending commitments were permissible. I was therefore concerned that the Conservative party was trying to sound sympathetic to the 60,000 workers while not wanting to spend any money on them. I believe that it is important to unite on this issue and I shall therefore assume that I was wrong to draw that conclusion.
  The discussion between the Front Bench spokesmen has revealed some interesting developments. I want to ascertain the extent to which we can find consensus. We want the Pensions Bill to be amended to provide assistance, compensation or simply some money. I strongly suspect that the 60,000 people who have lost out do not give a fig whether the provision is called compensation or assistance; they simply want the money that they were expecting to live on. I should be happy if, at the end of his deliberations, the Secretary of State decided that although the Government saw no case for compensation, they were prepared to provide assistance on a discretionary basis that effectively tackled the injustice. I am prepared to swallow such phraseology if it provides legal cover for the
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  Government. My main concern, like that of many other hon. Members, is to ensure that the injustice that such a large number of people have suffered is tackled. It is therefore welcome that the Secretary of State is giving himself some room. If pressing for assistance rather than compensation helps, I can live with that.
  The motion does not mention compensation and the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg) highlighted that by tabling an amendment that referred to it. The Government's response so far has tended to be, "We can't have retrospection or an insurance scheme that applies retrospectively to people who suffered their loss before the insurance was introduced." I am not calling for that. I am not suggesting that we should have an insurance scheme that insures people who had not paid any premiums when they suffered their loss. The argument that we cannot have retrospection does not stack up. All sorts of people suffer losses, and all sorts of Governments compensate them for or assist them with the consequences. Nobody says, "You can't do that because it's retrospective." People cannot be compensated until they have suffered a loss. Compensation must always happen after the event, and there is no great issue of principle at stake.
  Mr. Frank Field: At least some of us who propose that there should be some compensation or payment for those who have lost their pension do not argue that that should be part of the new scheme. Indeed, the last thing that we want to do weigh down a new scheme with such considerable debt. Compensation or payment should be totally separate from the scheme.
  Mr. Webb: That has always been my view but Ministers appeared on the main evening news bulletins on the day the Bill was published and argued that we could not help people retrospectively. The straw man of retrospection was put up only to be knocked down. I am grateful for the right lion. Gentleman's confirmation of my view. However, compensation or payment is a matter of natural justice, leaving the aside the legal niceties of the insolvency directive and so on.
  Adam Price: Just to back up the hon. Gentleman's point, retrospection has always been part of a tradition in civil law. The War Damage Act 1965, passed by a Labour Government, provided retrospective compensation for injury suffered during the second world war. That is just one example.
  Mr. Webb: My general point is that Governments often take action after the event to compensate or help people who have lost out. That is not my understanding of retrospection, which is applying a law to people who acted before that law came into force. This issue is different because it is about compensation, or assistance—call it what we will. I therefore hope that the Government will stop saying on the radio and television that they cannot take this action because it would be retrospective. It would not be retrospective action, because it is about compensation or assistance.
  Kevin Brennan: Is not a further point that the Government have a responsibility always to act in the

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  public interest? To restore confidence in occupational pensions, it is very important that after the establishment of the pension protection fund—which is very welcome—there are not tens of thousands of people around saying, "Don't join an occupational pension scheme; look what happened to me."
  Mr. Webb: That is right. One problem with pension reform is that there is always a lot of history. Just as pension mis-selling has done real damage to the private pension sector, so tens of thousands of people who had lost their occupational pensions could do damage to the future of occupational pensions. That has to be true.
  Another important thing to come out of this debate is the Secretary of State's confirmation that the estimate of 60,000 workers is in the right ball park. I think that that faithfully reflects the tenor of his remarks. That is an extraordinarily significant remark for him to make, given the Government's argument about blank cheques. I have to say that the Conservative party's objection to signing early-day motion 200 now goes out of the window because we know what average industrial sector workers' earnings were, so it is not beyond the wit of man to estimate the broad order of magnitude of the losses. Clearly, there will be a rant e of figures on that. No one knows for sure, and I shall return to information in a moment; but we now need a declaration of principle from the Conservative Opposition Now that we know that we are not talking about a blank cheque because we have an order of magnitude, do they accept in principle that there is a natural justice case For compensation or assistance of some sort?
  If we are going to move forward together, we do not need the hon. Member for Bournemouth, West (Sir John Butterfill) and the hon. Mem Der for Cardiff, West (Kevin Brennan) to fall out with each other; we need them in the same Division Lobby. Conservative Front Benchers should be able to agree that we can have a pretty good idea of the amount involved because the Secretary of State has confirmed on the record that the rough figure of 60,000 is correct, we know what average earnings are, and we have a lot of detail from some of the schemes about typical deficits.
  Only a few hours ago, we were discussing the national insurance fund, whose revenue for this year was overestimated by £1.5 billion and whose administrative costs were underestimated by £750 million. That was in just one year. We are not talking in this debate about anything like that sort of annual sum. All of us who have spoken sympathetically to ASW workers and others have a duty to say, now that we have a rough idea of the number of zeros on the figure and of the scale of the problem, whether we are in principle willing to sign up to some sort of assistance or compensation scheme.
  I understand why the Conservatives were not willing to sign the early-day motion prior to today, but I hope that now they will be prepared to sign on the dotted line in principle—I am not too worried about particular early-day motions—and that all of us who have shown sympathy can make an unambiguous statement. The Government motion shows sympathy, but even they would accept that these workers need more than that. We should now go forward in as united a way as possible
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  and say that, even if we query the compensation issues, as hon. Members have today, there is an issue of natural justice involved.
  Mr. Heald: What figure does the hon. Gentleman put on the problem? What does he capitalise the cost as being?
  Mr. Webb: It has been said that Ros Altmann and the pensions action group are more or less alone in coming up with figures, and I am pretty sure that the figure of 60,000 workers is broadly consistent with what they have come up with. A sum of £100 million per year has been mentioned as the long-term average cost. Essentially, when the pension protection fund comes in, no new liabilities will accrue under the regime. There will be a cap on the amount; it is not an open-ended commitment, because it will come to an end when the pension protection fund is introduced. In the first four or five years, there will probably be no cost to the Exchequer because the funds will already have money in them, and it is important that that money is not spent on poor value for money annuities. There are things that could be done very quickly, as the hon. Member for Havant (Mr. Willetts) has mentioned. That seems to be the order of magnitude that we are talking about.
  To put this in perspective, at the start of the year, the Department for Work and Pensions had a line in its annual report for unallocated expenditure that will rise to £200 million next year. This is almost the spare cash that the Department has not yet decided what to do with.
  Rob Marris: I would suggest that the hon. Gentleman looks again at the figures. If we are talking about 60,000 people, current annuity rates, and a very modest figure of £ 1,000 per year lost pension—although I am sure that it will be higher than that—that would result in a ballpark figure of £1.2 billion as a capital buy-out, not the few hundred that he is talking about.
  Mr. Webb: The hon. Gentleman is confused on two counts. First, I am talking about the £100 million not as a one-off cost but as a recurring annual average cost over the lifetime of a scheme. Secondly, if we go for this sort of approach, we do not have to buy these grotty annuities; we can allow the capital that is left in the funds to go on appreciating. The sum does not therefore work out in the way that the hon. Gentleman suggests, but I am grateful to him for giving me the opportunity to clear up that point.
  A number of us have paid tribute to the pensions action group and to Ros Altmann and the campaigners for getting this issue so high up the agenda and for being more or less the only people putting information into the public domain, perhaps until today. Is this not an issue for the Government? I am appalled to hear that we can do nothing about the injustice of long-serving workers getting next to nothing because the people who run the schemes do not even know how long the workers have been in them. Even the most basic record keeping seems not to have been carried out.
  One might say that such record keeping would be another burden on the scheme, but it seems a pretty minimal burden to have to record when someone joined

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  a scheme and put their money into it. We are talking about incredibly basic record keeping. We are also talking about public money; tax relief and national insurance rebates apply to these contributions, and there is tax relief on the fund. The situation is just horrifying, and I hope that the Minister will be able to tell us that there is to be better record keeping—as a minimum—in the future. The Government have been remiss in not obtaining the information on the numbers affected throughout all the time that this issue has been current. That has been a long time now. It is shocking that we cannot make good policy because of a complete lack of decent information.
  The hon. Member for Havant raised the issue of the minimum funding requirement. I remember sitting on the relevant statutory instrument Committee for the second of the debates on the MFR. My initial reaction was to think, "This is undermining people's protection", but the Government said that their actuaries had advised them that the measure was appropriate. The Conservative members of the Committee then said that they did not want to put burdens on occupational schemes. That was the other argument: they did not want to overdo minimum funding requirements, because people would shut the schemes. The Conservative members of the Committee—whom I shall not name—then nodded the provision through.
  I was determined not to be partisan, so I had better stop at this point. We must all stop using this issue to say, "Let's get one over on the Government" or "Let's get one over on the Tories". I hope that we are all serious about doing something about this issue, as I believe that the Secretary of State is. I am not suggesting that the Liberal Democrats have a monopoly of virtue in this regard. I wonder, however, how long it will take to achieve. Now that we have a rough idea of the orders of magnitude involved, surely we need to crack on with it, and we need to do that in as non-partisan a way as possible. I therefore hope that we can look at the Pensions Bill in a collaborative way that will enable us to put something forward that is precise and that will give real hope—rather than false hope—to the people who have been affected by these issues. The onus is on all of us to do that, and I hope that today's debate—and perhaps my contribution to it—will have taken that agenda forward.
  5.21 pm
  Mr. Jim Cunningham: I welcome this debate, particularly in relation to occupational pension schemes. The workers involved have been referred to, and if we recall the early 1970s, we remember that the workers always saw contributions to their occupational pension schemes as part of their wage deals. That developed in the 1980s, and from about 1986 onwards we saw a hard sell at companies such as Rolls-Royce to encourage people to opt out of SERPS—the state earnings-related pension scheme—and to get into private pension schemes. Tax incentives were introduced, and some companies obviously used the employment regulations of the time to encourage people to be part of those schemes, or to make it compulsory. One way or another, elements of coercion were used to get people—certainly those working in factories—to
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  join those schemes. Of course, they joined those schemes in good faith, and they thought that it was a step forward, because they would ultimately gain some sort of security in old age We now find that that security was on shifting sands.
  Hon. Members will remember that I said in an intervention that one thing that the Tory Front Bench spokesmen omitted to mention was the mis-selling of pension schemes. That was a calamity, and there were no calls from the then Government to do anything about it. All sorts of reasons were given why compensation could not be paid out at that time, which led this Government, when they came into office, to set up the Financial Services Authority. Any Back Bencher who has been involved in Treasury matters will know that these issues have been raised with the FSA on a number of occasions For the House's information, it is not generally known that the financial services people have paid out in compensation something in the region of £2 billion to £5 billion as a result of the mis-selling of some of those schemes. Those are old figures, and there are probably more up-to-date ones. The idea that the Government have not done anything over the past six or seven years is therefore an illusion. The truth is that they have stated to do something through the FSA.
  Compensation ha, been mentioned. Because people entered those schemes in good faith way back in the 1960s and 1970s and, obviously, in the 1980s, and because there was a hard sell, on which there has been a report, I am one of those who think that we should consider some form of compensation. We can debate what the figure should be, and work it out, but a heck of a lot of people are involved.
  Kevin Brennan: My hon. Friend made an important point in the early part of his speech when he said that pension schemes are, in effect, deferred wages for many workers. In paying them compensation, therefore, all that we would be doing would be paying them the wages that they were promised.
  Mr. Cunningham: To elaborate on that point, I can remember that when I was involved in negotiations many years ago people would accept 3 per cent. as opposed to 5 per cent. because it was a deferred wage, and most people understood that. Although I welcome the fact that the Secretary of State has not closed the door on compensation, I hope that he will give due weight to the views expressed on both sides of the House as it is a major issue. If it is not addressed, we will have perhaps 60,000 people on benefits who should not need to be in that position. That is the difference between the poverty line and a little bit of affluence. I hope that the Secretary of State will bear that in mind.
  On the whole question of pensions, we would not be having this argument if the previous Government had not started their coercion, as I call it, in 1986. It goes without saying that w e would not be debating it if we had a proper old age Pension fixed at a reasonable level, possibly linked to earrings, although there may be other ways of doing it. The problem with linking it to earnings is the issue of what category of earnings should be chosen or what average, which can get us involved in all sorts of arguments. In the absence of a decent pension being paid, though, the argument about the link gains credibility. At some point, future Governments will

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  have to address the question of what we call a decent pension. At the moment, while about 2.5 million pensioners have been taken out of poverty and given assistance, the number is not really diminished, because if we change the goalposts, we find that other people come into that category.
  I was interested in the point mad, by the Opposition about the link. As I said in an intervention, they abolished the link when in Government, and I find it strange that they have suddenly gone populist. They must have discovered pensioners g Soups somewhere—they were always there, but the Tories did not know that when they were in Government. As a result of their conversion, the Opposition are formulating their policies on the Swiss concept—they consult the canton to decide what they are going to do. That is very interesting. They poked fun at us about the big conversation, but listening to what they were saying earlier, I think they have one heck of a conversation going on. I am interested that the Tories are suddenly becoming the listening party. They are having all sorts of consultations with all the pensioner groups whose existence they never acknowledge (when they were in power; now that they are the Opposition, they suddenly find that those groups matter. We always knew that they did, which is why we continually raised pensioners' issues when we were in Opposition
  David Taylor: If my hon. Friend cares to walk the road between Havant and Damascus, he will find, among the discarded McDonalds wrappers. many abandoned policies that the Tories were happy to implement during their last period in office.
  Mr. Cunningham: It seems to me that we entered the era of Pol Pot politics in 1997 so far as the Tory party was concerned: that was year zero, and every misdemeanour was laid at our door, but history shows that the Tories are very good at blaming others for their own shortcomings.
  I see that the hon. Member for Eastbourne (Mr. Waterson) is dying to intervene.
  Mr. Nigel Waterson: May I lure the hon. Gentleman away from Cambodia for a moment? His main complaint seems to be that restoring the link with earnings is our policy. If it became his party's policy tomorrow, would he be happy about that?
  Mr. Cunningham: Of course I would be happy about it, but I would see it as only a short-term measure. The one thing that cannot be avoided by Government or Opposition, although the Opposition tried to avoid it when they were in power, is the fact that people are entitled to a decent pension. Until that is dealt with, there will always be this to-ing and fro-ing across the Chamber.
  We now have to tackle the new phenomenon of final salary pension schemes and the moving of goalposts. My right hon. Friend's proposals are a step forward, but something that has not been addressed so far—certainly not when the Conservatives were in Government—is the
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  issue of pension holidays. Companies would take pension holidays, and after four or five years there would suddenly be a problem with pension funds. I find that strange; there should have been some form of compulsion. Another thing that went on when the Conservatives were in power was the use of pension funds to finance other businesses. Conservative Members speak of people complaining in their surgeries about pensions, but I am sure that Labour Members' surgeries have been visited by people complaining about one of those two practices. Some of the companies involved eventually folded.
  As I have said, the Government's proposals are a step in the right direction and we should not be negative about them but should view them as something on which to build. We should take a leaf out of the Conservative Government's book, and do things gradually. They cannot be done overnight.
  I have tried two or three times to get my Pensioner Trustees and Final Payments Bill through the House, without success. Nevertheless, although the law says that trustees must represent everyone, groups of retired people who are members of pension schemes feel that they have no voice, and are left out when decisions are made. Over the last 12 months, I have had a number of meetings with retired Rolls-Royce employees. As many as 300 or 400 people have turned up from all over the west midlands, which gives some idea of the strength of feeling—a strength of feeling that is beginning to gain momentum among the former employees, and doubtless among those of other companies.
  On numerous occasions, along with my hon. Friend the Member for Coventry, North-West (Mr. Robinson), I have spoken to the Minister about the scandal of former Massey Ferguson employees who were faced with a "take it or leave it" redundancy proposal, and who, more importantly, never received from their pension scheme what they had put into it. The last I heard was that the issue had gone to the High Court, and the Secretary of State was saying that we would have to wait and see what decisions it made. Whatever the decisions, however, and even if the issue is being addressed, there remains a great deal of bad feeling among Massey Ferguson's former workers—certainly in Coventry—about what happened to them.
  My hon. Friend the Member for Cardiff, West (Kevin Brennan) has, from time to time, mentioned steelworkers. He will find that the employees of Massey Ferguson were in exactly the same position. I certainly had a lot of sympathy with him when he raised those issues, because I—along with my hon. Friend the Member for Coventry, North-West—was among those making representations to the Secretary of State. It is about time that my hon. Friend and I had another meeting with the Secretary of State to talk about the future of Massey Ferguson workers. [Interruption.] My right hon. Friend is grinning, but as he knows, we shall certainly return to that issue.
  In some ways, in a debate such as this, pension schemes are only part of the problem. In addition to the need for an adequate pension is the question of care and how to fund it. That is all part of the big equation. From time to time, social service departments are in conflict with the private sector over the cost of providing care. Thanks to a measure introduced by the previous Conservative Government, people had to find their own

