Pensions Policy

HC Deb 08 September 2004 vol 424 cc725-84

Mr. Speaker

We now come to the main business, and I have selected the amendment in the name of the Prime Minister.

12.42 pm

Mr. David Willetts (Havant) (Con)

I beg to move,

That this House regrets the Government's failure to tackle the pensions crisis; expresses concern that present and former employees of Turner & Newall and those in a similar position do not know what assistance, if any, they will get from either the Financial Assistance Scheme or the Pension Protection Fund; regrets the inadequacies of Government efforts to encourage people to build up retirement savings in funded pensions; condemns the spread of means-tested benefits; draws attention to the Government's recent failure to deliver benefits to pensioners competently; further regrets the Government's wider failure to reform the welfare system for older people; notes that the National Pensioners Convention is lobbying Parliament on 8th September; and calls for Government action to tackle the crisis in funded pensions and to ensure dignity and security in retirement for older people.

I wish to draw the attention of the House to my interests, which appear in the Register of Members' Interests.

I begin by bidding farewell to the previous Secretary of State, who is sadly not in his place. We will miss him. He was a decent and honourable man—[HON. MEMBERS: "He still is."] It is a pity that he will no longer serve on the Front Bench. Those Labour Members who shouted that he still is decent and honourable might like to reflect on why he was the victim of such a sustained campaign of spinning aimed at undermining his position as Secretary of State. He had to wake up every morning and read over his breakfast comments such as the following: Mr. Blair is known to be looking for fresh thinking on the pensions crisis after warnings from Adair Turner, his pensions guru, on the seriousness of the situation." That is what The Guardian said. The Sun said: Tony Blair is alarmed by the failure of successive ministers to grapple with the pension crisis. Back in July, as the Secretary of State set off for his summer holidays, he had to read: Andrew Smith is set for the sack, according to ministerial sources, after failing to tackle the pensions crisis. We have had a Secretary of State brought down by spin and dissatisfaction at No. 10 with the quality of his performance in tackling the pension crisis.

The right hon. Gentleman resigned two days ago, and we still do not have a Secretary of State to replace him. It is always good to see the Minister for Pensions, who is jovial and amiable—we always enjoy debating with him—but it would be convenient to have a Secretary of State here.

As pensions are in crisis, as we are debating the subject and as the National Pensioners Convention is here, it is a slight oversight that we do not have a Secretary of State for Work and Pensions in the Chamber. I do not know whether hon. Members here are candidates for the post, but I can see a very strong candidate on the Labour Benches.

In the absence of the right hon. Gentleman, perhaps the best person to speak on behalf of the Government would have been the Chancellor of the Exchequer. After all, that important constitutional text, the Granita pact, set aside economic and social policy as a responsibility of the Chancellor, and he has been fighting a successful rearguard action over the past two days to keep it that way. He is the guy who is responsible for the £5 billion a year tax on our pension schemes that has wrought such havoc. He is the guy who is obsessed with introducing more and more complicated means-testing. It is a pity we do not have him here to defend the Government's policies.

So we do not have the right hon. Gentleman and we do not have the Chancellor. Instead, what we have is a shambles, with a serious and growing crisis in our pensions.

Mr. Andrew Miller (Ellesmere Port and Neston) (Lab)

I accept that the country faces some serious problems as a result of people retiring now and those who are about to retire. Does the hon. Gentleman accept that part of the problem is the failure of the Pensions Act 1995 to solve the problems facing some occupational pension funds, contrary to what the House was told at the time?

Mr. Willetts

The 1995 Act set in place a regime with the minimum funding requirement and regulation of pensions that was intended. It improved the security of our pensioners. I am afraid that the problem has arisen since 1997 when, among other things, the Government reduced the level of protection provided by the minimum funding requirement. Conservative Members, who have watched a £5 billion a year tax imposed on our pension funds and the reduction in the level of protection provided for the minimum funding requirement, are not going to hear the Labour party suddenly claim that it is all our fault.

Mr. Peter Lilley (Hitchin and Harpenden) (Con)

My hon. Friend will doubtless recall that the 1995 Act was introduced to deal with the crisis created by Robert Maxwell removing hundreds of millions of pounds from pension funds. The current crisis results from this Chancellor introducing the Robert Maxwell memorial tax, which removes £5 billion a year from pension funds.

Mr. Willetts

My right hon. Friend puts the point with customary precision and honesty. That is exactly the case and it is good to have his authoritative intervention.

Kali Mountford (Colne Valley) (Lab)

Will the hon. Gentleman give way?

Mr. Willetts

I want to make a bit more progress, but it might be possible to hear from the hon. Lady in a moment.

I want to remind the House of what has happened in the past 10 days. Last Monday—only nine days ago—hundreds of thousands of pensioners could not get the pensions to which they were entitled when they went to their post office because an official of JP Morgan in New York pushed the button on the computer programme to stop all payments. That was why for several hours on Monday we all had constituents who were unable to get the pensions to which they were entitled. The House ought to receive a proper explanation from the Minister, which I hope we will hear in a moment, about what went wrong and why the new system, which is being imposed on many reluctant pensioners who would much rather carry on being paid through the order books with which they are familiar, has already crashed and caused such distress.

Michael Fabricant (Lichfield) (Con)

Does my hon. Friend think it despicable that just as the Secretary of State has been scapegoated by the Government, the Post Office was scapegoated by the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond), on Radio 4. When he was asked what responsibility he would take, he said none. He said that the Post Office was at fault and the Government were not to blame, but was it not the Government who instituted that system in the first place?

Mr. Willetts

As always, it is everyone else's fault, but never the Government's. The test of their performance on pensions is which is closing more rapidly—the post offices or the pension schemes. I never quite know which it is because they are both closing under this Government.

Earlier this week, the main steel union, the Iron and Steel Trades Confederation Community union, confirmed that it will take Ministers to court for failing to protect its members' pension funds.

I hope that we shall hear from the Minister about what was referred to in the press as the "unsatisfactory negotiations" with the Department that led the union to decide to take legal action.

The latest figures show the scale of pension deficits in our leading companies. The top 100 companies alone have a deficit of £42 billion in their pension schemes with possibly another £20 billion on top of that to cover factors for which they have not allowed.

Kali Mountford

Which of the Conservative party's policies should give us some sense of security about its ability to handle pensions? Would it be the pensions holiday, the cutting of the state earnings-related pension scheme without telling anyone or the mis-selling of pensions? Which of those policies should give us confidence?

Mr. Willetts

I shall turn to our policies for tackling the pensions crisis. I am proud of those policies, and what is happening at the moment—the collapse of funded pensions and the spread of mass means-testing—shows that our policies are needed to get funded pensions going again in our country.

We have had post offices failing to pay benefits, new figures on the state of the pension deficit, and we have seen the Pensions Bill staggering through the House of Lords. There have been new amendments, and clauses tabled and withdrawn. At the latest count, 360 Government amendments have been tabled in the Lords. We read that the Government are so desperate to get their Hunting Bill through that they are willing to contemplate abandoning the Pensions Bill in order to do so. I see the Minister shaking his head. If he can give a categorical assurance that the Government will not abandon the Pensions Bill in favour of their obsession with banning hunting, I would be very interested to hear it. [Interruption.] Does he wish to come to the Dispatch Box and give that assurance?

The Minister for Pensions (Malcolm Wicks)

The Government and our supporters in the House are absolutely determined to ensure that the Pensions Bill receives Royal Assent. I hope that hon. Members on both sides of the House will ensure that that is done so that, among other things, the protection fund will be up and running in April next year.

Mr. Willetts

I guess that that was the Minister saying that he would not allow the Government's obsession with the Hunting Bill to get in his way. He is the Minister responsible for the Pensions Bill, and I should warn him that some of the briefing has affected him as well. On the BBC "News at Ten O'Clock" the night before last, the political editor said: A senior source told me tonight that the Pensions Bill is still in a shambolic and chaotic state. That is what No. 10 is saying about the Minister's Bill. He had better watch out because at that rate, I do not think he will be the new Secretary of State.

Mr. Peter Pike (Burnley) (Lab)

I know that the hon. Gentleman is an expert on the subject of pensions but does he accept that many of the problems of shortfalls in funding would not have been created if companies had not had pensions holidays when the stock exchange and the market were in a different position a few years ago?

Mr. Willetts

When the hon. Gentleman says "different position", he means everything was a lot better. That is what "different position" means. In that different position, under my party, when pensions had surpluses—those were the good old days—it is right that there were contributions holidays. Of course, there were also increases in benefits for members of pension schemes that went beyond what was necessary according to the terms of the pension or the law of this House. Everyone participated in the benefits of those pension surpluses.

Mr. David Tredinnick (Bosworth) (Con)

Will my hon. Friend explain why, if everything is so marvellous and the Government have done such a wonderful job, hundreds of pensioners have come to Westminster today—including some from Hinckley and Bosworth—to complain about the atrocious situation the Government have created?

Mr. Willetts

Exactly. One of the reasons we have called the debate is to show that we care about the plight of millions of our pensioners. The Government cannot even field a Secretary of State to handle the subject. Our pension funds are in crisis, pensions are not being paid through post offices, and we had the latest figures on pension credit this week as well. They showed that out of the 4.8 million pensioners eligible for the pension credit—as we know from a parliamentary answer from the Minister to me—3.1 million pensioners are claiming it. That means that 1.75 million pensioners eligible for the new means-tested benefit are still not receiving it. After next month, it will be impossible for them to claim the full backdated benefit from the introduction of the new pension credit. As we have always warned, the Minister has a massive problem of low take-up of his complicated means-tested benefits. No wonder the National Pensioners Convention, and just about every outside group, is pressing for the reversal of the pernicious spread of means-tested benefits.