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  means and methods of paying for care. The cost of care varies thorough the country, which is part of the pensioners' lot. That is why, in trying to understand the plight of pensioners, we must take a number of factors into consideration. For example, it is not too long since we had the problem of bed blocking. On investigating that problem, we discovered that we did not have sufficient social workers to ensure that people returned to the accommodation and care that they needed on leaving hospital.
  The issue of pensions is complex, therefore, and we cannot talk about occupational pensions in the abstract; we must consider the plight of pensioners in its entirety. Of course, in some parts of the country, such as the west midlands, pensioners get free travel, but in others they pay a 50 per cent. fare. To a certain extent, we must congratulate the Government on introducing that fare. It constitutes progress, but pensioners nevertheless feel strongly about free travel, which allows them to see friends in different parts of the country with whom, perhaps, they grew up, but who moved away. In discussing these issues, we must therefore start to think about the general needs of pensioners. In fairness, however, it must be said that this Government have done a lot for pensioners, particularly those on the poverty line.
  Nobody will deny that the pension protection fund is bound to be welcomed. It has been a long time coming but it is finally here; let us hope that it goes from strength to strength. The introduction of a regulator should have happened years ago, and it will be very interesting to discover how the regulator will regulate the various pension schemes and occupational schemes. Many people will also welcome the simplification of paperwork. Pensioners often have to fill in reams of paperwork that they do not really understand. Such simplification is really a job for the regulator. Pensioners are often aggravated by the amount of form filling required when they apply to local authorities for benefits or rate reductions. We have raised this issue with Treasury Ministers from time to time to see whether such forms can be simplified.
  It will be interesting to discover how the state pension lump sum develops. I should point out to the Secretary of State that we will certainly monitor that proposal, on which there is not too much detail. Nevertheless, it, too, is a step in the right direction. There is also the vexed question of informed choice in promoting pensions. The regulator should probably consider that issue, and here we come back to the mis-selling of pensions and the hard selling that occurred in the days of Conservative Government. I would certainly welcome the provision of such information.
  The key measures that the Government are trying to introduce include safeguarding accruable pension rates during periods of statutory paternity and adoptive leave. If we think about it, that issue has never really been addressed before, and there will be a particular impact on women. The lack of pensions, particularly occupational pensions, for women, often forces them on to benefits. If the fact that they have to rear a family was taken into consideration, they might be in a far different situation.
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  The House would certainly want to monitor the capping limit in relation to price indexation. It is one thing to link a pension to the price index, and quite another to link it to average earnings. There is a difference. Overall, however, we talk about capping issues, and Secretaries of State under previous Governments always had the right to decide whether to link pensions to prices or wages and to do it through regulation; the discretion has always been there. It is up to the Secretary of State, in discussion with the Chancellor, to have a good look at that.
  The trade unions and the TUC have given the proposals a cautious welcome on the basis that they are a step in the right direction. For many years, many people outside the House—it certainly continued when we came into the House—raised those issues because we all knew that we would reach pensionable age ourselves at some time in the future. That sounds a bit mercenary, but, seriously, anyone who has watched the plight of pensioners over the years and done case work or attended surgeries knows how easy it is to come across heartbreaking stories. They often happen because people do not know what benefits they are entitled to. People need to be experts to work out what benefits are available and who should get them.
  Pensions are often increased in line with inflation only to be taken away by increases in council tax. That is a Catch-22 dilemma that many pensioners face, but I notice that the Government are going to take the necessary action to Beal with the situation. There are a number of ways of doing it. They can cap councils and stop them increasing the tax that way, but that is a short-term measure. We know what happened when the previous Government capped councils. Programmes and revenues were capped, which meant school buildings and council houses could not be repaired, so it is only a short-term measure.
  The real measure that the Government should take is to ensure that councils are properly funded. In Coventry, for example, when the Opposition were in Government, we lost something like £600 million in grant from the central Government as a result of the change from the old rates to the poll tax. That is a lot of money in Coventry's circumstances. We often find that councils are asked by successive Governments to introduce measures without the necessary funding. All in all, I note that the Secretary of State is saying that his measures will go a long way to ensure that the burden does not fall on the taxpayer. Again, that remains to be seen.
  I finish by saying that I welcome the Government's proposals, and I hope that they will be introduced in the form of legislation. However, I still believe that the Secretary of State must reflect more on the question of pension holidays and the ability of companies to use pension fund money for other purposes. Mention was made earlier of the Pensions Act 1995, introduced under the Conservative Government; that was a very weak Act that did not address the fundamentals that I have raised in the House today.
  I hope that the Secretary of State will take some of my points into consideration, and I remind him that I hope to have a further meeting with him, together with my hon. Friend the Member for Coventry, North-West, about the plight of the ex-employees of Massey Ferguson.
  5.39 pm
  Sir John Butterfill: It is rather refreshing when a political party such as my own admits that it got some things wrong and that they need to be put right. It is right to say that we got some things wrong in the Pensions Act 1995 and that we want to sit down with the Government to work out how to improve things. That does not always happen. There is no doubt that there were faults in the 1995 Act, although some have been compounded or made a good deal worse by the present Government's subsequent actions.
  It is undoubtedly true that the priority orders introduced by the 1995 Act are wholly inappropriate for the circumstances in which many pensioners, prospective pensioners or deferred pensioners find themselves today. It is wholly unfair that existing pensioners under a scheme that is being wound up continue to receive full pensions, while other scheme members on the verge of retirement get almost nothing.
  There is an urgent need for change. My colleagues on the Front Bench have said that they' would be happy to engage in bipartisan talks to see how such change could be achieved. I think that the Liberal Democrats would go along with that as well.
  Mr. Webb indicated assent.
  Sir John Butterfill: I see that the hon. Member for Northavon (Mr. Webb) is nodding in approval. The matter is urgent. Action needs to be taken now, and it is astonishing that it has not been taken before.
  The 1995 Act was rather a hurried response to the Maxwell scandal. It attempted to pitch up the holes that that affair revealed in the pensions system. Like all hurried legislation, the Act was not perfect. There have been plenty of opportunities to improve it since it was enacted almost nine years ago. The previous Conservative Government, and the present Labour Government who came to power in 1997, have had plenty of opportunity to sort out the defects. I am worried that nothing has been done, even though some of us have said repeatedly that the 1995 Act has defects that need to be resolved.
  There is another considerable problem. The regulatory regime—the Occupational Pensions Regulatory Authority, and other bodies—is not dealing with the difficulties that have arisen in some of the many schemes to which the hon. Member for Cardiff, West (Kevin Brennan) referred, and in other schemes that are now in liquidation. The Government must think about how to deal with the problems that have arisen and how to alleviate the plight of the people who have been affected so severely.
  I do not go along with the hon. Member for Northavon, however, whose approach was typical of the Liberal Democrats. He seemed to say that Government money should be used to bail out all the people who have been affected. Everything/ would then be lovely, at a cost of only a few hundred million pounds a year. However, that few hundred million would not then be available to the health ser rice, education or any of the other things at which the he n. Gentleman's party has pledged to throw money.
  Mr. Watts: Many people who are faced with a black hole in their pensions look at the very rich farmers who
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  were compensated for losses as a result of foot and mouth disease, and other tragedies, and ask, "Why was it good enough for the farmers but not for us?"
  Sir John Butterfill: The hon. Gentleman makes an interesting point. It is a matter of the existing legislation or the priorities of the Government of the day. My point is that it is not appropriate to say that we can always throw money at the problem. That is especially true in respect of private sector schemes, some of which have been the subject of pretty dirty dealing.
  I make no specific allegations, even with the benefit of parliamentary privilege, but some companies have been very badly run, with directors running off with the money or using it for inappropriate purposes. In some schemes, the trustees have not properly guarded the funds that they were supposed to look after, and other schemes have not been regulated properly by the Occupational Pensions Regulatory Authority. Litigation may follow in all such cases and some of the money may be recovered. If the regulatory authority is at fault, the Government might be an appropriate compensator. However, to say that the Government should write a blank cheque to bail out any private sector scheme that is in trouble would be to encourage the misbehaviour that we want to discourage. In many ways, the Pensions Bill is a good one, and it is designed to prevent such misbehaviour in the future.
  Mr. Waterson: My hon. Friend speaks from vast knowledge and experience. Does he think that there will be any effect on the behaviour of those who run pension schemes and the risks that they take, knowing that in future—if not retrospectively—there will be a safety net along the lines of that which has existed in America for some 30 years?
  Sir John Butterfill: My hon. Friend makes an important point. There is the risk of moral hazard. If there is a safety net, some employers may be discouraged from behaving correctly. For that reason, there should never be a flat-rate contribution to the pensions protection fund, but it must relate to the level of risk—so that employers who do not behave correctly pay a much higher premium than employers who behave in the best interests of their work force.
  I criticised the minimum funding requirement in 1995 and have done so ever since because it directs people, through actuarial advice, to specific forms of investment—overwhelmingly to index-linked, predominantly Government bonds. The more bonds that people buy in a diminishing bond market—and it has been diminishing—the lower the yield. The way that the MFR operates requires the purchase of more bonds if there is not enough income to cover the liabilities then the yield may fall still further. It is a like a black hole that spirals ever downwards, sucking in money from a lower and lower yield. That is not necessarily always the fault of the Government, but perhaps of the actuarial profession in being terribly short-sighted in the way that it has viewed liabilities—thinking that the only way to match a future liability to pay pensions is to buy a bond that will provide an income in the future. If the yield keeps falling, the bond will not even achieve its primary objective. Successive Governments—including

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  those of my own party and the present Government— have failed to address that fundamental flaw in the MFR mechanism.
  David Taylor: Is it not the case that MFR directions of the kind to which the hon. Gentleman refers have relatively little influence on the price of bonds compared with minimum strategic economic actions such as changing interest rates? One cannot attribute everything to the MFR.
  Sir John Butterfill: The hon. Gentleman is entirely correct that bond values are attributable to a series of factors—including the fact that Government borrowing has decreased, so the supply of bonds has diminished. That may be a good thing, but it has nevertheless been a contributing factor, for which the Government should have compensated in the make-up of the MFR.
  Another factor is that regulators are increasingly telling insurance companies that they must cover more of their potential liability by bonds rather than equities. We saw that with Standard Life, which was recently told that it must sell a chunk of equities and buy something seen as more secure. Standard Life, having done that, and to everyone's surprise, now has, through bonds, double the liability coverage required by statute—yet the yield to that company's policyholders will be substantially reduced. The fall in yields is attributable also to changing market conditions. The point that I am trying to make is that the Government and the actuarial profession must be far more sensitive to how the market has changed and examine other forms of investment.
  In my capacity as chairman of the parliamentary pension fund, I recently went to a seminar held by PricewaterhouseCoopers on alternative investments. Statistics show that investments in, for example, commercial property over a 30-year period have been less volatile than bonds, which are supposed to protect against volatility, and have shown almost double the yield. Should we not ask the actuarial profession why we have not put more—not all of it—into commercial property? Why are we not investing in derivatives that protect against future changes? We should have a range of investments because there are more choices than equities versus bonds—we should have mixed portfolios. Successive Governments have, however, failed to do that, which is why the MFR is a problem today. I shall give up that particular hobby-horse, but I was challenged to say whether I objected to the MFR in the past, and I objected to its composition.
  Mr. Webb: Ideologically, I imagine that the hon. Gentleman favours thrift and self-reliance. We face a situation in which people worked hard, saved hard and anticipated a good pension, but are getting next to nothing. Does he accept that there is a basic injustice there that must be addressed in a way that goes beyond legal action by those who can afford to take it? Is there not a bigger issue?
  Sir John Butterfill: There may well be a bigger issue, and we must quantify the scale of the problem, how it has arisen and whether the Government have failed to regulate, which would give them a moral responsibility.
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  The hon. Gentleman is right to raise that point. All I am saying is that there are all sorts of demands on the public purse, and compensation may mean one less hospital, somebody not getting a hip operation or education not being provided properly. We must all suffer a degree of pain if we compensate everybody. We currently live with a compensation culture where everybody must be compensated for everything and the Government bail out every lame duck. We cannot go that far, but the hog. Gentleman is right to say that it is a question of balance.
  The reforms that the Government are introducing and the changes that they have made since they came to power have had a pernicious effect. The difficulty is that if we are to encourage good employers to provide good pension schemes, they must have some incentive to do so. Most o1 the Government's actions have provided disincentives—there was no worse disincentive than their £5 billion a year grab on all our pension schemes.
  Mr. Ken Purchase: Oh no not you as well.
  Sir John Butterfill: The hon. Gentleman says, "Oh no", but one must keep referring to that point because the sum of money is significant-it equates to about £600 a year for every pensioner in an occupational scheme in this country.
  Mr. Jim Cunningham: The hon. Gentleman refers to a money grab, but if he goes into the House of Commons Library he can find out why the Chancellor acted on pension schemes. Companies were creaming off profits and were not reinvesting; it is not a political point, and the hon. Gentleman will find it in the Library.
  Sir John Butterfill: The Chancellor's explanation will not comfort many pensioners. This morning, I received some figures relating to that point from the Association of Consulting Actuaries. About one third of defined benefits schemes remain open to new members. Despite the Government's attempts to persuade people to choose other forms of pension saving, other schemes have not been frightfully successful. On group personal pensions, for example, only 44 per cent. of firms offer such arrangements, and the combined contributions of employer and employee are about 8.6 per cent., which is nothing like enough o provide an adequate pension in retirement. As for stakeholder schemes, only 37 per cent. participate in those or other stand-alone schemes and the average combined contribution is only 4.8 per cent., which will produce hardly anything and certainly will not reach the level of the Government's pension guarantees.
  Only 36 per cent. of defined benefit schemes in smaller firms are open to new members. Worryingly, the fall-off in defined benefit schemes—which are the best form of pension for employees, provided that the company or scheme does not go bust—is greatest in the small schemes. That is because they cannot cope with the level of regulatory burden. However, we have increased that burden. My party did it in the Pensions Act 1995 and the Government will repeat that in the Pensions Bill, which