Sir Nicholas Winterton (Macclesfield) (Con)

My hon. Friend mentioned in passing the role of the right hon. Member for Birkenhead (Mr. Field). Am I right in saying that the right hon. Gentleman was struggling hard to produce the right results and was about to recommend the unthinkable? If his proposals had been taken into account by the Government and implemented, many of the problems we are facing today would not be with us.

Mr. Willetts

My hon. Friend makes a very good point. Perhaps I could briefly remind the House of the cycle that we have been through. We have been told again this week in the briefing from No. 10 that the Government are about to get serious about reforming welfare and tackling the pensions crisis. We have been through this before. In fact, we have been through it several times. Before the 1997 election, it was stated: Social security requires very bold thinking. The right hon. Member for Birkenhead (Mr. Field) was appointed as the Minister for Welfare Reform because Mr. Blair saw welfare reform as crucial to his administration. Sadly, the right hon. Gentleman left the Government because they were not willing to embark on serious welfare reform.

Mr. Frank Field (Birkenhead) (Lab)

The hon. Gentleman has been speaking for almost 15 minutes. Is it not fair comment that both the major parties, looking back on their records, may well regret some of the things that they have done, but they never set out with the intent to arrive at the current position? The crucial matter in the debate is what both the major parties plan from now on. If I catch your eye, Mr. Speaker, I want to talk about the ideas that I advanced, which are ideas for the future. Before the hon. Gentleman sits down, will he give us a clear idea of where the Opposition stand on the matter? Although lots of pensioners are rightly here today, it is pensioners in the country who want to know where all three parties stand before they cast their votes at the next election. During the next election, for the first time ever, the majority of those turning up at the ballot boxes will be pensioners.

Mr. Willetts

The right hon. Gentleman is absolutely right. As he knows, my party has been putting forward constructive proposals concerning the pensions crisis, how to reform the mess of state benefits for pensioners, and how to encourage more funded pensions saving over many years. We shall continue to do so, and I hope to touch on that in my remarks.

However, we are talking about a Government who do not even have a Secretary of State for Work and Pensions to explain their policies on a major crisis affecting our country. The Opposition are entitled to hold the Government to account for that. We have been told again this week not to worry, as the matter is about to be tackled, No. 10 is about to make it a priority and the Prime Minister will focus on it during the third term. To remind everyone, we were told that he was going to tackle it as part of his first term. When the right hon. Gentleman was a Minister, he was appointed to do precisely that.

We were then told that the matter was to be the Government's priority in their second term. They have endlessly produced documents announcing that they are about to start tackling the pensions crisis because they are committed to doing so. We endlessly go through the same cycle, where Secretaries of State come and go, but the situation gets worse and worse. The right hon. Member for Edinburgh, Central (Mr. Darling) was Secretary of State for four years. During that time, an average of 50,000 members were affected by pension schemes being wound up every year. He produced Green Papers, and announced that the time for talking and discussing is coming to an end. We now actually need to implement our programmes. He said that in July 1998.

The Secretary of State who has just left office was there for two and half years. During his time, 60,000 people a year were affected by the winding up of pension schemes. He began the job announcing that he was insisting that reform of welfare was vital to Labour's second term. What has happened? The problem has got even worse. This week's briefing sets out the matter as a priority for the third term. That is not good enough. The Government have been in office for long enough to seriously tackle the crisis instead of making it worse. Millions of pensioners are trapped on means-tested benefits and many pensioners are not claiming the benefits to which they are entitled.

Household saving was 10 per cent. of household income when we lost office, but it is now down to 6 per cent. Funded pensions are in crisis and many of our constituents are worried about the severe financial problems they face as a result of their pension schemes winding up. Tackling the pensions crisis would therefore be one of our priorities in government.

Mr. Jonathan Djanogly (Huntingdon) (Con)

Is it not the case that many young people are dissuaded from taking up pensions because of the lack of incentives? Are we not putting ourselves in a position that will lead to our having a disaster on our hands in 20 years time?

Mr. Willetts

Indeed, which is why I should like to turn to our policies for tackling the crisis. We have two central propositions. First, we must reverse the spread of means-tested benefits. We are heading for a situation in which more than half of pensioners will be dependent on means-tested benefits. There is widespread consensus among people who have thought seriously about the subject that we need to reverse the spread of means-testing. I could cite to the Minister for Pensions comments by the charities, the National Association of Pension Funds and the savings industry, but I shall not do so. I shall simply refer him to what he once said: No one of sound mind could advocate wholesale means-testing". Is not the pension credit, which is supposed to go to almost half of pensioners, an example of mass means-testing? Or is the Minister saying that the Chancellor is not of sound mind? Does he still stand by that view? If so, he can join the mainstream consensus, which favours reforming the mess of means-tested benefits for pensioners.

We are committed to increasing the value of the basic state pension by linking it to earnings, not prices, thus reversing the spread of means-testing. We will not, contrary to what the Prime Minister said again in Prime Minister's questions today, abolish the pension credit. However, as the value of the basic state pension rises, fewer pensioners will need to claim the pension credit. That is the right way to implement reform, and that is what we will do.

Mr. Steve Webb (Northavon) (LD)

As the hon. Gentleman knows, to some extent I support his analysis of the problem, but could he clarify something? His policy would link the pension credit to prices, not earnings. When challenged, he argued that the Government have not promised anything beyond this Parliament. However, if they promised to earnings-link the pension credit, would he do so as well, or would he price-link it?

Mr. Willetts

If the Government said that they would increase the pension credit in the next Parliament by linking it to earnings, not prices—we are still waiting for a statement of their policy—once we had seen the figures and their modelling we would consider what we would do to the pension credit. We are certainly not obliged, however, to commit ourselves on the pension credit when we have not heard from Ministers. However, it would be interesting to hear the intentions of the Minister for Pensions on the pension credit in the next Parliament.

The first thing that we must do is reverse the spread of means-tested benefits and reform benefits for pensioners. My hon. Friend the Member for Huntingdon (Mr. Djanogly), however, is right that that is only half the story. We must also restore incentives to save and offer people new incentives, so that if they put money into a reliable savings product there will be a clear reward. We therefore propose the introduction of a new lifetime savings account—there will be a contribution from the Government alongside the money that the individuals put in—with the aim of achieving a clear and vivid reward for saving.

I do not know whether the Minister—who knows, he may become the Secretary of State—can signal in his speech that the Government will join the consensus, but I hope that he can. If he agrees that there is too much means-testing and that the Government are going to do something about it, that would be welcomed by hon. Members from many parties.

Ms Sally Keeble (Northampton, North) (Lab)

rose—

Mr. Willetts

I hope that the Minister can say something about encouraging people to save more for their retirement, as that would also be welcome, but even if he cannot take those big strategic steps—after all, he does not even have a Secretary of State to consult—I hope that he can answer two specific questions about problems facing pension funds. First, however, I shall give way to the hon. Member for Northampton, North (Ms Keeble)

Ms Keeble

What are the hon. Gentleman' proposals for the 86 per cent. of women who work but who do not make sufficient national insurance contributions to receive the state pension? As their earnings are low they are unlikely to be able to save enough to receive a funded pension of the type that he described.

Mr. Willetts

Those women would benefit from the greater uprating in the basic state pension. At present, they do not benefit from the pension credit, as it is assumed that they have a full contribution record and receive the full state pension, even though many of them, as the hon. Lady rightly said, do not do so.

Ms Keeble

rose—

Mr. Willetts

I will give way to the hon. Lady again—let us continue the pensions policy seminar.

Ms Keeble

I want to press the hon. Gentleman on a point that I would make to the Minister for Pensions, but unfortunately I have to attend Committee. Eighty-six per cent. of women who work do not make sufficient contributions to qualify for a pension, so they do not benefit from the earnings link. Women's earnings are lower, so they do not make enough money to save. What will happen to those women pensioners?

Mr. Willetts

I accept the hon. Lady's concern about women whose earnings are so low that do not receive any contributory state pension at all, but the proportion of such women is less than 80 per cent. Most women who work are earning enough to make contributions, so even though we would increase the basic state pension by linking it to earnings, we would not raise the lower earnings limit as we do not want to take away from women the opportunity to contribute to the basic state pension. I continue to study with great interest research by the TUC and the Fawcett Society on the problem, as I accept that there is a genuine grievance among women pensioners, many of whom were let down when they were not properly informed by the Inland Revenue in the past few years about the opportunity to contribute to the state pension through higher national insurance contributions.

I wish to press the Minister for Pensions on two specific points. First, I am sure that many Members have constituents affected by the winding-up of pension schemes. Sadly, over the summer, we have followed the problems at Turner and Newall, which could lead to a pension winding-up that would dwarf any previous winding-up.

Mr. Adrian Flook (Taunton) (Con)

Dozens of Turner and Newall employees living in Taunton are affected by the collapse of the fund and appear to be trapped in a less well-off retirement. They have heard about a pot of money—I accept that it is only about £6,000 a pensioner—which is meant to help people like them, but I have been told that it will not. Is my hon. Friend as disappointed as my constituents and me by the Government's failure to act?

Mr. Willetts

My hon. Friend is right to raise that issue, which I hope the Minister will address. I have a flimsy document, published a couple of weeks ago by the official Occupational Pensions Regulatory Authority, entitled "The Financial Assistance Scheme and completing scheme wind-ups". It is OPRA's first attempt to make sense of the Government's hurried announcement following pressure from us and their own Back Benchers for a financial assistance scheme. That flimsy document has an even thinner appendix entitled "Current information about the Financial Assistance Scheme", which includes a paragraph that states: The Minister of State for Pensions, Malcolm Wicks"— he is still in post— has explained that the Financial Assistance Scheme…is for those who have lost out because they worked for companies that have become insolvent and wound up their pension scheme underfunded before the Pension Protection Fund…is set up. The pension protection fund is due to be set up in May 2005, so the financial assistance scheme would cover everyone up to that date. However, at the bottom of the page another paragraph says: '"The current expectation is that the FAS will provide help for members of schemes which started to wind up between April 1997 and May 2004". If that statement, which contradicts the earlier paragraph, is true and the FAS only runs until May 2004, it is not OPRA's fault as it does not have the faintest idea of what Ministers are up to or what the Government are doing. Many people, perhaps including Turner and Newall employees, could suffer as there is a gap between the deadline for the FAS and the establishment of the pension protection fund.

We cannot allow our constituents to live with such uncertainty any longer. The Minister ought to take the opportunity of this debate to give clear assurances that the financial assistance scheme will cover everybody affected by wind-ups until the pension protection fund comes into force.

Tom Levitt (High Peak) (Lab)

rose—

Mr. Patrick McLoughlin (West Derbyshire) (Con)

I am grateful that my hon. Friend has used part of his speech to highlight the problems that a great number of our constituents will face. Would it not be a disgrace if the employees at Turner and Newall, who paid into a pension scheme in good faith, fall between the two schemes, as my hon. Friend described? Even though there is no Secretary of State, should we not expect the Minister to make it clear that the Government will not allow that to happen?

Mr. Willetts

My hon. Friend is right. I know that near his constituency, in High Peak—I see the hon. Member for High Peak (Tom Levitt) trying to intervene—in Chapel-en-le-Frith, many workers are affected. Workers in Lydney in the Forest of Dean are also affected. Those people are extremely concerned, so I hope we will hear from the Minister. As I have referred to his constituency, I shall happily take an intervention from the hon. Member for High Peak, although I hope that he is not present just because of the rather desperate e-mail sent round by the Minister's office to Labour Members, saying that it was very concerned about the pensions debate and that it would be greatly appreciated if you were able to attend at least part of the debate, especially the beginning". I do not know whether that includes the Minister's speech. If the hon. Member for High Peak can assure us that he is not present in response to the e-mail, we might be interested in his intervention.

Tom Levitt

I am happy to assure the hon. Gentleman and the House that I have not even seen the e-mail. I am here to represent my constituents, who have been mentioned by the hon. Gentleman and others. He and his hon. Friends should not go around giving the impression that the Turner and Newall scheme has collapsed. It has not. Talks are continuing between the trustees, the company's administrators, the trade unions and others to reach a resolution that will enable the company to fulfil the moral obligation that it undertook when it took on its employees who joined the scheme. That must be the primary aim of what is taking place now. Does the hon. Gentleman agree that the more we speak about safety nets and about bailing out, the more likely it is that company schemes will fold in the knowledge that they will be bailed out in future? That is not the way to proceed.

Mr. Willetts

That is a point that the hon. Gentleman might like to put to those on the Government Front Bench. It raises a rather fundamental question about his Government's strategy and the Minister might wish to comment on it. I very much hope that the scheme does not wind up. We are discussing elementary security and insurance for the workers at Turner and Newall if it does wind up in the course of this year. I repeat: I very much hope the Minister will respond to that in his speech. Even in the absence of a Secretary of State, that is the first issue on which we hope the Minister will respond.

The second issue concerns the pension protection fund—the new insurance scheme coming into force next year. Here, I am afraid, the Minister is in danger of misleading many people who are led by him to expect, after the fund is in place, a degree of security in their pensions much greater than it can offer. Let me quote to the Minister his own words in the past few months about the scheme. He said, for example, on Channel 4 news on 21 July that our pension protection fund when it comes in in April…will bring real guarantees to Britain's pensioners in final salary schemes"— real guarantees. He said in the same programme that existing pensioners in that company will get 100 per cent. of their pension, workers will get 90 per cent. I often meet the Minister in TV studios nowadays. We ought to meet more in the Chamber as well. He said on "Newsnight" the other week:

From April, we'll have a Pension Protection Fund. So if their schemes go bust, they won't be left with 30 per cent., they'll get 100 per cent. or 90 per cent., depending on whether they've retired or not. Everybody has been led by such remarks to believe that there is a guarantee of 100 per cent. or 90 per cent. of their pension, but may I put to the Minister the words of the person whom he has just appointed to chair the pension protection fund, Mr. Lawrence Churchill, who was asked about the belief that the fund will guarantee the pension? Mr. Churchill was asked whether the fund offers a guarantee. The Government-appointed chairman of the pension protection fund said: No. 'Guarantee' is a very misleading and misunderstood word—a very dangerous word to use in financial services. When challenged about how the fund was supposed to pay all the benefits that were promised when it might not have the money to do so, he said:

We have been given specific powers to vary the levy to make sure our funding position is adequate and have been given powers to vary the liabilities so I do not see how that situation will arise. "Vary the liabilities" is technical language for changing the pension promise, so the chairman of the pension protection fund has specifically, in public, warned about the use of the word "guarantee", although the Minister has been using it. The chairman specifically said in public that one of his options is to cut the liabilities—to cut the value of the pension promise. If that is what he is saying in public, the Minister should make it clear now at the Dispatch Box that the pension protection fund is not a guarantee and that there is no way that he can promise that people will get 100 per cent. or 90 per cent. of the pension that has been promised.

There are specific powers in the Bill for the chairman and managers of the scheme to cut the level of benefits way below 100 per cent. and 90 per cent., and the incoming chairman has made it clear that he will use those powers if necessary. In the light of that, I hope that the Minister will choose his words much more carefully in future than he has so far on this extremely important subject.

I very much hope that we will have support for our motion from all parts of the House today, because it tackles a widespread concern. I believe that the majority of pensioners and the majority of people in this country want to see the reverse of means-tested benefits.

Sir Nicholas Winterton

My hon. Friend has given a great deal of detail about where the Conservative party stands. Will he go further? Does he agree that the standard old age pension should be exempted from taxation for everyone? Will he go even further and say that the first £10,000 of occupational pension for people who have saved consistently throughout their working lives should be taxed at a lower rate than the marginal rate of tax—at a rate of 20 per cent., rather than 40 per cent. as at present?

Mr. Willetts

My hon. Friend tempts me. One of the many differences between the Opposition and the Government is that the debate on the Government Benches is about which taxes to put up and by how much, whereas the debate on the Conservative Benches is about which taxes we should cut and by how much. I am sure that my hon. Friend's proposal is one of the many imaginative proposals that the shadow Chancellor, our right hon. Friend the Member for West Dorset (Mr. Letwin), will be considering.

1.18 pm

The Minister for Pensions (Malcolm Wicks)

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

supports the Government's strategy to enable people to save securely for their retirement and to promote retirement flexibility and informed choice; welcomes the Government's Pensions Bill and Pension Protection Fund, which will bring real security for over 10 million defined benefit pension scheme members if their employer becomes insolvent and their pension scheme winds up; further welcomes the £400 million Financial Assistance Scheme which will help people who have already lost out; believes that the Pensions Bill will enable many more people to save with confidence with a new proactive pensions regulator, measures to simplify pensions legislation and improved incentives to work past the state pension age; supports the pensions tax simplification proposals being taken forward in the Finance Act 2004, which will replace eight tax regimes with one simplified system; commends proposals in the Pensions Bill to allow individuals to defer their state pension and draw it as a lump sum; welcomes measures to enable people to make an informed choice in pension provision, including new pilots to provide information and advice in the workplace; condemns the inheritance of 1997, with the legacy of pension mis-selling and millions in poverty, whereby many were expected by the previous Government to live on under £69 a week; believes that the Opposition parties' policies will be unfair to the poorest pensioners, unaffordable and unsustainable; commends the Government's historic commitment to tackling pensioner poverty; and welcomes the extra £10 billion that the Government is spending on pensioners in 2004–05 compared with the 1997 system. First, I take this opportunity to pay tribute to the important work of our former Secretary of State, my right hon. Friend the Member for Oxford, East (Mr. Smith). He served the Government well as a champion of disability rights and as a creator of the new deal, and most recently by driving through the groundbreaking pension protection fund. I and my colleagues shall miss him as a friend in Government, and I hope that hon. Members will join me in thanking him for all his hard work and in wishing him well for the future and for the contributions that he will make in the future.

I start by asking hon. Members to sit back for a moment and imagine a Britain where there are 2.7 million pensioners living in poverty; where the value of the basic state pension has been increased just once in 18 years; where many pensioners are expected to live on just £68.80 a week—and, as a result, some face a stark choice between eating and keeping warm in winter; where pound-for-pound withdrawal undermines the whole benefit system by showing that it sometimes pays not to have saved; where pensioners' benefit forms are 40 pages long; where confidence has been rocked by pensions mis-selling; and where carers and people with long-term disabilities lose out on building up rights to the state pension.

We have all lived in a Britain like that and we have all got constituents who have suffered in a Britain like that. What new Government could possibly fail to act? That was the Britain that the Labour Government inherited in 1997, and we could not sit back and preside over such an unjust mess.

We are proud that we have cut absolute pensioner poverty by two thirds, lifting 1.8 million pensioners out of poverty; we are proud that about 20 million people gained from the introduction of state second pensions in April 2002, including 5 million carers and long-term disabled people; and we are proud that pension credit rewards those who have saved something for their retirement, but have missed out in the past because the system knocked such savings straight off their benefits.

Annabelle Ewing (Perth) (SNP)

The Minister did not mention that after seven years of a Labour Government, one in four pensioners in Scotland still lives in poverty. Surely the Minister accepts that that is a disgrace. The way forward is to replace means-testing with a decent basic state pension.

Malcolm Wicks

Although I might dispute the figures, I am proud of our achievements and am determined to achieve more in the future. I am not complacent about older people who face hardship and do not re-emphasise the legacy that we inherited simply to make comparisons with the previous Government. Although it is important to remember the context in which this Government have acted, 1997 is history and, thankfully, Britain has moved on.