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  is in other ways an excellent Bill. The Government do not understand the cost and the impact of the burdens that are likely to be imposed.
  I shall not address the entire Pensions Bill today, because we shall have another day in which to do so in rather more detail. However, I shall give an example. One of the problems with the Pensions Bill is that it inserts into our legislation, almost in toto, the draft directive from the European Union The draft directive was created by Commissioners from countries that do not have occupational pensions in the same way that we do. Only the Netherlands and Ireland also have significant local schemes. Most of the others have only sophisticated state schemes. However, the Commissioners see fit to publish regulations that apply principally to us, even though this country has more in pension savings than any other. The Dutch have more per capita, but we have more in total.
  The level of burden that the Bill will impose is huge and it will drive more and more small employers out of defined benefit schemes. Clause 200, for example, will take the requirement for knowledge for trustees to a professional level. Historically in this country, trustees have been ordinary people, including pensioner trustees or trade union-appointed trusties, who have no specialised knowledge but good common sense and sound judgment. They take advice if they do not know something. They know that they have to appoint a scheme actuary and a scheme lawyer, and consult investment advisers and fund managers. Under the Pensions Bill, the trustees will have to know all that themselves. Clause 200 (4) states:
  "An individual to whom this section applies must have knowledge and understanding of … the law relating to pensions and trusts … the principles relating to … the funding of occupational pension schemes, and … in vestment of the assets of such schemes, and … such other matters as may be prescribed."
  I attended a seminar held by S J Berwin, also in my capacity as chairman of the parliamentary pension fund trustees, and I was told that most pension lawyers and actuaries would not fulfil those requirements.
  Mr. Watts: Does the hon. Gentleman agree that part of the problem that we face is that many people who had responsibility for pension schemes did not have the knowledge that they needed to manage them? We need trustees who know what they are doing. The problem is companies that do not wish to invest in their employees. Employers are good at looking after their own pension schemes and pay, but they are less likely to want to invest in providing proper pension schemes for their employees.
  Sir John Butterfill: To a degree, the hon. Gentleman is right, but there is a great advantage in having trustees who are not particularly specialist. There could be an ordinary pensioner representative, as there is in our scheme, or there could be trade anion or work force representation. That is a good thing. All those people may not be experts, but they can employ experts. Perhaps there should be a minimum standard for trustees. Hon. Members' trustees. of whom I am one, are all taking the examination in essential pensions knowledge of the Pensions Management Institute, which is a good thing. I suspect, however, that we shall be among the minority of such trustees.
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  The Pensions Bill would place such burdens on trustees in terms of required knowledge that no ordinary trustee will be able to take them on. Firms will be able to comply with the measure only by employing professional trustees. If they do that, the input of those with an intimate relationship with the scheme will disappear and the costs will go up enormously. Only the bigger firms will be able to cope.
  Mr. Jim Cunningham: I readily acknowledge that the hon. Gentleman has greater expertise on pension funds than me. I have some sympathy with his point about trustees. Trustees in the trade union movement have a degree of training, but I should not like them all to be financial experts at the expense of the people they are supposed to be representing. We need to find a balance, so I have sympathy with what the hon. Gentleman says.
  Sir John Butterfill: That is absolutely right. Trustees should have a minimum standard of knowledge. I should be happy if the Government were to say that all trustees must have obtained the certificate of essential pensions knowledge from the PMI or something similar, which would limit the requirement under the Bill to something that most trustees could probably achieve. If, over six months, they did a bit of homework and spent some of their free time learning the subject, they could probably obtain that qualification, but the open-ended provisions in the Bill are ridiculous. They have been lifted straight out of the draft directive, which is madness.
  In Committee, I hope that we can take such silly burdens out of the Bill and get on with the good things that it contains.
  6.2 pm
  Rob Marris: I had not intended to speak in the debate, but as a member of the Select Committee on Work and Pensions I am interested in the subject.
  The Secretary of State told us that about 60,000 people are affected. Constituents of mine and of my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) were done out of their pensions by what went on at Chart Heat Exchangers Ltd., formerly IMI Marston Ltd. There are serious questions to be asked about who was, or was not, minding the shop for that scheme, but that must be for another day as there are legal considerations.
  I am heartened that we have the figures, but we need to put them in perspective. Devastating as the individual stories of our constituents are, we are talking about only 0.5 per cent. of pensioners. There are 12 million pensioners in the United Kingdom: we are talking about 60,000 people—a small, albeit important, proportion.
  Kevin Brennan: Will my hon. Friend clarify that point? We are not talking about 0.5 per cent. of all pensioners; we are mainly talking about deferred pensioners—people who have not yet retired.
  Rob Marris: I am setting the figure of 60,000 against the 12 million total. The figure includes some prospective pensioners, as well as some people who should be receiving a pension but are not.

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  I am heartened by the Secretary of State's remarks today, as, in response to a question from my hon. Friend the Member for Cardiff, West (Kevin Brennan), he did not seem entirely to close the door to assistance—the word we now use rather than "compensation". Farmers received compensation for foot and mouth; assistance is what we hope some of our constituents might receive for what went on in some of those pension schemes.
  The motion refers to the "crisis in occupational pensions". That assertion has not been backed up by evidence—for example, that less money is being saved in schemes. In fact, more money is being saved in pension schemes. There may be difficulties with confidence, but there is no structural crisis in pensions in the UK.
  The pension protection fund proposed under the Pensions Bill—I will not say much about that Bill, as we will shortly debate it on Second Reading—will further increase confidence. It clearly cannot be retrospective, yet the Government are criticised by some Members who wish to have it both ways. They say, "Ah, well, all the pension protection fund premiums should be risk based"—the implication being that its start should be deferred until the risk figures are available and can be taken into account when setting premiums—yet the same Members criticise the Government for not setting up the fund before next April. They should not try to have it both ways, and I welcome what the Government are trying to do to get the fund off the ground quickly and generate the information. We ought to look at pensions more broadly than we often do in the House.
  Sir John Butterfill: I very much agree that it is better to get the fund up and running, but the problem is that the Government have not yet confirmed whether they will move away from the flat rate and, if so, over what time scale. The Opposition and the hon. Gentleman need to press the Government on how quickly they will move to a risk-based premium.
  Rob Marris: I certainly support risk-based premiums and the hon. Gentleman is entirely right to suggest that hon. Members on both sides of the House should continue to press the Government on the time scale, but I am delighted that the April 2005 time scale has been announced because it will at least get things moving, even though flat-rate premiums will be used.
  I want briefly to discuss the structure of pensions in the United Kingdom. The motion refers to encouraging savings. The cost of tax incentives for pension contributions—the forgone tax revenue—is about £14 billion a year. That is a huge amount of money, and the better-off in our society disproportionately take advantage of those arrangements. Half that benefit is received by the top 10 per cent. of taxpayers and a quarter of it by the top 2.5 per cent. of taxpayers.
  Massive amounts of money are involved, but does that money change people's savings behaviour? Evidence from the Department for Work and Pensions shows that it does not. Page 289 of the evidence volume published last year by the Select Committee on Work and Pensions—of which I am a member—that accompanied its report, "The Future of UK Pensions", says:
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  "The Committee asked… whether there is actually any evidence for tax incentives to encourage people to save for their pensions."
  It was me who asked that, I say parenthetically. It continues:
  "There has been considerable academic work on the impact of tax incentives on savings behaviour. Its conclusions can be very broadly summed up as follows:
  —there is little evidence that tax incentives can significantly increase the overall lewd of saving;
  —but they can significantly affect its allocation."
  That refers to where the money goes. Tax incentives are vastly expensive, but it is questionable whether they alter behaviour in a way that society wants.
  Mr. Willetts: The hon. Gentleman is getting into dangerous territory The crucial argument—indeed, it has been put by the hon. Member for Cardiff, West (Kevin Brennan) and other hon. Members—is that we are talking about deferred pay. As it is deferred pay, it is taxed only when it is received as pay. He argues that there is a special tar privilege. The tax-free lump sum represents tax relief but apart from that, the money is taxed when people finally receive their deferred pay. That is a perfectly logical system; it is not a special tax privilege.
  Rob Marris: It may be perfectly logical to the hon. Gentleman, but the other side of the coin is, as he says, that the sum is taxed when it is received in retirement. The Government's additional tax from that sum is estimated, from memory, at £8 billion, so the net cost—14 minus 8—is £6 billion a year, which is a considerable sum.
  Kevin Brennan: Will my hon. Friend give way?
  Rob Marris: I will not give way because I am limited for time and I know that another hon. Member wishes to speak. I wish to develop the point that I am making.
  My hon. Friend the Member for Coventry, South (Mr. Cunningham) talked about a decent state pension. He is entirely right. I am not an actuary, but, according to the figures that I have calculated, if we got rid of the tax relief on pension contributions and put I per cent. on both employers' and employees' national insurance contributions, we could have a basic state pension of £150 a week for a single person and £250 a week for a couple. The Government could then get out of the pensions business any other sense and get rid of all the regulations on private pensions. We could say, "If you want to save for your old age, save for your old age, and if you don't want to save for your old age, that's fine because the state will guarantee that you will not starve in your old age." Pensions have tax breaks to stop people starving in their old age by encouraging them to save. If the basic state pension is relatively high, the state does not need to encourage people to save for their old age, and tax breaks are not necessary. The Government amendment mention! "simplicity, security and choice". My proposal, which should be considered in a public debate, is to whack up the basic state pension massively and get rid of all layers of complex regulation—and that is covered by the amendment.

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  The hon. Member for Bournemouth, West (Sir John Butterfill) said that final salary schemes—defined benefit schemes—were better than money purchase, or defined contribution, schemes. Then is mixed evidence of that because the situation depends on the historical snapshot that one considers and what the stock market did at that time. The attraction of a defined benefit, or final salary, scheme is that people think that what they will get out of it is certain. That is true in the public sector, but I predict that final salary schemes will wither and die in the private sector because such schemes have historically relied on a trading company topping up its scheme in bad times. We have increasingly seen over recent years that as companies go bust, they get out of such pension schemes, so the certainty of final salary schemes for private sector employee; is going out of the window. Confidence has been eroded in the private sector, but not in the public sector.
  Sir John Butterfill: Of course, any view of the relative attractiveness to employers of defined benefit and defined contribution schemes varies according to the investment climate of the time. When we had a boom, all employers thought that DB schemes were wonderful because they could take contribution holidays. If they had been in defined contribution schemes, they could not have done that because they would have had to pay the same amount-the attraction of a contribution holiday would have disappeared. Everything depends on the snapshot of time at which one considers the situation.
  Rob Marris: The hon. Gentleman makes my point for me. Money purchase schemes can be just as attractive, or more attractive, in the long run because they do not give employers the incentive to take pension contribution holidays—they carry on paying into such schemes. Final salary schemes will wither and die, and, although it might be heresy to say it, I think that is good thing. Such schemes discriminate against the low paid and women—they are predominantly the low paid in those schemes. If people work in the same low-paid job for 30 years, they traditionally receive thirty eightieths of their pay under such schemes. People who work for 20 years in such jobs and get promoted so that they work for 10 years in higher-paid roles get the whole thirty eightieths—not just ten eightieths—of their pension paid at the higher rate. The schemes discriminate against low-paid people who do not receive promotion, and although the trade union movement traditionally defends them, we should have another look at them in the private sector because as confidence and certainty change, they will wither and die.
  6.13 pm
  Mr. Quentin Davies: If the complete lack of appreciation shown by the hon. Member for Wolverhampton, South-West (Rob Marris) of the importance of saving and having vigorous funded pension scheme including defined contribution schemes, for the econ my and the security of human lives and families is typical of the Labour party, it is not surprising that it has presided over such a disaster in pensions and savings in our country over the past six years. I accept that that was a political remark, but it was required and emerged spontaneously
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  because of the hon. Gentleman's speech. Nevertheless, given that we are contemplating a serious problem, I hope that we can try to reach the maximum possible degree of consensus.
  I hope that the House will agree on at least three points. The collapse of the pension schemes of companies that have become insolvent has been an unmitigated human disaster for many people. It emerged during the debate that the number of people affected is probably approximately 60,000—it was interesting that the Government confirmed that figure. That will inform the debate in the country as a whole.
  The second point on which I hope there will be a wide measure of agreement is that the collapse is a disaster in a second sense, because it has done traumatic damage to people's confidence in pension schemes, to the credibility of our whole pension system. That can only flow through, inevitably, into a lesser inclination to contribute to pensions, which is most unfortunate.
  Even though there may have been shortcomings in the 1995 Pensions Act—I have always thought that it was excessively bureaucratic—there was created in the 1980s and early 1990s a climate in which people felt that their pensions were secure. That was an enormous comfort to individuals, and it was an enormous benefit to the economy that we had a very large amount of savings generated through the pension schemes that emerged. I am afraid that we shall pay a terrible price for the blow to credibility that has resulted from the collapse of schemes and the fact that some people have been left high and dry. It follows a whole series of blows to pensioners, potential pensioners and the pensions industry.
  The third point that I hope the House will agree on is that there can be no marks at all for coming here and simply expressing sympathy for the victims of a disaster and not doing anything about it. The people who have to do something about it are the Government. It is no defence for them to tell the Opposition, "You haven't come up with any practical proposals." For heaven's sake, they are the Government—though I regret that—and it is up to them to come up with a solution. They have come up with none.
  The Secretary of State, who I regret is not here now, said this afternoon that he did not want to excite false hopes. One understands that. He added that he did not exclude the possibility of some compensation. If he does nothing, he will have aroused false hopes by putting things in that way. Unfortunately, he did not say that it was necessary for the Government to have more information or that certain preconditions had to be fulfilled before a decision could be made. In fact, it does not appear to me that the Government need any more facts than they have. They have simply tried to avoid the unpopularity of saying explicitly and frankly to the House this afternoon that they will not do a damn thing. I fear that that is their intention. They do not want to say that, because they know how unpopular that announcement would be, so they hope that they can get away with that kind of evasiveness, no doubt hoping that the political heat will go out of the issue.
  Kevin Brennan: Would it not be helpful if the hon. Gentleman and his colleagues explicitly stated that they would support my proposal that, for example, some sort

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  of assistance or compensation—call it what you will—should be paid to at least the worst cases among the workers concerned? Is the hon. Gentleman prepared to tell the House that now, and perhaps to support early-day motion 200?
  Mr. Davies: I am not prepared to support early-day motion 200, for reasons that have already been given this afternoon, when it was very helpfully analysed. I do not want to go over them again, but I will live up to what I have just said and try to make some constructive and helpful suggestions, which I hope the Government will take on board.
  The first thing that the Government have a moral responsibility to do is to make an estimate of the extent to which they have directly and explicitly contributed to this disaster through the abolition of the dividend tax credit. That must be a calculation that it is perfectly possible to make on the basis of the portfolios held over the relevant period of years since 1998 by the relevant pension funds. I am sure intuitively that substantial amounts of money are involved. It was inadequate and spurious of the Secretary of State to say that the abolition of the dividend tax credit was just part of a reorganisation of corporation tax, that the mainstream rate had been reduced and that that had to be taken into account.
  The implication was that the abolition of the dividend tax credit or the so-called pensions tax was not a net tax-raising measure at all. It was part of a rearrangement of corporation tax. If the Secretary of State reads his remarks this afternoon in Hansard he will be thoroughly ashamed, as that was an extraordinarily disingenuous comment. We all know that the abolition of the dividend tax credit was conceived by the Chancellor as a massive net revenue-raising measure, and the inevitable consequence of that abolition were equally massive losses from gross funds.
  Mr. Watts: Is the hon. Gentleman advocating a return to the previous tax system, and is he saying that that is the Opposition's position? There are a lot of crocodile tears on the issue, but no constructive ideas. The hon. Gentleman is criticising the Government but has not suggested any options himself.
  Mr. Davies: I may have been hasty in accepting the hon. Gentleman's intervention, as I was about to propose a practical idea based on the dividend tax credit. We ought to start a debate about the amount of compensation that could reasonably be made by the Government from the figure that I have just asked them to produce—namely, what they have raised incrementally from the schemes that have collapsed following the abolition of the dividend tax credit. There is no doubt that that will be a significant sum. In some cases, it may have pushed into insolvency schemes that would not otherwise have become insolvent. In other cases, the deficit will be much greater than would otherwise he the case. The Government have a moral responsibility to be straight with the public and to quantify the extent to which they have deliberately contributed to that disaster. We should have a discussion about the appropriate level of compensation to be paid by the Government based on that figure.
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  The Government should deal right away with the disaster—I am not talking about closing the stable door after the horse has bolted and the Pensions Bill that we will debate next weak—experienced by people who are suffering now. They should do something this week to change the guidance to trustees of schemes from themselves and the Occupational Pensions Regulatory Authority, which, frighteningly, has led trustees to take perverse measures. In most cases, when a company has gone broke and its pension scheme is insolvent or below full solvency it automatically winds it up and buys annuities at a disadvantageous price—as Members will know, the annuities market is entirely a seller's market and is distorted—which is a bad deal. Alternatively, the company sells the whole equity portfolio—the fall in the equity market over the past couple of years has largely contributed to the problems in these schemes—and moves it all into cash or fixed-interest securities. Again, that is the worst possible reaction, because it means that as the equity market takes an upturn, it is impossible for the schemes to recover lost ground. That does not make sense when the market—one never knows what the bottom or the top of the market is—has had an exceptionally striking fall from an historical high. It is crazy to get out oil equities altogether, which is the absurd and damaging course of action that trustees have taken.
  Something must therefore be done quickly about the guidance given to trustees. I suspect that they are taking such action because they have been advised that, to protect their position, they must go for the so-called lowest-risk solution—either buy final annuities or move into fixed-interest securities. As I have explained, that is the worst possible thing to do—trustees should increase their investment in he equity market, and they could increase their protection against a further fall in equity market through an appropriate derivative. As we have seen in the derivative market in the past few months, when the market is historically low, the cost of such protection is correspondingly low. The investment management strategies pursued by trustees in this situation have not been rational, and the Government should do something about that immediately. That point has not been made, and it badly needs making.
  I have two more proposals, which are focused on how the Government should go forward in trying to prevent the repetition of such a disaster. When something like this happens, the legislature must try to ensure that it is less likely that the ill from which we have suffered will recur. The first thing that the Government should do is to consider making pensioners preferred creditors. The situation that we are addressing results from a combination of factors. When a company collapses, it becomes insolvent and can no longer make statutory contributions to the scheme, and the scheme can be wound up only at a considerable loss because it is itself insolvent. That unfortunate combination of circumstances is particularly likely to arise during a downturn in the econ Amy when the stock market is at an historical low and there are a greater number of insolvencies in commerce and industry. That was the situation in 2002 and 2003. We should consider changing the law to make pensioners preferred creditors of companies that have become insolvent in those circumstances, exactly as employees are preferred

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  creditors at present, because a comp my that collapses has to pay its contractual obligations to its employees for the work that they have done.
  I recognise that one has to consider the disadvantages of any such move. I am not suggesting that it could be made retrospective, because supplier, have traded with the companies concerned, or lenders have lent to them, on the basis of the existing rules, which cannot be changed retrospectively.
  Sir John Butterfill: I hope that my hon. Friend would exclude from those preferred creditor s the directors who may have been pumping up their own schemes just as the company was going bust.
  Mr. Davies: I thoroughly agree with my hon. Friend, who makes a just comment.
  As far as credit ratings are concerned, we must bear in mind that if my suggestion were to be implemented in law, there would be no significant change for the vast majority of companies where lender or suppliers see no real prospect of their going broke. There would be a problem between creditors only where a company became insolvent.
  My final point is very important. We must look again at the whole issue of pension holidays. One aspect of the fundamental lack of symmetry in flu present situation is inherently suspect—namely, that if a company finds that its pension scheme has a surplus, it can take a pension holiday, but if it has a deficit it does not have to make it up immediately. That is asymmetric. Nor does it make sense in terms of accounting or economic theory, because one has a liability that one should be providing for over the years as it accumulates There should be a ceiling up to which it is not possible for a pension surplus to result in a pension holiday. Actuaries should advise on that ceiling, taking into account the expected fluctuations in the markets.
  Clearly, at a time when equity markets are at an historical high, a well-managed scheme will always be in surplus. That should not mean that companies should cease to make any contribution unless the surplus is such as to provide protection against the likely cyclical downturn in the market. There should be symmetry on both sides. We should not have a situation in which companies can be expected overnight to make up a deficit in their pension fund because there has been a sudden fall in the market, but equally, by the same token, we should not have a situation in which if the pension scheme has a surplus of the company can declare a pension holiday. That is thoroughly unreasonable and needs to be looked at again.
  I am afraid that since this Government took over, the pension system, which was a flowering garden in the 1980s and early 1990s, has been turned into a desert.
  The figures that my hon. Friend the Member for Bournemouth, West (Sir John Bitterfill) cited—I am glad that he did so because tilt y should be known throughout the country—say it all. Only one third of defined benefit schemes remain open. Since 1997, hardly a week has gone by without the closure of a defined benefit pension scheme. The pensions system was steadily built up under various Governments, especially the Thatcher Administration of the 1980s, but we can go
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  back to the 1950s. It was one of the glories of our country, an enormous economic asset and a great asset to individuals and their families. It has been eroded.
  The rhetoric of current members of the Labour party—for example, the hon. Member for Wolverhampton, South-West—tries to rationalise the appalling position and pretend that it is thoroughly commendable that our pensions system is breaking down. I cannot imagine a more perverse or destructive policy. If this afternoon's debate has exposed the Labour party's genuine direction and goal on pensions, it has been worth while.
  6.30 pm
  Mr. Henry Bellingham: Unlike some Labour Members, I enjoyed listening to my hon. Friend—and near neighbour—the Member for Grantham and Stamford (Mr. Davies), who rightly pointed out that barely a week goes by without an announcement of a company closing down a final salary scheme. Last September, the Confederation of British Industry published a survey of 551 companies. It showed that half of employers had a final salary scheme that closed last year and that only 27 per cent. of firms continue to offer a final salary scheme—the figure last year was 43 per cent. The position is therefore serious, as my hon. Friend pointed out. John Cridland, deputy director general of the CBI, said the other day:
  "On pensions the dam has burst as rising costs overwhelm employers who are increasingly being forced to pull out of final salary schemes for new employees … We need radical proposals that will make pensions simpler and more affordable."
  My hon. Friend the Member for Havant (Mr. Willetts) made an excellent and impressive opening speech. As he pointed out, our recent position was not only the envy of the world but extremely stable and exceptionally robust. Although Labour Members derided his words, he was right to point out that the Chancellor's smash-and-grab raid on pensions—£5 billion a year—started the rot. The hon. Member for Coventry, South (Mr. Cunningham) said that there were strong, logical tax reasons for the change to advance corporation tax at the time. That may be true. The stock market was booming and many companies were taking pension holidays. However, the stock market subsequently went into decline and many schemes started to lose substantial amounts of capital value. Surely that was the time to reverse the policy. What was right in the Chancellor's first Budget was wrong two, three or four years later. The policy has taken a huge amount of money out of pension funds.
  My hon. Friend the Member for Havant also pointed out that minimum funding requirements were lowered by 10 per cent. in June 1998 and subsequently by a further 8 per cent. The position is therefore bleak. Today, we have heard about several companies, including Allied Steel and Wire workers and Dexion, about which The Mail on Sunday wrote recently. I want to bring to hon. Members' attention a company in my constituency. Its parent company went into liquidation and the subsidiary company in my constituency is called Fisher Frozen Foods.
  The Albert Fisher Group went bust in May 2002. There were 1,000 employees in the scheme—many in my constituency and that of my right hon. Friend the

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  Member for South-West Norfolk (Mrs. Shephard). Although the scheme was under some pressure, the directors took a pension holiday as recently as four years ago. At the time, the fund was in surplus, but, as some hon. Members have pointed out, the tax regime bore down on the funds that were in surplus and getting too big. There was a tax disincentive, which was another big mistake.
  The scheme suffered a shortfall two and a half years ago. New trustees tried to make it up by raising contributions from 10 per cent. to 20 per cent. The parent company, Albert Fisher Group plc, then went into liquidation. The deficit on the pension scheme was £35 million, which works out at roughly £35,000 per employee.
  That figure, however, is distorted. I have several constituents who were middle managers for Fisher Frozen Foods, and I spoke this afternoon to one who was with that company for about 20 years. Over that period, he invested 5 per cent. of his salary in his pension, while the company contributed 10 per cent., and his pot was in the region of £300,000. He has lost 90 per cent. of that pot. It is not surprising that, along with the employees of Allied Steel and Wire workers, Dexion and the many other companies that my hon. Friend the Member for Havant mentioned in his opening speech, my constituent and others like him are very angry indeed. As he pointed out to me, he is particularly angry and upset because a number of younger people took early retirement from Fisher Frozen Foods literally weeks before the Albert Fisher Group went into liquidation. They received their full entitlement, but those who stayed with the company, even those who were substantially older than that cohort, will receive 10 per cent. if they are lucky, as 90 per cent. of the value is being lost.
  Pinguin, the Belgian company that took over Albert Fisher's Fisher Frozen Foods subsidiary, refused to honour the final salary pension scheme. That was understandable, because Pinguin bought the company from the receiver when it had many serious problems. and not surprisingly, it refused to top up the pension fund.
  Kevin Brennan: Will the hon. Gentleman acknowledge two points? First, one reason why employees on the cusp of retirement cannot access their full pension fund is because of the Pension Act 1995 and the regulations that it introduced. Secondly, in most such cases, including that of the Allied Steel and Wire workers from Cardiff, we are not talking about large pensions. We are talking about people who, after working for 30 or 40 years, might expect a maximum pension of £13,000. Therefore, if there were to be compensation, it could be capped at a reasonable level.
  Mr. Bellingham: The hon. Gentleman has done much work on this subject, and he and I were at the meeting of the all-party group on occupational pensions two or three months ago. I shall come back to his points in a moment when I mention retrospective compensation.
  As my constituent said to me today, to lose money that the company has paid into his pension scheme is one thing, but in his view—hardly surprisingly—to lose
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  what he himself has paid in is pretty outrageous, especially when he looks at neighbours who are receiving their full pension and enjoying a happy retirement, even though they are younger than him.
  My hon. Friend the Member for Havant dealt very well with retrospective compensation. We badly need substantially more data. How can we commit ourselves to that retrospective compensation until we have those data? Can the Minister tell the House why those data are not in place? That seems extraordinary when there have been so many parliamentary questions on the issue.
  Will the Minister tell the House his views on the proposals made by Ros Altmann from the London school of economics, who came to the meeting organised by the all-party group on occupational pensions four or five months ago? She made it quite clear that because c f the huge cost of buying annuities, to which my hon. Friend the Member for Grantham and Stamford alluded—the market for annuities is extremely difficult for buyers at the moment—if changes were made to the regime, the ongoing cost to the Government of retrospective compensation would be about £100 million.That cost is a fraction of the cost of the dome, a fraction of the cost of the increased bureaucracy involved in running Whitehall since 1997, a fraction of the cost of an asylum system in chronic meltdown and less than the cost of the proposed devolved assemblies that no one wants.
  So far as the Pensions Bill is concerned, the Government will he judged not just on their actions for people who will be affected by future schemes, and future meltdowns or wind-ups of schemes, but on what they do for people ho are really suffering now. Those people have lost everything that they were looking forward to—a happy, prosperous, or even simply a bearable, retirement That is how the Government will be judged, and I look forward to the Minister giving various answers when he winds up.
  6.39 pm
  Mr. Nigel Waterson: This has been a very interesting debate. We have ranged far and wide, and all the enthusiasts gathered here can regard it as an aperitif to the debate next Tuesday on the Second Reading of the new Pensions Bill. The excitement in the Chamber is palpable as I remind Members of that.
  I declare an interest as I have some private pension provision. We heard a good speech from the hon. Member for Coventry, South (Mr. Cunningham). I am delighted that he agrees with our policy of restoring the link. My hon. Friend the Member for Bournemouth. West (Sir John Butte -fill) spoke with his usual massive authority on this subject, and I am delighted that our pensions are in his excellent and reliable hands. A fellow member of the Select Committee, the hon. Member for Wolverhampton, south-West (Rob Marris), understated the extern of the current pensions crisis, but if he returns on Tuesday, I will tell him a bit more about why I disagree with hi n, and vice versa. My hon. Friend the Member for Grantham and Stamford (Mr. Davies) provided an excellent analysis of many of the problems besetting pension schemes and provided some good ideas for solutions. My hon. Friend the Member for North-West Norfolk i Mr. Bellingham), who has taken a close interest not only in the specific case to which he referred of Fisher's but in the more general issues, made a welcome contribution.

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  The hon. Member for Northavon (Mr. Webb) spoke knowledgeably. As I understand the policies of the Liberal Democrats, they have signed early-day motion 200 and would write a cheque tomorrow, or at least the day after. That is not, of course, what my party proposes at the moment, as my hon. Friend the Member for Havant (Mr. Willetts) explained.
  This problem is gathering pace, even as we debate it. I noticed only today in The Independent a report that the insurance broker, Jardine Lloyd Thompson, announced yesterday that it is closing its final salary pension scheme to new entrants. It has injected £50 million of its own money to try to alleviate the £157 mil lion pension deficit in its fund. It is not alone. It believes that that is the largest injection of any FTSE company relative to the size of its pension fund. Even companies that are trying to do the decent thing are struggling in the present climate.
  I want to dwell in most detail on the Secretary of State's speech. We heard the usual mantra about not wanting to raise false hopes. While I understand the logic of putting that caveat into every speech that he and his colleagues make on this subject, it must become monotonous, not least to those who have already lost their pensions. A real danger exists— I say this in sorrow rather than in anger—of the Government becoming part of the problem, not the solution. As I said, the Pensions Bill has been published, and we will debate it in detail next week. It was published to a chorus of disapproval. I have yet to find a single comment from any organisation, serious newspaper or anyone involved in the pensions industry—except possibly the TUC—that did not criticise it, often for its timidity, and, of course, for the fact that it deals with problems in the future.
  It was pretty clear, as my hon. Friend the Member for Havant pointed out in an intervention, that the Secretary of State had written his speech before he had taken account of what my hon. Friend had to say. Carrying out the role of a serious official Opposition, my hon. Friend set out a range of possibilities—[Interruption.] It is the Secretary of State and his colleagues who are meant to be in charge of this area of policy, yet on 12 January, in this Chamber, he declined the request of the hon. Member for Sittingbourne and Sheppey (Mr. Wyatt) that he set up an independent inquiry to find out the scale of the problem.We set out not our alternatives, as the Minister says from a sedentary position, but the obvious alternatives—those put forward by other people—which are the only ones anyone can come up with to solve this problem. We remain to be convinced that the Government are doing any serious thinking about the subject.
  When pressed, the Secretary of State said that 60,000—the number of members of schemes who had lost most or all of their pension—seemed to be the "right scale". So we have managed to nail down one corner of the tent. He then said that the Government were not in a position to estimate the figures arising from that 60,000 figure. What we do not know is what he or his Department are doing to work on those figures. What work is being done, by whom, with what purpose and on what time scale—if not by the right hon. Gentleman's Department, perhaps by the Treasury? As we know, the DWP is a wholly owned subsidiary of the Treasury in this Government.
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  The right hon. Member for Birkenhead (Mr. Field) talked about drawing the boundaries. The Secretary of State seemed rather taken by that idea, as if it had never occurred to him before; but surely it, too, is part of the process. Throughout the debate, we have tried to tease out of the Secretary of State and his colleagues just how deeply the Government are and have been thinking about solutions to a problem that will not go away and will not be resolved by the Pensions Bill. I must say, with respect, that the Secretary of State seemed a little like a very well-meaning member of the public who had wandered in with a few thoughts about what might be the solution, rather than a Cabinet Minister with the resources of the entire civil service at his command. Surely there should be a battery of Wykehamists with double firsts working night and day on this problem. Perhaps there are; if there are, may we be told about it?
  We were told that something would happen about the priority order in the near future. We have heard such expressions before—"soon", "in the near future" and the like. They could mean anything. They could mean "by the time the snow is falling next year". The point about the priority order is that it was always going to be an interim measure, applied until the Bill became an Act. What is happening, and when will it have happened?
  Kevin Brennan: As we near the end of the debate, will the hon. Gentleman finally tell us whether he and his fellow Front Benchers believe there is a moral case for compensation or assistance for these workers?
  Mr. Waterson: The hon. Gentleman has been the intervention king today. What we have not heard from him are his ideas about what should happen. Let me remind him that the official Opposition have taken this first opportunity since the publication of the Pensions Bill to call a debate in our Opposition time.
  Although the country faces an unprecedented crisis in savings and pensions, there is nothing in the Bill to encourage saving for retirement. Although final salary schemes continue to close at an alarming rate—I have just given one example—there is nothing in the Bill to encourage an employer to keep a scheme open, let alone open a new scheme. Although some 60,000 people have lost all or most of their pension entitlement in the last few years, there is nothing in the Bill to compensate them or even give them the hope of compensation. Meanwhile the Government, who for the moment are in charge of the issue, stand by impotent while the pensions crisis rages. As my hon. Friend the Member for Havant pointed out, it is as if there had been a household fire and, rather than offering to call the fire brigade, the Government merely offered insurance to cover the next fire.
  Our motion rightly accuses the Government of inaction in the face of the pensions crisis, and I commend it to the House.
  6.48 pm
  The Minister for Pensions (Malcolm Wicks): I agree that this has been a wide-ranging debate, and I think that it has been an important one. The pensions question is rising on all the agendas that count in our society, and rightly so. In fact, it is really a series of