Mr. Mark Prisk (Hertford and Stortford) (Con)

The Minister mentions the economic aspect of the pension credit, but what about its human aspect? Is he ashamed that the Government humiliate 70-year-olds by asking them to give personal details, such as the person with whom they live, to perfect strangers in order to pursue the misguided idea of more and more means-testing? Does he understand how humiliating that is for my constituents and others who, at that time in their life, should not have to do such a thing?

Malcolm Wicks

I do not recognise that portrait. The income-testing of pension credit is a million miles away from old-fashioned means-testing. When I speak to elderly people—I may do that more often than the hon. Gentleman—and hear their experiences of claiming pension credit, which happens over the telephone or, where necessary, by a home visit, I hear nothing but praise for the system, which is a reaction also shown by our surveys. The hon. Gentleman should get out more and talk to older people instead of conspiring with others to present a portrait of pension credit that runs the risk of putting off people who need help.

Conservative Members do not always appear to have moved on, which is why I felt the need to begin my remarks by referring to the 1997 legacy. As the Government have acted, Conservative Members have fought to oppose us. I agree with the hon. Member for Havant (Mr. Willetts) that it would have been nice to achieve consensus—I do not agree with Sir Keith Joseph's remark that post-war consensus was a slippery slope to socialism and state control—and he is now a man of consensus who has, in that sense, moved on.

On 8 June 2000, in the House of Commons, the hon. Member for Havant called the winter fuel payment "a gimmick" that the Conservative party would abolish. Well, the winter fuel payment is some gimmick: in the past financial year, winter fuel payments have helped 11.5 million pensioners in about 8 million households by providing £200 at the right time of year, just before Christmas. From last year, households containing someone over 80 years old have received £300. Does the hon. Gentleman still think that the winter fuel payment is a gimmick? I think that it provides important support for all pensioners at the right time of year by taking the fear and the sting out of the arrival of electricity and gas bills.

Mr. Miller

Before my hon. Friend moves on from the 1997 legacy, does he agree that part of that legacy was the way in which the Pensions Act 1995 failed to meet commitments given to this House? Does he agree with me, my right hon. Friends the Members for Birkenhead (Mr. Field) and for Makerfield (Mr. McCartney) and others that people such as the H. H. Robertson workers must be considered sympathetically? Will he closely examine the file on his desk to make sure that those people who were let down by the 1995 Act are protected?

Malcolm Wicks

My hon. Friend has done a great deal to campaign for that group of workers, and I pay tribute to him. Sadly, too many such examples exist and we must examine them carefully. I acknowledge my hon. Friend's remarks about the 1995 Act. I have never made too much of the matter myself because of the complexities of pensions legislation, but we are changing the legacy of the 1995 Act in the Pensions Bill, although I do not want to make a political point about that process.

Mr. Willetts

I want to return to the winter fuel payment because the Minister has mentioned it before and I want to make the position clear. Four years ago, we proposed incorporating the winter fuel payment into a higher state pension, a process by which no pensioner would have lost. That led Labour candidates in the general election to tell pensioners that they would lose their winter fuel payment, without telling them that it would automatically go into their weekly pension payment. That is a typical example of Labour campaigning and we have learned our lesson. We do not propose to change the winter fuel payment in any way, and it will not even be incorporated into the basic state pension.

Malcolm Wicks

To quote the late, great Roy Orbison, "Running scared"— [Interruption.] Hon. Members will see why I am not in the Department for Culture, Media and Sport. As a former Minister for Lifelong Learning, I am encouraged that the hon. Member for Havant has learned his lesson and that the so-called gimmick is now part of Tory strategy—some of us were finding it difficult to get to grips with Tory strategy, but it was only because he was speaking at the time.

Mr. Tony McWalter (Hemel Hempstead) (Lab/Coop)

Before my hon. Friend took that amusing intervention, he said that he would not make political capital out of the 1995 Act. However, that Act opened a huge gap between those people in pension funds who were already pensioners and were entitled to the assets of the fund, and those who were not yet pensioners and were forced to take whatever leftovers from the table that their fund could provide. The Government have corrected that injustice and I hope that my hon. Friend is extremely proud of that achievement and will never go anywhere near the foul provisions of the 1995 Act.

Malcolm Wicks

We have learned a great deal from the failings of part of the 1995 Act, not least that the minimum funding requirement was nothing of the kind. Much of the new Pensions Bill is about addressing those issues, and I have been suitably chastised for not attacking the Opposition.

David Winnick (Walsall, North) (Lab)

Will the Minister give way?

Malcolm Wicks

I am happy to give way to the second ever Labour MP for Croydon, Central.

David Winnick

Prior to 1997, when the Labour Government introduced the winter fuel allowance, the only scheme was the Tories' cold weather payments. In order to be eligible, people had to be on income support, and even then it had to freeze for seven consecutive days before some £8 was paid. Compare that with what we have done in office—the Tories should be thoroughly ashamed of themselves.

Malcolm Wicks

Again, I would not be complacent because there is still a road to be travelled, but with the winter fuel payment, the home energy efficiency schemes in Scotland and Wales, and the Warm Front scheme in England we are starting to make serious inroads into the horror of the "old and cold" problem, as it has been called, and the problems of fuel poverty. Of course, I am very proud of that.

Now that we have had some clarification of the Conservatives' view of the winter fuel payment, perhaps we can get some help on their view of pension credit. At first, Conservative Members said that they would scrap pension credit. Then they said that they would "reconsider it". [Interruption.] I do not know whether the hon. Member for Havant is denying that they would reconsider it. Then they said that they would keep it. But they continue to carp away at what they describe as an extension of means-testing and still pay no attention to the importance of helping the poorest pensioners; that is a key weakness of their strategy. Indeed, last year the then shadow Chancellor, who is now Leader of the Opposition, conceded that under the Tory plan presented by the shadow Secretary of State, Those who are entitled to the pension credit and do claim…will not be better off under the Tory plan. Perhaps the Opposition spokesman will want to justify that in the wind-ups. We, within an overall strategy on state pensions, want to benefit most the poorest and the hard-pressed, who are often women and the older elderly, yet the Leader of the Opposition says, honestly and accurately: Those who are entitled to the pension credit and do claim…will not be better off". How does the hon. Member for Havant justify that?

Mr. Willetts

rose—

Malcolm Wicks

Perhaps he is about to reconsider.

Mr. Willetts

Let me make this absolutely clear. First, there has never been any proposal to abolish the pension credit. We wanted an alternative approach—we were supported in that by the Liberal Democrats and the right hon. Member for Birkenhead (Mr. Field)—but we never said that the pension credit should be abolished. If the Minister has any evidence that we ever said that, I should be very interested to look at it, because it was never in my mind. We want to increase the value of the basic state pension so that fewer pensioners need to receive it. If one increases the basic state pension, it follows that nobody loses. This is a policy in which there are no losers and the gainers are the people who are not claiming the pension credit. The Minister talks about the problem of the poorest pensioners; the problem is that 1.7 million of them who are entitled to the pension credit are not claiming it. They will be the main beneficiaries of our policy: that is why it is better.

Malcolm Wicks

The record will show that, by implication, the shadow Secretary of State agrees with the Leader of the Opposition—I suppose that that is what is one has to do in his position. Under his strategy, those who are entitled to pension credit and claim it will not be better off. That is inevitable, because if the strategy for four years or so is to raise the basic state pension in line with earnings, meanwhile only raising pension credit in line with prices, most of the resource will go to the better-off and less of it will go to the poorer. That is why, although the Shadow Secretary of State is in denial, I pay tribute to the Leader of the Opposition for understanding the unjust statistics that would be involved in the implementation of the Tory strategy.

Mr. McLoughlin

The Minister keeps talking about helping the worst-off pensioners. Why then is the winter fuel allowance paid to everybody irrespective of their income?

Malcolm Wicks

Because our pensions strategy, like all pensions strategies, seeks to strike the right balance between overall support for all pensioners and special support for the most hard-pressed, many of whom are women and the older elderly who do not have full national insurance contributions. Different Administrations will reach different judgments on that balance; I am presenting our judgment. The fact that older people—for physiological reasons and because they often live in the least energy-efficient homes—may suffer from the cold more than younger people is an added reason for the winter fuel payment.

Mr. James Arbuthnot (North-East Hampshire) (Con)

I should like to credit the Minister with a genuine wish to help the poorest pensioners, but does he not accept, like the right hon. Member for Birkenhead (Mr. Field), that over a period of years that will inevitably be achieved at the expense of building up the long-term pension provision that this country had in 1997, of which we were able to be so proud and which we sadly no longer have?

Malcolm Wicks

I hope to address those issues later. Obviously, I always take seriously the important contributions of my right hon. Friend the Member for Birkenhead (Mr. Field.). I look forward to his helpful comments: the wounds heal faster than one might think.

Next month sees the first anniversary of pension credit payments. More than 3 million people in Great Britain now receive pension credit, two-thirds—2 million—of whom are women. What is more, more than 1.9 million households receive more money than before because of its introduction.

In today's complex 21st century society, the role of Government in pensions has evolved considerably since Parliament first legislated—courtesy of the Liberals—to introduce the state pension. That was slightly less than 100 years ago. [Interruption.] The hon. Member for Havant says that the Liberal proposals of our friend Lloyd George were means-tested. In fact, as I have told the House before, they were subject to two tests—a test of means and a test of moral character. I may also have said that of Members currently on the Liberal Benches half would fail one test and half the other, although I am not sure who would be in which half.

To meet the demographic challenges of an ageing population, Government policy needs to be affordable, sustainable and fair. The Government's approach has rightly targeted extra state support at those who need it most and encouraged private funded provision for those who can afford to save. That has enabled us to strike a fair balance between being fair to the poorest, fair to those who have saved, and fair between generations by not levying big tax rises on future generations. By contrast, the policies of the Conservative Opposition are unaffordable, unsustainable and unfair.

Mr. Geoffrey Robinson (Coventry, North-West) (Lab)

Will my hon. Friend give way?