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  questions. When I reflect on the issues that have been discussed, I conclude that part of the pensions question has been determined by the past, that we need to address the present, and that we must also have a strong regard to the future.
  The incomes of today's pensioners, many of them very poor and in their 80s and 90s, are largely determined by their social circumstances, education and family and employment histories dating from the 1920s and 1930s. The position of today's elderly women, in particular, needs to be seen in that context.
  I shall say something about the pension credit later, but in looking to the future we are talking about incomes that today's young people will retire on in the middle decades of this century. They will experience an economy, educational opportunities, careers and family patterns that are radically different from those experienced by their grandparents or great-grandparents. So in some respects, the task of the Government and of Parliament is to understand and respond to a social and economic history that stretches over some 120 to 130 years.
  We have had some notable contributions and interventions during today's debate: from my Front-Bench colleagues; from my hon. Friends the Members for Coventry, South (Mr. Cunningham) and for Wolverhampton, South-West (Rob Marris); and from the hon. Members for Bournemouth, West (Sir John Butterfill) and for Grantham and Stamford (Mr. Davies). All were noteworthy in their own way. I always enjoy—I had better not say in particular—the contributions of the hon. Member for Bournemouth, West, who, as has been acknowledged, is a great expert on these issues. As he pointed out, he largely welcomes the Pensions Bill, contrary to what one of his Front-Bench colleagues said. That colleague may want to take note of his hon. Friend in that respect. Indeed, many others have also welcomed the Bill.
  In a slightly more self-interested way, we took note of the fact that the hon. Member for Bournemouth, West, who is chairman of the parliamentary pension fund trustees, said that he and his fellow trustees are sitting a learned institute's pensions exam. We were all very impressed by that. I noticed that from a sedentary position, my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) said that he hopes that they pass it.
  I shall not discuss in detail our strategy for the future because there is not sufficient time, but let us remind ourselves of some salient points. Although the concern of Members on both sides of the House has understandably concentrated on groups of existing workers who are in difficulties, we need to look at the future and at the pension protection fund. To dismiss this as insurance tomorrow is a trivial comment, if I may say so. I have drawn on the experience of a visit to Washington. I learned from the Pension Benefit Guaranty Corporation, which has widespread political and other support in the United States—from industry and from unions—and a track record of more than 25 years. I believe that if we can establish the fund, subject to the will of this House, it will become a permanent part of our pension and social security architecture, and will be seen one day as a major social policy innovation
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  introduced by my right hon. Friend the Secretary of State. It will offer real guarantees for the future. When company schemes go bust, existing company pensioners will have 100 per cent. of their pension guaranteed, and scheme members of working age will have 90 per cent. guaranteed.
  I put it to the House that this is a policy worth supporting and worth getting right. Our deliberations in Committee will be very important in this respect, and we will consider all useful contributions. The hon. Member for Northavon (Mr. Webb) said that he will enter into such discussions in a spirit of consensus, and I welcome that. We will not have a monopoly of wisdom on the details; we need to get things right.
  The policy will be funded by an annual levy and from the income of the assets that the fund takes over from company pension schemes. Although in the first year there will be flat-rate levy of only 50 per cent. of the eventual levy, with in a year we will roll out the risk-based levy, which will he at least 50 per cent.—I repeat: at least 50 per cent.—of the whole levy. We are very determined to haw a risk-based element, contrary to what was said in t knee-jerk press release from the Liberal Democrats, which was published the day before the Bill's publication. I was about to say that the Liberal Democrat in question was either foolish or prescient, but he cannot haw been the latter because he got it wrong.
  I cannot add to what my right hon. Friend said about any assistance that may or may not be forthcoming to those groups of workers who are currently affected. It is not sensible for the opposition to mock the phrase "not holding out false hope", because I believe that it would be foolish to do so. We are in a very difficult position, in which only the most unwise voices somehow think that the state can nationalise all risk. It cannot, but we are examining sensible suggestions and much work is going on.
  In common wit' other Members who have met groups of workers, the ministerial team, which has met a large number, can tot fail to be moved by their plight when these honest and decent people speak about the contributions that May have made, sometimes for 40 years. They often speak in a dignified and quiet way about the effect on their marriages and their health. No one can fail to be moved and the House will have welcomed our debate on those important points.
  Mr. Waterson: I take the Minister's point about the "false hopes" argument—I thought that I had already dealt with it—but when he says that much work is going on, can he give the House some idea, in the dying minutes of the debate, what sort of work is going on and to what it is directed?
  Malcolm Wicks: Now is not the time to go into the detail, but we are examining the problems very carefully. As my right hon. Friend said, when we reach a conclusion one way or another, we will come before the House.
  I was asked about Equitable Life and the Penrose inquiry. All I can say is that Treasury Ministers have made it clear that the) intend to publish the report in full as soon as possible. They will keep the House fully informed.

  247
  Although the pension protection fund has gathered much interest around it, in some respects of equal importance in the Bill are proposals for a pensions regulator. By targeting the badly run and highest risk schemes, the regulator will enable well-administered and secure schemes to continue without unnecessary regulatory burden. The hon. Member for Northavon spoke about the importance of having clear requirements on information, and we can deal further with that important matter in Committee. We have also set out proposals for full buy-out and will have an employer taskforce to set out ideas about good practice in occupational pension schemes.
  One or two Members referred to at bother aspect of the pension question—pensioner poverty. When we came into power in 1997, the state pension system was lacking in investment and was in a state of disrepair. Many people were poor, particularly older elderly people and often women. Indeed, single pensioner women were expected in 1997 to exist on £ (8.80 a week. By introducing the minimum income guarantee and now the pension credit, we have increased that income in real terms by one third, which is important. We have also reduced pensioner poverty by about 60 per cent. since 1997.
  The Conservative proposals to place all the emphasis on raising the basic state pension—the Conservatives are now born-again earnings linkers, rather too late in our history—represent a hole that r hey are digging for themselves. It will mean that the poorest pensioners on pension credit will receive less—or little more—than the better-off half of pensioners. That is the logic of their proposals. Indeed, that was admitted a year ago by no less than the then shadow Chancellor, now the leader of Her Majesty's Opposition. It was an honest remark and the current shadow Secretary of State needs to heed his leader's wise words when he said:
  "Those who are entitled to the pension credit and do claim … will not be better oft"
  under the Tory proposals. That is the logic of the scheme.
  Mr. Patrick McLoughlin:rose in his place and claimed to move, That the question be now put.
  Question,That the Question be now put, put and agreed to.
  Question put accordingly, That the original words stand part of the Question:—
  The House divided: Ayes 193, Noes 319.

  Division No. 56

  [6:59 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Bercow, John

  Amess, David

  Beresford, Sir Paul

  Ancram, rh Michael

  Boswell, Tim

  Arbuthnot, rh James

  Bottormley, Peter (Worthing W)

  Atkinson, David (Bour'mth E)

  Bottomley, rh Virginia (SW Surrey)

  Atkinson, Peter (Hexham)

  Bacon, Richard

  Brady, Graham

  Baldry, Tony

  Brake, Tom (Carshalton)

  Barker, Gregory

  Brazier Julian

  Baron, John (Billericay)

  Breed, Colin

  Beggs, Roy (E Antrim)

  Brooke, Mrs Annette L.

  Beith, rh A. J.

  Browning, Mrs Angela

  Bellingham, Henry

  Bruce, Malcolm

  248

  Burnett, John

  Key, Robert (Salisbury)

  Burns, Simon

  Kirkwood, Sir Archy

  Burnside, David

  Knight, rh Greg (E Yorkshire)

  Burstow, Paul

  Laing, Mrs Eleanor

  Burt, Alistair

  Lait, Mrs Jacqui

  Butterfill, Sir John

  Lamb, Norman

  Cable, Dr. Vincent

  Lansley, Andrew

  Calton, Mrs Patsy

  Laws, David (Yeovil)

  Cameron, David

  Lewis, Dr. Julian (New Forest E)

  Campbell, rh Sir Menzies (NE

  Liddell-Grainger, Ian

  Fife)

  Lilley, rh Peter

  Carmichael, Alistair

  Llwyd, Elfyn

  Cash, William

  Loughton, Tim

  Chapman, Sir Sydney (Chipping

  Luff, Peter (M-Worcs)

  Barnet)

  McIntosh, Miss Anne

  Chidgey, David

  Mackay, rh Andrew

  Chope, Christopher

  Maclean, rh David

  Clappison, James

  McLoughlin, Patrick

  Collins, Tim

  Malins, Humfrey

  Conway, Derek

  Maples, John

  Cormack, Sir Patrick

  Marsden, Paul (Shrewsbury &

  Cotter, Brian

  Atcham)

  Curry, rh David

  Mates, Michael

  Davey, Edward (Kingston)

  Maude, rh Francis

  Davies, Quentin (Grantham &

  May, Mrs Theresa

  Stamford)

  Mercer, Patrick

  Davis, rh David (Haltemprice &

  Mitchell, Andrew (Sutton

  Howden)

  Coldfield)

  Djanogly, Jonathan

  Murrison, Dr. Andrew

  Dorrell, rh Stephen

  Oaten, Mark (Winchester)

  Duncan, Alan (Rutland)

  O'Brien, Stephen (Eddisbury)

  Duncan, Peter (Galloway)

  Öpik, Lembit

  Evans, Nigel

  Osborne, George (Tatton)

  Ewing, Annabelle

  Ottaway, Richard

  Fabricant, Michael

  Page, Richard

  Fallon, Michael

  Paice, James

  Flight, Howard

  Pickles, Eric

  Flook, Adrian

  Portillo, rh Michael

  Forth, rh Eric

  Price, Adam (E Carmarthen &

  Foster, Don (Bath)

  Dinefwr)

  Francois, Mark

  Prisk, Mark (Hertford)

  Gale, Roger (N Thanet)

  Pugh, Dr. John

  Garnier, Edward

  Rendel, David

  George, Andrew (St. Ives)

  Robathan, Andrew

  Gibb, Nick (Bognor Regis)

  Robertson, Angus (Moray)

  Gidley, Sandra

  Robertson, Hugh (Faversham &

  Gillan, Mrs Cheryl

  M-Kent)

  Grayling, Chris

  Robertson, Laurence (Tewk'b'ry)

  Green, Matthew (Ludlow)

  Rosindell, Andrew

  Greenway, John

  Ruffley, David

  Grieve, Dominic

  Russell, Bob (Colchester)

  Gummer, rh John

  Salmond, Alex

  Hague, rh William

  Sanders, Adrian

  Hammond, Philip

  Selous, Andrew

  Hancock, Mike

  Shephard, rh Mrs Gillian

  Harvey, Nick

  Shepherd, Richard

  Hawkins, Nick

  Simmonds, Mark

  Hayes, John (S Holland)

  Simpson, Keith (M-Norfolk)

  Heald, Oliver

  Smith, Sir Robert (WAb'd'ns &

  Heath, David

  Kincardine)

  Hendry, Charles

  Smyth, Rev. Martin (Belfast S)

  Hermon, Lady

  Spelman, Mrs Caroline

  Hoban, Mark (Fareham)

  Spicer, Sir Michael

  Hogg, rh Douglas

  Spink, Bob (Castle Point)

  Holmes, Paul

  Spring, Richard

  Horam, John (Orpington)

  Stanley, rh Sir John

  Howard, rh Michael

  Steen, Anthony

  Howarth, Gerald (Aldershot)

  Streeter, Gary

  Hughes, Simon (Southwark N)

  Stunell, Andrew

  Jackson, Robert (Wantage)

  Swayne, Desmond

  Jenkin, Bernard

  Syms, Robert

  Johnson, Boris (Henley)

  Tapsell, Sir Peter

  Jones, Nigel (Cheltenham)

  Taylor, Ian (Esher)

  Keetch, Paul

  Taylor, John (Solihull)

  Kennedy, rh Charles (Ross Skye &

  Taylor, Matthew (Truro)

  Inverness)

  Taylor, Dr. Richard (Wyre F)

  249

  Teather, Sarah

  Willetts, David

  Thomas, Simon (Ceredigion)

  Williams, Hywel (Caernarfon)

  Thurso, John

  Williams, Roger (Brecon)

  Tyler, Paul (N Cornwall)

  Willis, Phil

  Tyrie, Andrew

  Wilshire, David

  Viggers, Peter

  Winterton, Ann (Congleton)

  Walter, Robert

  Winterton, Sir Nicholas

  Waterson, Nigel

  (Macclesfield)

  Watkinson, Angela

  wishart, pete

  Yeo, Tim (S Suffolk)

  Webb, Steve (Northavon)

  Young, rh Sir George

  Weir, Michael

  Younger-Ross, Richard

  Whittingdale, John

  Widdecombe, rh Miss Ann

  Tellers for the Ayes:

  Wiggin, Bill

  Mr. Hugo Swire and

  Wilkinson, John

  Mr. Mark Field

  NOES

  Adams, Irene (Paisley N)

  Clelland, David

  Ainsworth, Bob (Cov'try NE)

  Clwyd, Ann (Cynon V)

  Alexander, Douglas

  Coaker, Vernon

  Allen, Graham

  Coffey, Ms Ann

  Anderson, rh Donald (Swansea E)

  Cohen, Harry

  Anderson, Janet (Rossendale &

  Connarty, Michael

  Darwen)

  Cook, Frank (Stockton N)

  Armstrong, rh Ms Hilary

  Cooper, Yvette

  Atkins, Charlotte

  Corbyn, Jeremy

  Austin, John

  Corston, Jean

  Bailey, Adrian

  Cousins, Jim

  Baird, Vera

  Cranston, Ross

  Banks, Tony

  Crausby, David

  Barnes, Harry

  Cruddas, Jon

  Battle, John

  Cryer, Ann (Keighley)

  Beard, Nigel

  Cryer, John (Hornchurch)

  Begg, Miss Anne

  Cummings, John

  Bell, Sir Stuart

  Cunningham, Jim (Coventry S)

  Benn, rh Hilary

  Cunningham, Tony (Workington)

  Bennett, Andrew

  Darling, rh Alistair

  Benton, Joe (Bootle)

  Davey, Valerie (Bristol W)

  Berry, Roger

  David, Wayne

  Best, Harold

  Davidson, Ian

  Betts, Clive

  Davies, rh Denzil (Llanelli)

  Blackman, Liz

  Dawson, Hilton

  Blears, Ms Hazel

  Dean, Mrs Janet

  Blizzard, Bob

  Denham, rh John

  Bradley, Peter (The Wrekin)

  Dhanda, Parmjit

  Bradshaw, Ben

  Dobbin, Jim (Heywood)

  Brennan, Kevin

  Dobson, rh Frank

  Brown, rh Gordon (Dunfermline

  Donohoe, Brian H.