Malcolm Wicks

I will, but then I must make some progress in order to be fair to others.

Mr. Robinson

I am sure that my hon. Friend will come to this point, and I was anxious not to interrupt his exposition, but I am grateful to him for giving way. We have been in correspondence regarding Turner and Newall and Federal Mogul, and I thank him for his constructive tone in that. While in no way wishing to make his difficult position more difficult, he must be aware that that matter affects the constituencies of many Members on both sides of the House and that there is great concern about it. If by some cruel accident of timing the pension were to find itself in limbo between the two schemes, it would be unthinkable to us, and ethically and politically impossible for the Government, were the Government not to take action to ensure that a certain level of provision in line with the pension protection fund was forthcoming.

Malcolm Wicks

I understand my hon. Friend's concern about that issue, to which I shall turn shortly. I certainly understand its importance.

Conservative policies are unaffordable, as even on the basis of the party's own figures there would be a £500 million-a-year black hole by the end of a Tory Parliament. Does anyone really know where their money would come from? Last year at the Conservative party conference, the hon. Member for Havant said that he would abolish the useless schemes and wasted money of the new deal. He has been quite honest about that. Nearly 1 million people have found work through the new deals, yet the shadow Secretary of State would scrap them. They have been a major contributor to our ability to move back towards full employment and to abolish, among other things, long-term unemployment among young people.

Conservative policies are unsustainable because the earnings link would cost £12 billion by 2020, rising to £69 billion by the middle of this century—2050. No party—certainly, no tax-cutting party—could ever deliver those funds. Moreover, their policies are unfair, because an in-built feature is that within around 20 years incomes for the poorest would drop from 21 per cent. of average earnings to 16 per cent. of average earnings. This Labour Government—indeed, only a Labour Government—have proved able to tackle pensioner poverty while ensuring that our policies are affordable, sustainable and fair.

However, tackling pensioner poverty is only part of the story. Again, I would like to ask hon. Members to sit back for a moment and imagine. This time, I ask them to imagine a Britain where people lose their pensions when their company goes bust and leaves the pension scheme underfunded; a Britain where people are not saving enough for their retirement and individuals have lost confidence in the security of their pensions.

We have seen that Britain all too recently. The challenges that face—[Interruption.] The challenge is not to harrumph but to take action. The challenges that face funded pension provision in this country are very real. However, the Government—and only a Labour Government—have acted to meet those challenges.

I have met many of those who lost some or all of their pensions when their employer became insolvent. I have seen what it has done to their lives as I heard their quiet and dignified stories of shattered security and shattered dreams for the future. Sometimes their health gives way through stress, sometimes family life and marriages are affected. All those lives are changed for ever.

However, I have also met people who do not face that risk. Members may remember Mr. Johnson. I first mentioned him on Second Reading of the Pensions Bill. He is 58, has worked for the same employer for 30 years and has contributed to his occupational pension throughout that time. When his employer went bust, Mr. Johnson knew that his pension was safe because he is an American and the US Pension Benefit Guaranty Corporation meant that his pension savings had been protected for decades.

What Government could sit back and watch while hardworking Britons lost their pensions? Not this Government. While Opposition Members were busy declining to give the Pensions Bill a Second Reading—we shall remind them of that in the months until next spring or the following spring—the Government took pride in the fact that, through the Pensions Bill, we were making the pension protection fund a reality. It will bring genuine security and peace of mind to more than 10 million defined benefit pension scheme members. The Government, and only this Government, are building confidence that a pension promise made will be a pension promise honoured.

I am afraid that there is more of the sorry tale of woeful resistance from Opposition Members. Some of those who had their accrued rights cut were employees who worked for solvent employers. When those employers wound up their defined benefit scheme underfunded, non-pensioner members could receive cash equivalent transfer values, which were too low to provide them with the pension that they expected at retirement.

Again, the Government acted. We introduced the full buy-out regulations so that trustees can require solvent employers who want to wind up their pension scheme to buy out members' rights in full. However, as recently as July, the Leader of the Opposition prayed against the regulations. The Labour Government, and only the Labour Government, are building confidence that a pension promise made will be a pension promise honoured.

Mr. Stephen Dorrell (Charnwood) (Con)

The Minister passed over the passage in his speech that dealt with the pension protection fund. Will he tackle the question that my hon. Friend the Member for Havant asked: does the pension protection fund constitute a guarantee to members of funds whose employers find themselves in financial difficulties? Is there a guarantee or does the fund have the power to vary liabilities? if the latter, in what circumstances does the Minister believe that the fund may use the powers?

Malcolm Wicks

Our firm intention, as the shadow Secretary of State rightly said, is that if a final salary scheme cannot fulfil its duties through the pension protection fund by taking in and investing the scheme's assets, which are often considerable, and through the levy, which we believe will average £20 a year per member—perhaps less than insuring a summer holiday—we shall have the funds to enable us to pay existing pensioners 100 per cent. and workers and scheme members 90 per cent.

We have learned lessons from the Pension Benefit Guaranty Corporation in Washington. To raise the levy there, the PBGC needs to return to Congress. It is not for me to comment on American politics, but that is a more complex process. We, albeit with a cap, will enable the board of the pension protection fund—a board that is deliberately at arm's length from the Government; it is not a Department for Work and Pensions agency—to raise the levy if necessary.

We have an in-extremis provision because in an extraordinary economic or business situation, in which perhaps several FTSE 100 companies went bust, there might not be funds even after raising the levy. In that case, the board, with the Secretary of State's permission, could cut benefits. The right hon. Member for Charnwood (Mr. Dorrell) is right in that respect but such a provision would apply only in extremis. Calamities can happen in any economy, which would mean that specific things could not be done. However, we have set out the provision in the Pensions Bill and we have discussed it in Committee. We have costed the provision carefully and I am certain that, allowing for even a large company to go bust, we will fulfil our commitments. That is why I, as a lay person, use the term "guarantee."

Mr. Dorrell

The Minister gave a long answer; the issue is complex and I want to crystallise his reply: the pension of the American worker to whom he referred is guaranteed, the British equivalent would not be.

Malcolm Wicks

It is a different situation in the States. We have learned important lessons from the States but any reasonable person who examines the position and understands how to fund the provision, allowing for one big company to go bust from time to time, could use the term "guarantee". I believe that that is reasonable vocabulary. If a meteorite hits Britain, the provision obviously cannot be guaranteed. I am confident that, in 10 or 20 years, we shall look back and appreciate that the provision has been successful. I apologise to the right hon. Gentleman for giving a proper and detailed answer; I shall try to be shorter next time.

Mr. Lilley

Does the Minister agree that, if a levy of around £20 per member of private pension funds, which are not guaranteed by the state, is to be made, it should be extended to members of public sector pension funds, which are guaranteed by the state, including hon. Members? In all fairness, we should not be exempt from making a contribution towards underwriting funds if members of private sector funds have to make such a contribution or have it made for them.

Malcolm Wicks

The right hon. Gentleman is an expert in the matter, but with all due respect, I believe that that is more of a debating point than a substantive point. Clearly, the state ultimately stands behind most public sector pension schemes and we are making reforms to those schemes. For example, we believe that we should no longer have a position whereby one can draw a pension, albeit reduced, at the age of 50. We contend that, in future, that should not happen until the age of 55. That will be discussed with the professions and the unions. Several such developments are occurring. That is the way to tackle issues about funding in the public sector, not the way that the right hon. Gentleman described.

Mr. Djanogly

The Minister is speculating about what may happen in the future. Can he extend his guarantee to those people who are already in such a predicament, for example, the members of the Samuel Jones scheme in my constituency? They are currently left in an insolvent scheme and are consequently suffering.

Malcolm Wicks

Let me make some progress because I think that that would be helpful. In the previous Opposition Day debate on the subject in February, Opposition Members attacked the Government again, on that occasion for not promising assistance to those for whom the pension protection fund was going to be too late. I puzzled about that. They declined to give the Pensions Bill a Second Reading and then wanted to make it retrospective. Nevertheless, my hon. Friend the Member for Cardiff, West (Kevin Brennan), with several other parliamentary colleagues, admirably led calls to act.

The Government found £400 million without breaking any of their other spending commitments. When I presented that to the House on Report, I outlined a clear set of steps and a timetable for action. Earlier this summer, I spoke at the consultation event and we remain very much on course with the timetable. I am proud that the Government are introducing the financial assistance scheme. As for the hon. Member for Havant, he used warm words but did not even sign the early-day motion tabled by my hon. Friend the Member for Cardiff, West.

I have been asked about the worrying situation at Federal Mogul or T and N—Turner and Newall. Obviously, we are aware of the terrible uncertainties faced by members of the T and N scheme. My colleagues in the Department have met a number of people connected with the scheme since July, including the trustees, the scheme lawyer and trade union representatives. In August, I met concerned Members of Parliament, including my hon. Friend the Member for Cardiff, West, who have an interest in the T and N scheme. I understand that discussions are still ongoing between Federal Mogul, the independent trustees and the administrators regarding the future of the UK pension scheme.

On issues of this kind, may I make a plea that many such cases relating to solvency or insolvency have an extraordinary complexity. Often, a foreign company has an involvement. In the case of T and N, an added complexity is that it faces huge cases relating to asbestos, which has affected the whole future of that company. Let us avoid the knee-jerk questioning about whether we will definitely spend taxpayer's money on this group or that group. It is far more complex than that. We are not yet absolutely sure what will happen to that company or its pension scheme. It is an ongoing issue. I assure everyone in the House that we are keeping the issue carefully under review.

We are on course with the steps that we are taking on the financial assistance scheme. We very much hope that the scheme will be in being by the spring of next year, and that payments will be made as soon as possible. The pensions challenge facing the Government, and Governments across the developed world, are very real. I make no attempt to hide that.

Mr. Willetts

Setting aside the case of Turner and Newall, does the Minister accept that the financial assistance scheme needs to cover all people who lose out from wind-ups until the point at which the pension protection fund comes into force?

Malcolm Wicks

We are acting for the future with the PPF, hence our determination that the Pensions Bill will be on the statute book. I hope that everyone in both Houses will help us with that, and I think that they will. We are faced with more immediate situations, which require the establishment of the financial assistance scheme, with £400 million of the public's money—not because the public were at fault but because it was an important contribution. We have also said that we feel that the pension industry should make a contribution. I am still hopeful about that, and we are still in discussions about it.

We are monitoring carefully any schemes that are now in difficulty. I am concerned about those affected. Given our track record of establishing the PPF and the assistance scheme, we have good intentions about trying to help people. I cannot, however, say more about particular schemes that are in different stages of wind-up.

Through the Pensions Bill, we have taken great strides in bolstering security and confidence in funded pensions. Alongside the pension protection fund, the new flexible and proactive pensions regulator will further bolster security by tackling the risks to members' benefits, while enabling well-administered and secure schemes to continue without unnecessary regulatory burden. While the Pensions Bill is a cornerstone of the Government's reforms, it is only one step on the road to our goal of enabling people to save adequately and confidently for their retirement. Our programme of informed choice measures will empower individuals to take greater control of their retirement planning. Our age discrimination legislation—as well as the improved options for state pension deferral in the Pensions Bill—will open doors to greater opportunity for working longer, breaking the cliff-edge between work and retirement.

I have spoken about the past—in particular, the legacy that this Government inherited on coming into office in 1997. I have spoken about the present and the action that this Government have taken, despite opposition along the way, to tackle the injustice of pensioner poverty and to bolster security and confidence in funded pensions. But what of the future?

First, this Government have had the courage and vision to see the value of independent expertise. We look forward to the first report of the independent Pensions Commission sometime next month and a report from the employer taskforce by the end of the year. The findings of those reports will be of immense value in informing the way that our policies develop to meet the challenges that lie ahead.

Finally, I would like hon. Members to imagine once more: a Britain where pensioner poverty is nothing more than an unpleasant chapter of history; where women no longer face disadvantage in the workplace or in saving for retirement; where the pension protection fund has been set up and is enabling people to look forward to the future with confidence; where individuals are empowered to take control of their retirement planning, and able to take informed decisions about how and when to save and work; and where everyone—employers, trade unions, Government and individuals—are working together to make the British pensions partnership the envy of the world.

That is the consensus that I want. That is our vision. This Government are acting and will continue to act to make that vision a concrete reality.

1.55 pm

Mr. Steve Webb (Northavon) (LD)

May I begin by joining in the tributes that have been paid to the outgoing Secretary of State? All of us who worked with him, whether in government or in the House, never doubted for a moment his sincerity and commitment, and we wish him well in his future role, whatever that might be, in the House and beyond.

The Liberal Democrats welcome this debate. No doubt when the former Secretary of State heard that we were announcing our pension proposals yesterday, he looked at them and thought, "There's the answer. No point in my carrying on." Very decently, the Conservatives have given us an opportunity to bring those proposals to the House at the earliest opportunity. We are therefore grateful to both the Government and the Opposition for setting us up in that way.

I have no problem with the Conservative motion. It has been deliberately designed to focus on the analysis that we have in common, and I will ask my hon. Friends to support it in the Division later this afternoon. The opportunity to hear some of the Conservative proposals and to scrutinise them in a slightly more detailed manner has been fruitful. As I mentioned to the hon. Member for Havant (Mr. Willetts) in an intervention, he has a problem. Were the Government to make the pledge that I anticipate—to link the pension credit to earnings—his policy falls down one of two unacceptable routes. If he says, "If the Government are going to link the pension credit to earnings, we will do it as well"—

Mr. Willetts

Could do.

Mr. Webb

As the hon. Gentleman says from a sedentary position, he could do. He would then link the pension credit to earnings, and the pension to earnings, but the gap between the two, as he knows, is huge£25 a week at the moment. If both go up proportionately, that gap will never close. The chasm of savings disincentives, which he rightly describes, will therefore always be there.

Mr. Willetts

It will get no worse.

Mr. Webb

As he says, it will get no worse, but there will still be a substantial gap between the pension and the means test. All his rhetoric about incentives to save, his buy-one-get-one-free incentives, his lifetime savings account, and so on, will fall foul of the fact that people who do save will be penalised for doing so, because the chasm will remain.

The hon. Gentleman's alternative strategy, which I anticipate him operating were he ever to have the chance to do so in government, would be to break the link between earnings and the pension credit. That is the only way to close the gap, and that is what he wants to do if the Government do so. Compared with what the Government would promise—an earnings link for the poor—he would offer a price link for the poor. While we agree that many poor people fail to claim, more than 2 million poor people still do claim. For a Conservative party to stand for election on the grounds that it will give less money to poor pensioners than the Government would have done is the wrong priority and unacceptable. Either he does less for the poor, or he fails to tackle the savings incentive problem, if that is what the Government pledge. I therefore hope that the Government will pledge that, and I will be interested to know how the Conservatives will square that circle.

Naturally, the principal concern must be the direction in which the Government are taking us. I was dismayed by the Minister's response today. We all enjoy his bloke-ish style, but when we are dealing with matters of precision and entitlement, and with people making choices about their financial future, we need more than just being a good bloke. To say, "I am a layman, and when I say 'guarantee', we all know what I mean," is just not on. People have made mistakes about their future pension provision on the strength of Government leaflets that tell them that their pensions are guaranteed. We have discovered that the guaranteed minimum pension is not guaranteed after all. For the Minister, not having learned the lessons of the last few years, to tell people, "Don't worry, your company pension is now guaranteed," when it turns out that it is not, is unacceptable.

I hope that the Minister will take a message from this debate: however much he might like to be informal, people expect the Minister for Pensions to be the one person who is precise in his choice of language, so that they know where they stand.

Mr. Willetts

The hon. Gentleman will be aware that there are two theories about why the Minister goes around saying this. One is that he does not understand what he is saying. That is ungenerous. The other is that he is being very clever, and that every time he says the pension is guaranteed it becomes more difficult for the Treasury ever to do anything other than pay 100 per cent., or 90 per cent. At some point in the future someone will go to the Treasury and say, "You must cough up to rescue the pension protection fund after everything I have been saying." I do not know which theory the hon. Gentleman endorses.

Mr. Webb

Given a choice between whether the Minister is very stupid or very clever—[Laughter.] If it is a subtle negotiating ploy—and if it is, it is beyond me—it is a high-risk strategy. People are going to make decisions based on it, and if it does not turn out to be successful, other people will be vulnerable. That would worry me.

I am also concerned about the Minister's response to the perfectly proper question asked by the hon. Member for Havant about the position of workers between the time when the priority order on wind-up changed and the time when the pension protection fund comes in. I gather that in the other place Baroness Hollis has started referring to that period as the "sandwich year". I accept that we cannot talk in great detail about individual schemes. It may well be that the Turner and Newall workers' pension fund will not be wound up, and obviously we all hope that that is the case. But workers of that sort, and many others, want to know where they stand.

When the financial assistance scheme was presented to the House during the Report stage of the Pensions Bill, the Minister never said, "This will not apply to people from now on." If I am wrong I am happy to be corrected, but I am convinced that at no time during the hours we talked about the issue were we told that the protection would not apply in future. I do not suppose that, when we voted just a few months ago, a single Labour Member thought that if a firm in his constituency went to the wall after the vote, there was a danger that it would not be covered by the hardship fund. I do not suppose that one of the Minister's colleagues was aware of that.

And the Government have not even decided yet! The Bill will finish its progress through the House in a few weeks. When will the Government make up their mind? People need to know where they stand now. I find it extraordinary that the Minister says, "Well, we are still thinking about it." I think that that is totally unacceptable.

When the financial assistance scheme was proposed, we were promised something else on which the Government are now backtracking. We were promised a three-yearly review, which was another sop to the Back Benches. "Yes, perhaps £400 million is not enough," we were told, "but do not worry—we will look at it again in three years." The workers who have been suffering as a result of wind-ups, who have had meetings with the DWP, have been told by officials that the three-yearly review was not about the amount of money in the scheme, but about how it was carved up. If in three years' time it is proved that there was not remotely enough money, the Government have made no undertaking to increase the amount.

The basis on which the Minister's hon. Friends accepted his compromise is being undermined by the day. Four hundred million pounds was never enough. The promise was of a three-yearly review; but if the review does not examine the amount and the adequacy of that amount, what is the point of it?

Mr. Dorrell

Varying the liability.

Mr. Webb

Indeed.

We have grave concerns about what is being done for the security of occupational scheme members, and also about where things are going with pension credit. As the hon. Member for Havant said, we are given new figures each month about how they are going. The most recent figures, which have just come out, show that pension credit is running out of steam. The most recent month was the worst month ever for new cases: just 33,000 people went on to pension credit, while 1.7 million are missing out on the money to which they are entitled. The Government are not even beginning to scratch the surface.

Can the Minister confirm that every one of those 1.7 million who are missing out is, by definition, living below the poverty line—that every one is living below the minimum level that society considers adequate? If all those people are living below the poverty line, when the Minister talks about doing more for the poorest pensioners he should be concentrating on them. His policies are doing nothing to assist Britain's poorest pensioners. [Interruption.] They do not get the money. If they do not get the money, it is very hard to see how they benefit.

The Minister talked of the past and the future. There are three possible futures. The Minister's strategy of mass means-testing does not just apply to the 50 per cent. of all pensioners who are currently entitled to means-tested benefits; it is a projection that perhaps three quarters of all pensioners will be entitled to means-testing. This is the paucity of the Government's vision. Over seven years, the Government had a chance to establish a long-term vision of the sort of society in which they wanted older people to live. The vision that they have set before us is one of mass means-testing, in which three quarters of pensioners retire too poor to live on what they have accumulated, and have to go to the Government for a top-up. How can that be the vision that we want for the future?