  E)

  Doran, Frank

  Brown, rh Nicholas (Newcastle E

  Dowd, Jim (Lewisham W)

  Wallsend)

  Drown, Ms Julia

  Brown, Russell (Dumfries)

  Dunwoody, Mrs Gwyneth

  Browne, Desmond

  Eagle, Angela (Wallasey)

  Bryant, Chris

  Eagle, Maria (L'pool Garston)

  Burden, Richard

  Edwards, Huw

  Burgon, Colin

  Efford, Clive

  Burnham, Andy

  Ellman, Mrs Louise

  Byers, rh Stephen

  Ennis, Jeff (Barnsley E)

  Caborn, rh Richard

  Etherington, Bill

  Cairns, David

  Farrelly, Paul

  Campbell, Alan (Tynemouth)

  Fisher, Mark

  Campbell, Ronnie (Blyth V)

  Fitzsimons, Mrs Lorna

  Caplin, Ivor

  Flint, Caroline

  Casale, Roger

  Flynn, Paul (Newport W)

  Caton, Martin

  Follett, Barbara

  Cawsey, Ian (Brigg)

  Foster, rh Derek

  Challen, Colin

  Foster, Michael (Worcester)

  Chapman, Ben (WirralS)

  Foulkes, rh George

  Chaytor, David

  Francis, Dr. Hywel

  Clapham, Michael

  Gardiner, Barry

  Clark, Mrs Helen (Peterborough)

  George, rh Bruce (Walsall S)

  Clark, Dr. Lynda (Edinburgh

  Gerrard, Neil

  Pentlands)

  Gibson, Dr. Ian

  Clark, Paul (Gillingham)

  Gilroy, Linda

  Clarke, Tony (Northampton S)

  Godsiff, Roger

  250

  Goggins, Paul

  McCabe, Stephen

  Griffiths, Jane (Reading E)

  McCafferty, Chris

  Griffiths, Win (Bridgend)

  McCartney, rh Ian

  Grogan, John

  McDonagh, Siobhain

  Hain, rh Peter

  MacDonald, Calum

  Hall, Mike (Weaver Vale)

  McDonnell, John

  Hall, Patrick (Bedford)

  MacDougall, John

  Hamilton, David (Midlothian)

  McFall, John

  Hamilton, Fabian (Leeds NE)

  McGuire, Mrs Anne

  Hanson, David

  Mclsaac, Shona

  Harman, rh Ms Harriet

  McKechin, Ann

  Harris, Tom (Glasgow Cathcart)

  McKenna, Rosemary

  Havard, Dai (Merthyr Tydfil &

  McNamara, Kevin

  Rhymney)

  Mactaggart, Fiona

  Healey, John

  McWalter, Tony

  Henderson, Doug (Newcastle N)

  Mahmood, Khalid

  Henderson, Ivan (Harwich)

  Mahon, Mrs Alice

  Hepburn, Stephen

  Mallaber, Judy

  Heppell, John

  Mandelson, rh Peter

  Hesford, Stephen

  Marris, Rob (Wolverh'ton SW)

  Hewitt, rh Ms Patricia

  Marsden, Gordon (Blackpool S)

  Heyes, David

  Marshall, David (Glasgow

  Hill, Keith (Streatham)

  Shettleston)

  Hinchliffe, David

  Marshall, Jim (Leicester S)

  Hodge, Margaret

  Martlew, Eric

  Hoey, Kate (Vauxhall)

  Meale, Alan (Mansfield)

  Hood, Jimmy (Clydesdale)

  Merron, Gillian

  Hoon, rh Geoffrey

  Michael, rh Alun

  Hope, Phil (Corby)

  Milburn, rh Alan

  Hopkins, Kelvin

  Miller, Andrew

  Howarth, George (Knowsley N &

  Moffatt, Laura

  Sefton E)

  Mole, Chris

  Hoyle, Lindsay

  Morgan, Julie

  Hughes, Kevin (Doncaster N)

  Morley, Elliot

  Humble, Mrs Joan

  Mountford, Kali

  Hurst, Alan (Braintree)

  Mudie, George

  Hutton, rh John

  Munn, Ms Meg

  Iddon, Dr. Brian

  Murphy, Denis (Wansbeck)

  Illsley, Eric

  Naysmith, Dr. Doug

  Irranca-Davies, Huw

  O'Brien, Bill (Normanton)

  Jackson, Helen (Hillsborough)

  O'Brien, Mike (N Warks)

  Jamieson, David

  O'Hara, Edward

  Jenkins, Brian

  Olner, Bill

  Johnson, Alan (Hull W)

  Osborne, Sandra (Ayr)

  Johnson, Miss Melanie (Welwyn

  Owen, Albert

  Hatfield)

  Palmer, Dr. Nick

  Jones, Helen (Warrington N)

  Perham, Linda

  Jones, Jon Owen (Cardiff C)

  Picking, Anne

  Jones, Kevan (N Durham,

  Pickthall, Colin

  Jones, Lynne (Selly Oak)

  Pike, Peter (Burnley)

  Jones, Martyn (Clwyd S)

  Plaskitt, James

  Joyce, Eric (Falkirk W)

  Pollard, Kerry

  Kaufman, rh Gerald

  Pope, Greg (Hyndburn)

  Keeble, Ms Sally

  Prentice, Ms Bridget (Lewisham

  Keen, Alan (Feltham)

  E)

  Kemp, Fraser

  Prentice, Gordon (Pendle)

  Kennedy, Jane (Wavertree,

  Prescott, rh John

  Kidney, David

  Primarolo, rh Dawn

  Kilfoyle, Peter

  Prosser, Gwyn

  King, Andy (Rugby)

  Purchase, Ken

  Kumar, Dr. Ashok

  Purnell, James

  Ladyman, Dr. Stephen

  Quin, rh Joyce

  Lammy, David

  Quinn, Lawrie

  Lawrence, Mrs Jackie

  Rammell, Bill

  Laxton, Bob (Derby N)

  Rapson, Syd (Portsmouth N)

  Leslie, Christopher

  Raynsford, rh Nick

  Levitt, Tom (High Peak)

  Reed, Andy (Loughborough)

  Lewis, Ivan (Bury S)

  Reid, rh Dr. John (Hamilton N &

  Lidded, rh Mrs Helen

  Bellshill)

  Linton, Martin

  Robertson, John (Glasgow

  Lloyd, Tony (Manchester C)

  Anniesland)

  Love, Andrew

  Robinson, Geoffrey (Coventry

  Lucas, Ian (Wrexham)

  NW)

  Luke, Iain (Dundee E)

  Rooney, Terry

  Lyons, John (Strathkelvin)

  Ross, Ernie (Dundee W)

  McAvoy, Thomas

  Roy, Frank (Motherwell)

  251

  Ruane, Chris

  Timms, Stephen

  Russell, Ms Christine (City of

  Todd, Mark (S Derbyshire)

  Chester)

  Touhig, Den (Islwyn)

  Ryan, Joan (Enfield N)

  Trickett, Jon

  Salter, Martin

  Truswell, Paul

  Sarwar, Mohammad

  Turner, Dennis (Wolverh'ton SE)

  Savidge, Malcolm

  Turner, Dr. Desmond (Brighton

  Sawford, Phil

  Kemptown)

  Sedgemore, Brian

  Turner, Neil (Wigan)

  Shaw, Jonathan

  Twigg, Derek (Halton)

  Sheerman, Barry

  Tynan, Bill (Hamilton S)

  Sheridan, Jim

  Vaz, Keith (Leicester E)

  Singh, Marsha

  Walley, Ms Joan

  Skinner, Dennis

  Ward, Claire

  Smith, rh Andrew (Oxford E)

  Wareing, Robert N.

  Smith, rh Chris (Islington S &

  Watson, Tom (W Bromwich E)

  Finsbury)

  Watts, David

  Smith, Geraldine (Morecambe &

  White, Brian

  Lunesdale)

  Whitehead, Dr. Alan

  Smith, Jacqui (Redditch)

  Wicks, Malcolm

  Smith, John (Glamorgan)

  Williams, rh Alan (Swansea W)

  Smith, Llew (Blaenau Gwent)

  Williams, Betty (Conwy)

  Soley, Clive

  Wills, Michael

  Starkey, Dr. Phyllis

  Winnick, David

  Steinberg, Gerry

  Winterton Ms Rosie (Doncaster

  Stevenson, George

  C)

  Stewart, David (Inverness E &

  Woodward, Shaun

  Lochaber)

  Woolas, Phil

  Stewart, Ian (Eccles)

  Worthington, Tony

  Stinchcombe, Paul

  Wright, Anthony D. (Gt

  Strang, rh Dr. Gavin

  Yarmouth)

  Stringer, Graham

  Wright, Tony (Cannock)

  Sutcliffe, Gerry

  Wyatt, Derek

  Taylor, Dari (Stockton S)

  Taylor, David (NW Leics)

  Tellers for the Noes:

  Thomas, Gareth (Clwyd W)

  Margaret Moran and

  Thomas, Gareth (Harrow W)

  Mr. Nick Ainger

  Question accordingly negatived>
  Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—
  The House divided: Ayes 313, Noes 187.

  Division No. 57]

  [7:16 pm

  AYES

  Adams, Irene (Paisley N)

  Brennan, Kevin

  Ainsworth, Bob (Cov'try NE)

  Brown, rh Nicholas (Newcastle E

  Alexander, Douglas

  Wallsend)

  Allen, Graham

  Brown, Russell (Dumfries)

  Anderson, rh Donald (Swansea E)

  Browne Desmond

  Anderson, Janet (Rossendale &

  Bryant, Chris

  Darwen)

  Burden, Richard

  Armstrong, rh Ms Hilary

  Burgon, Colin

  Atkins, Charlotte

  Burnham, Andy

  Austin, John

  Byers, rh Stephen

  Bailey, Adrian

  Cairns, David

  Baird, Vera

  Campbell, Alan (Tynemouth)

  Banks, Tony

  Campbell, Ronnie (Blyth V)

  Barnes, Harry

  Caplin, Ivor

  Battle, John

  Casale, Roger

  Beard, Nigel

  Caton, Martin

  Begg, Miss Anne

  Cawsey, Ian (Brigg)

  Bell, Sir Stuart

  Challen Colin

  Bennett, Andrew

  Chapman, Ben (Wirral S)

  Benton, Joe (Bootle)

  Chaytor, David

  Berry, Roger

  Clapham, Michael

  Best, Harold

  Clark, Mrs Helen (Peterborough)

  Betts, Clive

  Clark, Dr Lynda (Edinburgh

  Blackman, Liz

  Pentlands)

  Blears, Ms Hazel

  Clark, Paul (Gillingham)

  Blizzard, Bob

  Clarke, Tony (Northampton S)

  Bradley, Peter (The Wrekin)

  Clwyd. Ann (Cynon V)

  Bradshaw, Ben

  Coaker Vernon

  252

  Coffey, Ms Ann

  Hill, Keith (Streatham)

  Cohen, Harry

  Hinchliffe, David

  Connarty, Michael

  Hodge, Margaret

  Cook, Frank (Stockton N)

  Hoey, Kate (Vauxhall)

  Cooper, Yvette

  Hood, Jimmy (Clydesdale)

  Corbyn, Jeremy

  Hood, rh Geoffrey

  Corston, Jean

  Hope, Phil (Corby)

  Cousins, Jim

  Hopkins, Kelvin

  Cranston, Ross

  Howarth, George (Knowsley N &

  Crausby, David

  Sefton E)

  Cruddas, Jon

  Hoyle, Lindsay

  Cryer, Ann (Keighley)

  Hughes, Kevin (Doncaster N)

  Cryer, John (Hornchurch)

  Humble, Mrs Joan

  Cummings, John

  Hurst, Alan (Braintree)

  Cunningham, Jim (Coventry S)

  Hutton, rh John

  Cunningham, Tony (Workington)

  Iddon, Dr. Brian

  Darling, rh Alistair

  Illsley, Eric

  Davey, Valerie (Bristol W)

  Irranca-Davies, Huw

  David, Wayne

  Jackson, Helen (Hillsborough)

  Davidson, Ian

  Jamieson, David

  Davies, rh Denzil (Llanelli)

  Jenkins, Brian

  Dawson, Hilton

  Johnson, Alan (Hull W)

  Dean, Mrs Janet

  Johnson, Miss Melanie (Welwyn

  Denham, rh John

  Hatfield)

  Dhanda, Parmjit

  Jones, Helen (Warrington N)

  Dobbin, Jim (Heywood)

  Jones, Jon Owen (Cardiff C)

  Dobson, rh Frank

  Jones,Keven (N Durham)

  Donohoe, Brian H.