When the Prime Minister was quizzed by a journalist at his press conference yesterday—"What is your answer to the pensions crisis, Prime Minister?"—he began by talking about welfare to work and incapacity benefit. Then he suddenly realised that that was not the answer to the pensions crisis, and said, "Well, we have asked Adair Turner." Seven years in, the Prime Minister's best answer on the pensions crisis is, "Adair Turner will report next month with some analysis"—to which we all look forward—"and after the election he will tell us what his recommendations are. Then we might look at the pensions crisis." That was the Prime Minister's answer. If the Prime Minister does not know how things are going, what hope is there for pensioners?

The Government do not seem to have a strategy for tackling the imminent crisis, but their long-term vision—their target—is the means-testing of three quarters of all pensioners. That is not a future that I want to see.

Tom Levitt

Surely the hon. Gentleman accepts that when resources are finite, it is necessary to focus them on where they will produce most benefit in order to meet a target. That means focusing most help on the pensioners who are most in need. How can the hon. Gentleman justify the alternative philosophy—relieve poverty and make the poorest pensioners better off by giving more money even to the richest?

Mr. Webb

I am slightly puzzled by what the hon. Gentleman has had to say. Perhaps he has not been listening. The poorest pensioners in the land today—this is a statement of fact—are those who are entitled to, and not claiming, pension credit: 1. 7 million of them. If the hon. Gentleman can tell me how putting extra money into pension credit helps any one of the poorest pensioners in the land, I should love to hear it. But clearly it does not: it does nothing at all for those people. The central plank of the Government's strategy does nothing for them. What does do something for a good many of them is using the basic state pension which they do all claim. We propose to focus on the older pensioners—those over 75—the majority of whom do not claim. We are focusing on the poorest pensioners by using age as an indicator.

Tom Levitt

I acknowledge that some pensioners have a difficulty with claiming anything to which they are entitled. They need help. Surely the hon. Gentleman accepts that take-up levels for pension credit are far higher than they ever were for income support in the days when pension credit did not exist. I hope he will take this opportunity to pay tribute to those in my constituency, in the Gamesley ward, who have ensured that 97 per cent. of all pensioners are claiming the benefits to which they are entitled.

Mr. Webb

I suspect that the proportion of those entitled to pension credit who claim it is lower than it was under income support. I do not know why the hon. Gentleman mentioned that ward—perhaps there is a by-election—but what about the people whom he claims to represent who are not covered by this complicated system? He seems to think that just a few more advisers or another helpline will crack it, but it is endemic. It is systemic. It is part of the structure of these benefits that they have high non-take-up rates. Another advertising campaign or another leaflet will not solve the problem.

The one thing that these people all claim is their pension. That is the only genuine—now I am going to use the word guarantee, and I mean guarantee. Putting the money in the pension guarantees that it will reach the people who are entitled to it.

One blueprint, then, is mass means-testing. The second option, the Conservative alternative, has some threads in common with our proposal, and I have some sympathy with elements of it. Using the basis state pension as a mechanism is clearly better than using mass means-testing. My difference with the hon. Member for Havant is this. We know that, because of a decision made by the Conservatives 25 years ago, the basic state pension has declined dramatically relative to the earnings that it attempts to replace. Retirement pensions are about replacing what people used to earn; if a pension is becoming a smaller and smaller percentage of average earnings, it is doing less and less of a job. The hon. Gentleman's decision to re-link pensions to earnings at a pathetic level, making them useless, by definition freezes the pension at that percentage of average earnings. It does nothing to raise it to a better level.

Therefore, for a long time to come under his proposals, large numbers of pensioners would still need to claim means-tested top-ups. I think that he proposed a figure of £7 by the end of the Parliament. That is a small step in the right direction, but the pensioners who lost the most from the Conservatives breaking the earnings link— they were perhaps 60 when Mrs. Thatcher, as she then was, broke the link—are now in their 80s and cannot wait for the hon. Gentleman to get round to bringing the pension up to a decent level. They will no longer be around then, and a figure of £7 by the end of the Parliament is no good for someone in their 80s who is getting a pathetic pension. That is why we want to concentrate on the "old" elderly as a first priority. That is my difference with the hon. Gentleman on how one improves the basic pension, which is a legitimate area of debate.

Let me explain my second concern about the Conservative approach. The hon. Gentleman wants to encourage private savings, which is obviously a good thing. He talks about the lifetime savings account, which is still not terribly well defined. We do not know much about it, but we do know that it is an instant access savings account. People can take their money out any time they want, so if they get a big credit card bill or they want to go on a nice holiday—Conservative Members might want to pay their children's school fees, for example—they just dip into the fund. An instant access savings account is apparently the solution to the pensions crisis and to the fact that not enough money will be ours, guaranteed, in 30 years' time.

I do not follow the logic. The hon. Gentleman thinks that if people know that they can have their money, they will put it into the account. Well, they might, but they might also take it out, so I do not see how such an account would solve the problem.

We are having a constructive debate, and I have a further query that the hon. Member for Eastbourne (Mr. Waterson) might be able to answer when he winds up. The hon. Member for Havant has this "buy one, get one free" notion, which is quite a good slogan. "Bogof" is the phrase he uses—at least, I think that is what he said. The idea is that the state matches savings pound for pound. However, given that he proposes no overall increase in taxation, that money must come from somewhere. Either he intends to take some of the pension tax relief to pay for his incentives—I do not think that he plans to change pension tax relief, unless there is something he has not told us—or to take some of the national insurance rebates. That sounds quite redistributive, but he has not been very up-front about who would lose. If one matches the savings of small savers and pays for that from somewhere else, one has to take money off someone, somewhere. The hon. Gentleman has been a bit coy about where that money would come from. I presume that it would come from higher earners, because they get the big rebates, but funnily enough we have not heard anything about that. There is a sense that we are getting a little more of a fleshed-out Conservative policy, but it is still extraordinarily vague. I hope that we will get more detail from him this side of the election.

Kali Mountford

Before the hon. Gentleman moves off the funding of Tory policies, perhaps he would like to advise the House about the funding of his own. Given what he has just said about the rather light presentation made by the hon. Member for Havant, perhaps he would like to flesh out his own presentation.

Mr. Webb

I am grateful to the hon. Lady for that invitation, because that is precisely what I was planning to do. We have taken the view that the fundamental problem for both today's pensioners and tomorrow's is sorting out the basic state pension. Sorting that out would deal with today's extremely poor, who do not claim the means test, but it would also deal with the incentive to save. If we get the pension clear of the means test, anyone who saves a pound would keep it, and it would be worth saving. Tackling the basic state pension is therefore a good answer for today's pensioners and for today's workers, who are tomorrow's pensioners.

Mr. McWalter

Will the hon. Gentleman give way?

Mr. Webb

I should make progress as the debate is only short, but I will certainly deal with the point that has been raised.

How do we tackle the basic state pension? We have argued that we need to start with the oldest pensioners. The pension has fallen so far for so long that we cannot deal with the whole thing at a stroke, so we would start with the oldest pensioners, who the Minister said tend, on average, to be the poorer pensioners. I am glad that he agrees with us on that. For the over-75s, we propose to raise the basic state pension to the original level of the minimum income guarantee—£105—to link that to earnings and, critically, to pay it on the basis of citizenship, not according to the record of national insurance contributions.

As my right hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy) said when he challenged the Prime Minister today—the House will have noticed that he got no answer—women continue to be the poor relation on pensions. It is unacceptable that at the start of the 21st century, the typical woman—not an extreme, hypothetical case—retires on a basic state pension of just over £50 a week, even though the full pension is £80. How can that be acceptable? We do not think that it is. Society should stop saying that the work that women have done in the past—caring for children and elderly relatives, and doing fairly menial, meagrely paid part-time work—should not be rewarded. Rather, it should be properly recognised in the pension system. It is no good saying that it will all be sorted out in 50 years' time, which is the Government's schedule. They talk about the state second pension, but it will not be fully in place for 50 years. Those women need justice now, which is why we propose a citizenship basis for the pension.

Once we have got the basic state pension structure in place—we want to extend it, but we would have to start with the over-75s—the question arises as to where the £2.7 billion, which would be the net cost in the first full year, rising to just over £3 billion by the end of a Parliament, would come from. My colleagues and I have been considering the entirety of what the Government do. As a whole, they spend some £500 billion on the entire range of activities. If neither of the principal Opposition parties can say that it would have a different priority in respect of 1 per cent. of what the Government do, we might as well all give up and go home. If we cannot say that 1 per cent. of what the Government do would be a lower priority for us, and that spending money on other things would be our higher priority, there is no difference between us. We have looked at what the Government do, and the Liberal Democrat shadow Chancellor, my hon. Friend the Member for Twickenham (Dr. Cable), will present a full and detailed breakdown of the £5 billion figure that we have identified.

Let me give a concrete example. The Prime Minister was mistaken in what he said earlier. He suggested that the £8 billion that we referred to in respect of the Department of Trade and Industry was more than is spent on administration and that it applies to the whole DTI, but he did not understand that that figure is for the entire Parliament, not a single year. Our policy requires that a Parliament run for four years, so the sums add up perfectly well.

Through the DTI, we spend hundreds of millions of pounds subsidising arms exports to dodgy regimes. The Government may think that a good thing; we think that there are bigger priorities. We would not cut the number of paperclips or bureaucrats, but we would cut one of the things that the Government do in order to free up money for something that they should do more of. We have a list of such things, and that is the basis on which we could fund the first round of pension improvements in the short term.