  Jones, Lynne (Selly Oak)

  Doran, Frank

  Jones, Lynne (Selly Oak)

  Dowd, Jim (Lewisham W)

  Jones,martyn (Clwyd C)

  Drown, Ms Julia

  Joyce, Eric (Falkirk W)>

  Eagle, Angela (Wallasey)

  Kaufman, rh Gerald

  Eagle, Maria (L'pool Garston)

  Keeble, Ms Sally

  Edwards, Huw

  Keen, Alan (Feltham)

  Efford, Clive

  Kemp, Fraser

  Ellman, Mrs Louise

  Kennedy, Jane (Wavertree)

  Ennis, Jeff (Barnsley E)

  Kidney, David

  Etherington, Bill

  Kilfoyle, Peter

  Farrelly, Paul

  King, Andy (Rugby)

  Fisher, Mark

  Kumar, Dr. Ashok

  Fitzsimons, Mrs Lorna

  Ladyman, Dr. Stephen

  Flint, Caroline

  Lammy, David

  Flynn, Paul (Newport W)

  Lawrence, Mrs Jackie

  Follett, Barbara

  Laxton, Bob (Derby N)

  Foster, rh Derek

  Leslie, Christopher

  Foster, Michael (Worcester)

  Levitt, Tom (High Peak)

  Foulkes, rh George

  Lewis, Ivan (Bury S)

  Francis, Dr. Hywel

  Liddell, rh Mrs Helen

  Gardiner, Barry

  Linton, Martin

  George, rh Bruce (Walsall S)

  Lloyd, Tony (Manchester C)

  Gerrard, Neil

  Love, Andrew

  Gibson, Dr. Ian

  Lucas, Ian (Wrexham)

  Gilroy, Linda

  Luke, Iain (Dundee E)

  Godsiff, Roger

  Lyons, John (Strathkelvin)

  Goggins, Paul

  McAvoy, Thomas

  Griffiths, Jane (Reading E)

  McCabe, Stephen

  Griffiths, Win (Bridgend)

  McCafferty, Chris

  Grogan, John

  McCartney, rh Ian

  Hain, rh Peter

  McDonagh, Siobhain

  Hall, Mike (Weaver Vale)

  MacDonald, Calum

  Hall, Patrick (Bedford)

  McDonnell, John

  Hamilton, David (Midlothian)

  MacDougall, John

  Hamilton, Fabian (Leeds NE)

  McFall, John

  Hanson, David

  McGuire, Mrs Anne

  Harman, rh Ms Harriet

  Mclsaac, Shona

  Harris, Tom (Glasgow Cathcart)

  McKechin, Ann

  Havard, Dai (Merthyr Tydfil &

  McKenna, Rosemary

  Rhymney)

  McNamara, Kevin

  Healey, John

  Mactaggart, Fiona

  Henderson, Doug (Newcastle N)

  McWalter, Tony

  Henderson, Ivan (Harwich)

  Mahmood, Khalid

  Hepburn, Stephen

  Mahon, Mrs Alice

  Heppell, John

  Mallaber, Judy

  Hesford, Stephen

  Mandelson, rh Peter

  Hewitt, rh Ms Patricia

  Marris, Rob (Wolverh'ton SW)

  Heyes, David

  Marsden, Gordon (Blackpool S)

  253

  Marshall, David (Glasgow

  Shaw, Jonathan

  Shettleston)

  Sheerman, Barry

  Marshall, Jim (Leicester S)

  Sheridan, Jim

  Martlew, Eric

  Singh, Marsha

  Meale, Alan (Mansfield)

  Skinner, Dennis

  Merron, Gillian

  Smith, rh Andrew (Oxford E)

  Michael, rh Alun

  Smith, rh Chris (Islington S &

  Milburn, rh Alan

  Finsbury)

  Miller, Andrew

  Smith, Geraldine (Morecambe &

  Moffatt, Laura

  Lunesdale)

  Mole, Chris

  Smith, Jacqui (Redditch)

  Morgan, Julie

  Smith, John (Glamorgan)

  Morley, Elliot

  Smith, Llew (Blaenau Gwent)

  Mountford, Kali

  Soley, Clive

  Mudie, George

  Starkey, Dr. Phyllis

  Munn, Ms Meg

  Steinberg, Gerry

  Murphy, Denis(Wansbeck)

  Stevenson, George

  Naysmith, Dr. Doug

  Stewart, David (Inverness E &

  O'Brien, Bill (Normanton)

  Lochaber)

  O'Brien, Mike (N Warks)

  Stewart, Ian (Eccles)

  O'Hara, Edward

  Stinchcombe, Paul

  Olner, Bill

  Strang, rh Dr. Gavin

  Osborne, Sandra (Ayr)

  Stringer, Graham

  Owen, Albert

  Sutcliffe, Gerry

  Palmer, Dr. Nick

  Taylor, Dari (Stockton S)

  Perham, Linda

  Taylor, David (NW Leics)

  Picking, Anne

  Thomas, Gareth (Clwyd W)

  Pickthall, Colin

  Thomas, Gareth (Harrow W)

  Pike, Peter (Burnley)

  Timms, Stephen

  Plaskitt, James

  Todd, Mark (S Derbyshire)

  Pollard, Kerry

  Touhig, Don (Islwyn)

  Pope, Greg (Hyndburn)

  Trickett, Jon

  Prentice, Ms Bridget (Lewisham E)

  Truswell, Paul

  Turner, Dr. Desmond (Brighton

  Prentice, Gordon (Pendle)

  Kemptown)

  Prescott, rh John

  Turner, Neil (Wigan)

  Primarolo, rh Dawn

  Twigg, Derek (Halton)

  Prosser, Gwyn

  Tynan, Bill (Hamilton S)

  Purchase, Ken

  Vaz, Keith (Leicester E)

  Purnell, James

  Walley, Ms Joan

  Quin, rh Joyce

  Ward, Claire

  Quinn, Lawrie

  Wareing, Robert N.

  Rammell, Bill

  Watson, Tom (W Bromwich E)

  Rapson, Syd (Portsmouth N)

  Watts, David

  Raynsford, rh Nick

  White, Brian

  Reed, Andy (Loughborough)

  Whitehead, Dr. Alan

  Reid, rh Dr. John (Hamilton N &

  Wicks, Malcolm

  Bellshill)

  Williams, rh Alan (Swansea W)

  Robertson, John (Glasgow

  Williams, Betty (Conwy)

  Anniesland)

  Wills, Michael

  Robinson, Geoffrey (Coventry

  Winnick, David

  NW)

  Winterton, Ms Rosie (Doncaster

  Rooney, Terry

  C)

  Ross, Ernie (Dundee W)

  Woodward, Shaun

  Roy, Frank (Motherwell)

  Woolas, Phil

  Ruane, Chris

  Worthington, Tony

  Russell, Ms Christine (City of

  Wright, Anthony D. (Gt

  Chester)

  Yarmouth)

  Ryan, Joan (Enfield N)

  Wright, Tony (Cannock)

  Salter, Martin

  Wyatt, Derek

  Sarwar, Mohammad

  Savidge, Malcolm

  Tellers for the Ayes:

  Sawford, Phil

  Margaret Moran and

  Sedgemore, Brian

  Mr. Nick Ainger

  NOES

  Ainsworth, Peter (E Surrey)

  Beggs, Roy (E Antrim)

  Amess, David

  Beith, rh A. J.

  Ancram, rh Michael

  Bellingham, Henry

  Arbuthnot, rh James

  Bercow, John

  Atkinson, David (Bour'mth E)

  Beresford, Sir Paul

  Atkinson, Peter (Hexham)

  Boswell, Tim

  Bacon, Richard

  Bottomley, Peter (Worthing W)

  Baldry, Tony

  Bottomley, rh Virginia (SW

  Barker, Gregory

  Surrey)

  Baron, John (Billericay)

  Brady, Graham

  254

  Brake, Tom (Carshalton)

  Johnson, Boris (Henley)

  Brazier, Julian

  Jones, Nigel (Cheltenham)

  Breed, Colin

  Keetch, Paul

  Brooke, Mrs Annette L.

  Key, Robert (Salisbury)

  Browning, Mrs Angela

  Kirkwood, Sir Archy

  Bruce, Malcolm

  Knight, rh Greg (E Yorkshire)

  Burnett, John

  Laing, Mrs Eleanor

  Burns, Simon

  Lait, Mrs Jacqui

  Burnside, David

  Lamb, Norman

  Burstow, Paul

  Lansley, Andrew

  Burt, Alistair

  Laws, David (Yeovil)

  Cable, Dr. Vincent

  Lewis, Dr. Julian (New Forest E)

  Calton, Mrs Patsy

  Liddell-Grainger, Ian

  Cameron, David

  Lilley, rh Peter

  Campbell, rh Sir Menzies (NE

  Llwyd, Elfyn

  Fife)

  Loughton, Tim

  Carmichael, Alistair

  Luff, Peter (M-Worcs)

  Cash, William

  McIntosh, Miss Anne

  Chapman, Sir Sydney (Chipping

  Mackay, rh Andrew

  Barnet)

  Maclean, rh David

  Chope, Christopher

  McLoughlin, Patrick

  Clappison, James

  Malins, Humfrey

  Clarke, rh Kenneth (Rushcliffe)

  Maples, John

  Collins, Tim

  Maude, rh Francis

  Conway, Derek

  May, Mrs Theresa

  Cotter, Brian

  Mercer, Patrick

  Curry, rh David

  Mitchell, Andrew (Sutton

  Davey, Edward (Kingston)

  Coldfield)

  Davies, Quentin (Grantham &

  Murrison, Dr. Andrew

  Stamford)

  O'Brien, Stephen (Eddisbury)

  Davis, rh David (Haltemprice &

  Öpik, Lembit

  Howden)

  Osborne, George (Tatton)

  Djanogly, Jonathan

  Ottaway, Richard

  Dorrell, rh Stephen

  Page, Richard

  Duncan, Alan (Rutland)

  Paice, James

  Duncan, Peter (Galloway)

  Pickles, Eric

  Evans, Nigel

  Price, Adam (E Carmarthen &

  Ewing, Annabelle

  Dinefwr)

  Fabricant, Michael

  Prisk, Mark (Hertford)

  Fallon, Michael

  Pugh, Dr. John

  Flight, Howard

  Rendel, David

  Flook, Adrian

  Robathan, Andrew

  Forth, rh Eric

  Robertson, Angus (Moray)

  Foster, Don (Bath)

  Robertson, Hugh (Faversham &

  Francois, Mark

  M-Kent)

  Gale, Roger (TV Thanet)

  Robertson, Laurence (Tewk'b'ry)

  Garnier, Edward

  Rosindell, Andrew

  George, Andrew (St. Ives)

  Ruffley, David

  Gibb, Nick (Bognor Regis)

  Russell, Bob (Colchester)

  Gidley, Sandra

  Salmond, Alex

  Gillan, Mrs Cheryl

  Sanders, Adrian

  Grayling, Chris

  Selous, Andrew

  Green, Matthew (Ludlow)

  Shephard, rh Mrs Gillian

  Greenway, John

  Shepherd, Richard

  Grieve, Dominic

  Simmonds, Mark

  Gummer, rh John

  Simpson, Keith (M-Norfolk)

  Hague, rh William

  Smith, Sir Robert (W Ab'd'ns &

  Hammond, Philip

  Kincardine)

  Hancock, Mike

  Smyth, Rev. Martin (Belfast S)

  Harvey, Nick

  Spelman, Mrs Caroline

  Hawkins, Nick

  Spicer, Sir Michael

  Hayes, John (S Holland)

  Spink, Bob (Castle Point)

  Heald, Oliver

  Spring, Richard

  Heath, David

  Stanley, rh Sir John

  Heathcoat-Amory, rh David

  Steen, Anthony

  Hendry, Charles

  Streeter, Gary

  Hermon, Lady

  Stunell, Andrew

  Hoban, Mark (Fareham)

  Swayne, Desmond

  Hogg, rh Douglas

  Swire, Hugo (E Devon)

  Holmes, Paul

  Syms, Robert

  Horam, John (Orpington)

  Tapsell, Sir Peter

  Howard, rh Michael

  Taylor, Ian (Esher)

  Howarth, Gerald (Aldershot,

  Taylor, John (Solihull)

  Hughes, Simon (Southwark N)

  Taylor, Matthew (Truro)

  Jackson, Robert (Wantage)

  Taylor, Dr. Richard (Wyre F)

  Jenkin, Bernard

  Teather, Sarah

  255

  Thomas, Simon (Ceredigion)

  Williams, Hywel (Caernarfon)

  Thurso, John

  Williams, Roger (Brecon)

  Turner, Andrew (Isle of Wight)

  Willis, Phil

  Tyrie, Andrew

  Wilshire, David

  Viggers, Peter

  Winterton, Ann (Congleton)

  Walter, Robert

  Winterton, Sir Nicholas(Macclesfield)

  Waterson, Nigel

  Wishart, Pete

  Webb, Steve (Northavon)

  Yeo, Tim (S Suffolk)

  Weir, Michael

  Young, rh Sir George

  Whittingdale, John

  Younger-Ross, Richard

  Widdecombe, rh Miss Ann

  Wiggin, Bill

  Tellers for the Noes:

  Wilkinson, John

  Mr. M irk Field and

  Willetts, David

  Angela Watkinson

  Question accordingly agreed to.
  MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.
  Resolved,
  That this House supports the Government's strategy to tackle pensioner poverty, and to deliver simplicity, security and choice in working and saving for retirement; condemns the pensions inheritance of 1997, with millions in poverty and the legacy of pension mis-selling; notes that the Government is spending £9 billion extra per year in real terms on pensioners compared with the 1997 system; condemns the unfair, unaffordable and unsustainable pensions policies of Opposition parties; expresses its sincere sympathy for those who have lost part or all of their pension as a result of their employer becoming insolvent; believes the Government should continue to look it all available options to help people affected, but that it would be cruel to raise expectations if no workable solution can he found; welcomes the publication of the Government's Pensions Bill; further believes that the Pension Protection Fund will bring real security for over 10 million defined benefit pension scheme members if their employer becomes insolvent and pensions schemes wind up in the future; further believes that firms should honour pension promises they have made; welcomes the Bill as a bi lanced package, with a new regulator and measures to simplify pensions legislation, making it easier for employers to run good schemes; further believes that pension reform should be a common cause; and calls on all Members of this House to support the Government's Pensions Bill.

  REGULATORY REFORM
  Motion made, and Question put forthwith, pursuant to Standing Order No. 18(1)(a) (Consideration of draft regulatory reform orders),

  SUNDAY TRADING
  That the draft Regulatory Reform (Sunday Trading) Order 2004, which was laid before this House on 22nd January, be approved. —[Paul Clark.]
  Question agreed to

PETITIONS

  Hemel Hempstead General Hospital
  7.29 pm
  Mr. Tony McWalter: I present a petition on behalf of 22,116 residents and workers of the Dacorum district of Hertfordshire.
  The petition declares:
  That the threatened downgrading of Hemel Hempstead General Hospital is unjustified given that its catchment population is the largest in the county and that it is still growing.
  The Petitioners therefore request that the House of Commons urge the Secretary of State for Health to direct the Bedfordshire and Hertfordshire Strategic Health Authority to reinvestigate thoroughly the business case for selecting one option over another in relation to the future of Hemel Hempstead District General Hospital.
  And the Petitioners remain, etc
  To lie upon the Table.

  Gadebridge Sub-Post Office
  7.30 pm
  Mr. Tony McWalter: I wish to present a petition of the Gadebridge Community Association and residents of Gadebridge.
  The petition
  Declares that the Petitioners would be deleteriously affected by the closure of Gadebridge Sub-Post Office at Rossgate in Hemel Hempstead.
  The Petitioners therefore request that the House of Commons urge the Government to take steps to secure the future of Gadebridge Sub-Post Office, and the beneficial services it provides, for the members of the Gadebridge Community.
  And the Petitioners remain, etc.
  To lie upon the Table

  VAT (Tourism)
  Motion made, and Question proposed,That this House do now adjourn. — [Paul Clark.]
  7.31 pm
  Mr. Roy Beggs: As a tourist destination, the United Kingdom offers a rich and diverse holiday experience to any tourist wishing to explore our national distinctiveness, our shared traditions and our unique heritage. As an industry, British tourism has enormous potential, offering the prospects of job creation, urban and rural regeneration and real economic and social benefits for all sections of our community.
  Tourism represents one of the largest industries in the United Kingdom, and makes a major contribution to the British economy. It is worth approximately £75.9 billion. In 2002, 24.2 million trips were made by overseas visitors to the United Kingdom, who spent approximately £11.7 billion, while British residents themselves made 167.3 million trips within the United Kingdom, spending more than £26.5 billion.
  Our tourist industry is, however, at a distinct economic disadvantage compared with those of our European neighbours, which is a cause of serious concern. The disadvantage is that the value added tax rate applied to Britain's tourist industry is substantially higher than that applied by the majority of European Union states. In particular, the VAT rate applied to tourist accommodation in the United Kingdom is more than twice the European Union average.
  With the exception of Denmark and Germany, EU states operate an average reduced rate of VAT on tourism of 8 per cent. The United Kingdom, on the other hand, continues to enforce a VAT rate of 17.5 per cent. on tourist services, including tourist accommodation. Consequently, the performance of the United Kingdom tourism industry over the past 15 years has been marked by a declining market share and a progressive deterioration in the balance of payments on tourism services. There is compelling evidence that there is a causal relationship between the two.
  Only Denmark, charging 25 per cent., has a higher rate of VAT on tourism than the United Kingdom. The negative effects on the Danish economy and tourist industry are undeniable. International tourist receipts in Denmark declined during the 1990s, leading to a fall in Denmark's share of the European tourist market, from 2.4 per cent. in 1991 to 1.83 per cent. by 1994. The Danish tourist industry is currently lobbying the Government to reduce the rate of VAT to a level more in line with those of its European partners.
  The Republic of Ireland provides an excellent example of the way in which extensive economic and employment benefits can be gained from the introduction of lower VAT, particularly on tourist accommodation. Following the Irish Government's decision to halve the rate of VAT applicable to visitor accommodation and restaurant meals in the mid 1980s, the number of overseas visitors to the south of Ireland increased from 1.9 million in 1986 to 3.1 million in 1990. Northern Ireland is the only part of the United Kingdom to share a land border with another European Union state, and is clearly weakened by variable levels
  258
  within the EU of VAT on tourism. As it is isolated and more expensive to reach from Great Britain, it struggles to attract large numbers of UK residents. Moreover, Northern Ireland shares a land border with an EU state operating a reduced VAT of 13.5 per cent. The 4 per cent. difference has major cost implications for overseas tourists. In such circumstances, it is difficult to know how long the industry can be expected to remain attractive to visitors.
  The majority of the tourism industry in Northern Ireland is in small and medium-sized enterprises, which are committed to remain there to develop the economy and increase employment. The tourism industry demands fair treatment on a level playing field so that those expectations can be met. In 2002, 1.7 million people visited Northern Ireland and contributed £274 million to our economy. Domestic tourists spent £121 million on top of that figure. The tax contribution to Her Majesty's Treasury, according to the Northern Ireland Tourist Industry Confederation, is more than £207 million in VAT and national insurance contributions. Tourism employs 49,000 full and part-time workers, with hotels and restaurants alone employing more than 38,000 full and part-time staff.
  Tourism is estimated to contribute nearly 2 per cent. of Northern Ireland's gross domestic product, compared with 5.4 per cent. in the Republic of Ireland, 5 per cent. in Scotland and 7 per cent. in Wales. If Northern Ireland and, indeed, the rest of the UK are to improve their attractiveness to visitors and fully develop an internationally recognised and globally competitive tourism industry, the lowering of VAT on tourist accommodation is a vital first step. Reducing VAT on tourism, particularly on tourist accommodation such as hotels, farmhouse bed and breakfasts, guest houses and similar establishments would undoubtedly do wonders for the economy of the UK as a whole.
  Price is a crucial factor for most tourists when choosing a holiday destination. By attracting more visitors with cheaper accommodation, tourists would be encouraged to spend more money in our restaurants, shops and visitor au' actions and make use of our public transport and car hire facilities. As more business is generated, more jobs will be created. According to Deloitte and Touche's 1998 study of the effects of changing VAT rates on tourist services, a reduction of VAT on accommodation would create more than 50,000 new jobs. The UK's receipts from international tourism would increase by £2 billion in the first year following a reduction, rising to £3 billion in the third year. The direct loss of VAT receipts is more than made up for by gains in Income and corporation tax and reductions in social security payments. According to Deloitte and Touche' simulation, the potential indirect gains to the Treasury from those sources rises from £426 million in the first year following a VAT cut to £753 million by year 10.
  The potential for increased Treasury revenue and employment is further supported by more recent VAT calculations on UK in bound tourism from VisitBritain. The international passenger survey notes that UK inbound tourism receipts for 1992–93 totalled £11.7 billion. Expenditure on accommodation was only £3.94 billion, or 33.7 per cent. of total UK in-bound tourism receipts. The increase in in-bound tourism receipts as a result of reducing VAT on accommodation from 17.5

  259
  per cent. to 8 per cent. would produce £562 million per annum and result in a very significal it increase in full-time and part-time jobs.
  In the light of such significant economic and employment benefits, I ask the Minister to undertake pilot research into the real economic effects that changing VAT rates would have on the British tourism and leisure industry. The Treasury should consider reducing the rate of VAT on tourist accommodation to 8 per cent. to test whether the benefits of such a reduction in VAT could be applied with economic success across the whole of the all Northern Ireland's bed and breakfasts, guest houses and hotels are already certified and registered through the Northern Ireland Tourist Board, the region s clearly the most cost-effective part of the UK in which a pilot scheme could operate, because a reduced rate of VAT could be easily controlled and quickly administered. I urge the Minister seriously to consider the opportunity that is available in Northern Ireland and impress upon him the need urgently to address this source of competitive disadvantage with the rest of the European Union.
  I want briefly to outline the legislative basis for a change in the UK VAT rate. Alongside the standard rate of VAT at 17.5 per cent., the UK operates two reduced rates: one at 5 per cent., which is applied to domestic fuel, for example; and the other zero rated for goods such as children's clothes, foodstuffs and books. At first glance, that would appear to rule out the possibility of applying a further reduced rate for tourism accommodation, because under the EC sixth directive member states are entitled to apply for up to two reduced rates of VAT. However, the zero rating is not recognised by the EC directive as a reduced rate, which leaves the way open for a potential third option brought about by a change to domestic VAT legislation to include a reduced rate for tourist accommodation.
  It therefore seems possible to revise the domestic VAT legislation to include the provision of hotel and similar accommodation in the United Kingdom in a lower reduced rate, effectively reducing the VAT charge due on those services to no more than 8 per cent., thereby creating a level playing field with the rest of Europe. That would in turn allow the UK broadly to follow the VAT liability that is applied to the provision of hotel and similar accommodation throughout Europe. For example, France operates a discounted VAT rate of 5.5 per cent. on accommodation, with a standard rate of 19.6 per cent.; Portugal has a discounted rate of 5 per cent. and a standard rate of 19 INT cent.; Spain has a discounted rate of 7 per cent. and t standard rate of 16 per cent.; and Luxembourg has a discounted rate of 3 per cent. and a standard rate of 15 per cent.
  The Minister should know that I am certainly not alone in calling for a reduced rate of VAT on tourism. He will be aware of the early-day motion that I recently tabled on the issue. In calling on the Chancellor to reduce the rate of VAT on tourist accommodation, I attracted a significant level of support from Members of Parliament across all parties. I ant encouraged to note that Welsh Members of Parliament have taken steps to meet representatives of the Wales Tourism Alliance to discuss the best way in which they can take the matter forward locally. The issue cleary extends beyond the walls of Westminster.
  260
  Before the Economic Secretary replies, he should know that several tourist organisations are backing and, in most cases, actively campaigning for the proposal. As well as the Wales Tourism Alliance, the England Tourism Alliance, the Scottish Tourism Forum, VisitBritain, the Northern Ireland Tourist Industry Confederation, the Northern Ireland Tourist Board, the Northern Ireland Hotel Federation, the Country Land and Business Association and the British Hospitality Association have extended their full support to my call for a reduction in VAT in the sector.
  Since the Chancellor will no doubt be concentrating heavily on his next Budget in the coming weeks, I am grateful for the opportunity to discuss and debate the issue. The tourism industry throughout the United Kingdom clearly believes that the whole country will benefit from a reduction in VAT on tourist accommodation. Such a reduction will be especially helpful to the tens of thousands of bed-and-breakfast owners and small hoteliers in rural areas, and will encourage more people to holiday in our beautiful country. I hope that the Treasury will consider the proposal carefully.
  7.46 pm
  The Economic Secretary to the Treasury (John Healey): I congratulate the hon. Member for East Antrim (Mr. Beggs) on securing not only the debate but the support of 67 hon. Members who signed the early-day motion that he tabled on a reduced rate for tourism. As he said, he has significant support inside and outside the House for some his arguments.
  I welcome the opportunity to discuss tourism and the Government's approach to promoting and supporting the tourism industry in Northern Ireland and the United Kingdom more generally.
  The Government recognise the vital importance of the tourism industry to the UK and, as the hon. Gentleman said, the great attraction of all parts of the UK to tourists from other countries. Last year, tourism spending in the UK was £76 billion. The wider industry employs approximately one in 13 of our work force, in the UK generally and in Northern Ireland.
  In recent years, there has been new investment, new services and new confidence in tourism. Last year's figures for holiday visitors in Northern Ireland show an expected increase of 15 per cent. on 2002. The Northern Ireland tourism industry earned £395 million in 2002—more than 12 per cent. up on the previous year. Of that total, £274 million came from staying visitors and £121 million from domestic holidaymakers.
  The Government therefore recognise the significance of tourism in Northern Ireland and strongly support its development. The hon. Gentleman may know that Invest Northern Ireland provides support with the operating, managing and development of tourism businesses, including grants for upgrading or developing guest houses and other holiday accommodation. A new development fund has been established to promote selected new air routes, especially to and from continental Europe, through investment support for local airports in the Province to reduce landing charges for carriers.
  The Northern Ireland Tourist Board has developed a "Strategic Framework for Action", which provides guidance on the development of the tourist industry in

  261
  the next three years. The Department of Enterprise, Trade and Investment in Northern Ireland, in partnership with the Northern Ireland Tourist Board, and alongside public and private sector agencies, will oversee the framework's implementation.
  Tourism is generally benefiting from the macroeconomic reforms that we introduced since coming to office in 1997. They have helped to create a stable and steadily growing economy. Some 1.7 million new jobs have been created since the Labour Government came to power.
  We have the lowest unemployment since the 1970s, and for the first time in 50 years, unemployment in Britain is lower than in the euro area, Japan and America together. This is the general picture across the UK, but it is particularly apparent in Northern Ireland, where unemployment has fallen by 27.5 per cent. since 1997, underlining the success of the Northern Ireland economy in recent years. Indeed, I heard the hon. Member for East Antrim himself say to my right hon. Friend the Chancellor in the House last month:
  "We in Northern Ireland are enjoying the lowest levels of unemployment and the highest levels of employment in my lifetime". —[Official Report, 29 January 2004; Vol. 417, c. 381.]
  So we are having this debate against the background of a strong tourism sector in a strong economy.
  Lady Hermon: Does the Minister agree that one of the main contributory factors to the increase in employment and stability in Northern Ireland is the Belfast agreement, which he has not mentioned? Since Northern Ireland is now a much more attractive destination because we have peace—by comparative standards—does he recognise that to make it even more attractive for tourists, the serious issue of VAT must be addressed?
  John Healey: Northern Ireland is certainly a more attractive and secure destination for tourists than it was a few years ago, and I welcome that. I am about to come to the question of VAT that the hon. Lady urges me to address. I know that she and the hon. Member for East Antrim will wish me to treat his contribution to today's debate as a Budget representation, and I shall certainly do so. I shall also ensure that we look at the Deloitte and Touche modelling that he mentioned in his speech. He will know, however, that this is a relatively longstanding issue to which the Government have given careful consideration in the past.
  The hon. Gentleman will also know that the scope of VAT reliefs—including reduced rates—is governed by long-standing agreements with our European member state partners. Those agreements would not allow the application of a blanket reduced rate to all tourism-related activities, but they do allow member states, if they choose, to apply a reduced rate of VAT for certain goods and services that tourists might use, such as hotel accommodation, food, public transport and cultural activities. In the UK, our VAT zero rates are among the most generous and wide-ranging anywhere in Europe, including on items that tourists will benefit from, such as food and public transport. After 1997, we set up a special VAT refund scheme to support free admission to
  262
  national museums, including the Armagh county museum and the Ulster museum in Northern Ireland. We also exempt from VAT the admission fees to many cultural attractions such as certain zoos, museums, theatres.
  The specific case for a reduced rate for hotel accommodation was considered carefully in 1998, and we decided then that a persuasive economic case did not exist for such a move. We gave the matter further careful consideration during the foot and mouth outbreak, when the tourism industry faced severe difficulties and there were many calls for such reduced rate support. However, we said then that we did not regard such a blanket measure as a well-targeted, cost-effective use of resources. Instead we put in place a package of measures specifically targeted at those businesses affected by the outbreak, including direct help from Customs and Excise and the Inland Revenue to help those businesses to cope with their tax bills.
  It may be useful if I explain why the Government still believe that a general approach is poorly targeted and that the VAT system already provides better-focused benefits for a high proportion of small and medium-sized businesses within the tourist industries. Many smaller hotels, bed and breakfasts, farm houses and guest houses, which the hon. Gentleman mentioned, already benefit from the fact that the UK has the highest VAT registration threshold anywhere in Europe. Businesses with an annual turnover of less than £56,000 do not therefore have to register for VAT and can remain outside the scope of the VAT system altogether. That means that around half of guest houses and small hotels in this country do not have to charge VAT to their customers.
  As the hon. Gentleman said, the reduced rate in the Republic of Ireland is 13.5 per cent.—4 per cent. below our standard rate. The reduced rate that we apply in the UK is of course 5 per cent., and we estimate that a blanket reduced rate for all hotel accommodation would cost in the region of £650 million. Moreover, the most likely beneficiaries would be major hotel chains and luxury hotels. Some argue, as he argued, that on a pilot basis a reduced rate could be targeted to apply only in Northern Ireland. Some also argue that it could be targeted only on supplies, such as accommodation, that are made to tourists. Let me be clear, however: although it is possible to introduce a reduced rate of VAT for hotel and other accommodation, legally, such reliefs cannot be confined to particular geographical areas such as Northern Ireland. Neither can such reliefs be applied selectively according to the use of the hotel or the status of the customer.
  The hon. Gentleman went on to highlight his concerns about Northern Ireland and the competition created by the fact that it has a land border with another European member state—the only part of the United Kingdom, as he said, in which that circumstance exists—[Interruption.] I will give way to the hon. Member for North E own (Lady Hermon), although I am keen to answer the points made by the hon. Gentleman.
  Lady Hermon: With the latitude of my hon. Friend the Member for East Antrim (Mr. Beggs), I want to make a quick intervention. The Minister has just referred to the fact that the difficulty is a legal one. Is the

  263
  legal basis for our not being able to have a variable rate of VAT in Northern Ireland compared with the rest of the Untied Kingdom founded on European Community law or on British law?
  John Healey: That is a legal constraint that exists for the UK within the framework of European VAT law.
  The Irish Republic does indeed apply a reduced rate of VAT of 13.5 per cent. for hotel accommodation, as it is entitled to do under the long-standing agreements between all EU member states. It is equally important, however, to take into account other VAT factors that work to the advantage of the Northern Ireland and UK tourism industry. We have the highest VAT threshold in Europe at £56,000. By contrast, service sector businesses in Ireland need to register when their turnover reaches €25,500—around £17,000, which is less than a third of our registration threshold. Our standard VAT rate is 17.5 per cent. In Ireland, it is 21 per cent., so most other goods and services consumed by tourists will be subject to this higher rate.
  We have a number of special schemes in place to help small and newly registered businesses reduce their VAT compliance costs, improve their cash flow and manage their entry into the VAT system. that benefits sectors such as the tourism industry in which, as the hon. Gentleman made clear, there is a high proportion of small and medium-sized enterprises. Those schemes include the flat-rate scheme, the cast accounting scheme and the annual accounting scheme. We also have a
  264
  special scheme that UK tour operators can use, which is known as the tour operators margin scheme, which was designed mainly to simplify the VAT system for such businesses by relieving them of the burden of having to register for VAT in all the member states in which they provide a travel package.
  Overall, of course, the Organisation for Economic Co-operation and Development figures show that the UK is a relatively lightly taxed economy. We have one of the lowest tax burdens in the European Union, far lower than the EU average. I hope the hon. Gentleman accepts that, when we take a broader view, we see that the United Kingdom is not disadvantaged in comparison with other EU states, as he argued on the particularly narrow issue of a reduced VAT rate.
  The hon. Gentleman presented his arguments well. However, while we greatly value the contribution of the tourism industry to our economy, we continue to believe that a reduced VAT rate for hotel accommodation would be poorly targeted as well as expensive. We continue to believe that a reduced rate simply for accommodation for tourists, or for Northern Ireland, would not be permitted by VAT law. And we continue to believe that such a measure would not be as effective as the range of provisions that already exist in the VAT system and the economy generally to support UK tourism.
  Question put and agreed to.
  Adjourned accordingly at Eight o'clock.