The citizens pension is the central and first element, and I will touch briefly on the company and private sectors. There is too little confidence in company pensions. Too many people have lost out, and they should be properly protected, as we discussed at the start. We want people to have to opt out of, rather than into, their company pensions. The hon. Member for Stalybridge and Hyde (James Purnell) suggested that, and we think it a good idea.

On personal pensions, there is the idea that National Savings should run a personal pension scheme. It is a brand that people trust and it will not go bankrupt or fleece people with charges. There needs to be a way for people to save with confidence.

Let me draw the threads together. A decent basic state pension would tackle pensioner poverty today and give people confidence to save. If they were clear of means-testing—the chasm whereby saving is not worth doing was created by the Government—the incentive to save would be restored. The state would be doing its bit, and the individual would be free to choose by how much to top up in old age, or how much they want to spend now. That seems the right combination. The future that the Government are offering is not one that most people would want to retire into. Our proposals would provide a much more positive future for the pensioners of today and tomorrow.

Several hon. Members

rose—

Madam Deputy Speaker (Sylvia Heal)

Order. I remind right hon. and hon. Members that Mr. Speaker has imposed a 15-minute limit on all Back-Bench speeches.

2.18 pm

Mr. Frank Field (Birkenhead) (Lab)

Like other contributors to the debate, I begin by paying tribute to my right hon. Friend the Member for Oxford, East (Mr. Smith), who was until very recently the Secretary of State for Work and Pensions. When I first entered the House and worked with Neil Kinnock, who became the Leader of the Opposition, he used to refer to a member of the Government as being 100 per cent. pure grease. I think that all of us in the House know that the former Secretary of State was 100 per cent. real decency. He was distinguished in his extraordinary ability to undersell his qualities, unlike most politicians who reach that rank. The Minister hinted that he hopes that we will see my right hon. Friend in many different roles in future, and I certainly underscore those comments.

I hope that not only the Whip on the Treasury Bench but the Prime Minister, as he considers his reshuffle, will note the Minister's contribution in defending the Government's policies. Indeed, I hope that he will be more ambitious in his reshuffle than even the press are hinting at. There is now a galaxy of Ministers of State who would be real additions to the Cabinet as we face the next general election. My hon. Friend always says that he worries when I speak that I might be wounding him. Our friendship goes back a long way and I know how deep his St. Sebastian complex is. I hope that nothing I say today or any other day will have the effect that he fears.

We face a real crisis in our long-term pension provision, because in the past we could disguise the fact that our state retirement pension was inadequate because our occupational schemes were such a success. That crucial prop now looks less certain than at any time in the past 50 years. When the Prime Minister says that he is serious about long-term pension reform, I hope that he will read this debate and consider contributions from all parties in the House for the remoulding of what the consensus should be. Conservatives, Liberal Democrats and Labour Members have all spoken about the long-term reform that is needed in this new and uncomfortable situation. Sadly, it is no longer the case that most of our constituents will have adequate occupational pensions to make up for the inadequacies of the state provision. We need now to review our schemes root and branch.

Part of the problem arises because the Chancellor has been so successful in helping the poorest pensioners now. No one in the House disagrees that the most urgent demand that the Government faced on coming to power in 1997 was to tackle the deepest poverty in our country, which was found generally speaking among pensioners, and as the Liberal Democrats rightly say, among the oldest pensioners in particular. However, the Government's policy is inadequate in that if we rely solely on a means-tested pension credit approach, we may help the poorest pensioners now but we begin to affect on an increasing scale the behaviour of the rest of our constituents. If about half the working population cannot save and know that they will make themselves better off if they blow all their savings on having a good time and rely on taxpayers when they retire, that not only spells a serious fiscal problem for the state but raises some fundamental questions about how we think free societies survive. I do not believe that a free society can survive in the long run if there is an increasing number of people in work whose standard of living is determined by one of the tax credits for those below working age, so that regardless of how long or hard they work or of whether they get a new job or qualifications, they face a marginal tax rate of 70 per cent.

Mr. McWalter

Does not my right hon. Friend welcome the fact that if a pensioner has the full single pension of £80 and has saved to get an occupational pension of £20, the pension credit will top up their income to get beyond what they would have had if they had not saved in the first place?

Mr. Field

I do, but it would have been much simpler to have disregarded the income in the first place; then we would not have had to have this hugely complicated scheme that we now suffer.

Before that valuable intervention, I was trying to say that while we need to debate the details of policy, we should also have clear in our mind's eye how we think free societies survive and how our policies can contribute to that. I applaud the Government for wanting to help the poor in work and the poor in retirement, but that was never by itself an adequate strategy, and it is certainly not adequate when it affects people's behaviour by making them better off claiming benefits than trying to improve their own lot.

Some suggestions have been made today that are valuable in trying to build a long-term consensus on the next stage of pensions policy. I welcome unreservedly the Conservative Opposition's proposal to freeze the uprating of pension credit eligibility and divert the money. We will never free ourselves from an expanded means test net unless we are prepared to take such decisions. Similarly, I welcome the Liberal Democrat proposal of significantly increasing the retirement pension for the very oldest of our constituents. It is a form of selectivity that works, in contrast with all the difficulties encountered with means-testing. It is selective in going only to those of a certain age, but we know from all the published figures that they will tend to be among the very poorest in our communities. Some, thank goodness, will have adequate pensions, but they are a very small minority, and even if they began their retirement life with an adequate pension, once they are into their eighties, with only price inflation, the situation looks very different.

The basic question concerns the state retirement pension itself. Unlike when the Government first came to office in 1997, we now have a consensus including everyone in the country—we wait only for the Government to join it—on the fact that no long-term pension reform can possibly get off the ground unless we make strides to increase significantly the first pension, which everybody claims.

There are proposals for a pay-as-you-go scheme and others, with which I am associated and which I put to the Prime Minister before I resigned, for a universal protected pension combining pay-as-you-go with a funded scheme. As the Government and the Department for Work and Pensions know, and as No. 10 knows, we have asked the assistant Government actuary to recost those proposals. One of the excitements is whether we will get those recostings before the assistant Government actuary retires. Those details will be very important to the debate that I believe will evolve after Adair Turner makes his first report from the Pensions Commission. I hope that the Government will use the opportunity of that report to say that we have done very well in tackling the immediate poverty that pensioners now face but we have not yet turned to the longer run and laid the foundations for a reform that will command support not only in the House but—more importantly, because we come and go as Members of Parliament—among the electorate. The starting point must be proposals for significantly increasing what we used to call the state pension—a benefit that I hope will be called in the near future by another name.

It is good fun to knock the Opposition for saying that they would freeze pension credit, but everyone who looks seriously at this question knows that at some stage someone must have the courage to freeze it before it gets even more out of hand.

It is easy to poke fun at the Liberal Democrats for wanting to channel some of our existing resources to the oldest pensioners, but any serious person knows that that should be part of the new consensus.

Those two reforms alone will not deal with the pension crisis that people are lobbying us on today. We also have to tackle the most fundamental of the issues—the inadequacy of the state first pension that we all require. We did not have to face that problem in 1997 because the weakness of the state pension was covered by the generosity of a growing occupational pension scheme. That option is no longer open to us, and I hope that, long before the next election, the Government will lay proposals before the country making it clear what specifically they would do about this matter when we win our third term of office.

2.30 pm

Mr. Peter Lilley (Hitchin and Harpenden) (Con)

The greatest domestic failure for which the Government will be remembered is having presided over the collapse of the British pension system. I pay tribute to the right hon. Member for Birkenhead (Mr. Field), who has just made a characteristically positive and objective contribution to the debate, for having done more than anyone to highlight the scale of that failure and the seriousness of the problem. He pointed out that, as my hon. Friend the Member for Havant (Mr. Willetts) said earlier, the incoming Labour Government inherited what was probably the strongest pension regime of any country in Europe. To meet our future pension liabilities, we had set aside and saved more money than not just any other European country, but all other European countries put together. Now, in the words of the right hon. Member for Birkenhead, that has been reduced to rubble.

A series of Secretaries of State have shared responsibility for presiding over this collapse. Sadly, the right hon. Member for Birkenhead was not given the chance to implement his own constructive and imaginative ideas in an attempt to alleviate or avoid the problem. The outgoing Secretary of State is no more or less responsible than his predecessors for having presided over the deterioration and having failed to stem or remedy it. I would love to be able to congratulate him on being the only one who had accepted responsibility and resigned because of that failure, but, unfortunately, new Labour Ministers are reluctant to resign at all—and, when they do, they do not accept responsibility and attribute their resignation to something else. Nonetheless, I pay tribute to the former Secretary of State's good faith and integrity while in office, and he certainly should not have been subjected to the humiliating series of leaks of the last few weeks that attributed all the responsibility for the cumulative failure to him alone. Everyone knows that the real responsibility lies not just with him or his predecessors, but with the Chancellor of the Exchequer, who has effectively reduced the Department for Work and Pensions to a subordinate department of the Treasury. Each of the Secretaries of State can claim in defence that they were simply obeying orders.

It is the Chancellor who was responsible for the two most damaging policy decisions that contributed to the weakening of our pensions regime. The first was the decision to introduce the pensions tax—the abolition of advance corporation tax credits, which effectively siphoned £5 billion from our pensions schemes every year. The second was the decision to extend means-testing. The pensions tax effectively cuts the yield on savings in pension funds by 25 per cent., and the potential extension of means-testing to more than three quarters of all future pensioners withdraws 40 per cent. of the benefit from every extra pound of saving that they may have made.

The combination of that 25 per cent. loss on yield and 40 per cent. loss on the benefit of extra savings is very significant. As a result, it is literally inadvisable to save. It would probably be illegal for any financial adviser to advise the bulk of the population to make any additional savings for their pensions, unless they are very rich indeed. No wonder that the savings ratio is this country has halved over the lifetime of the Government.

There is another underlying problem that affects all developed countries, for which no one can blame the Government although they have aggravated it: people are living longer without working longer or saving more during their working lives. Any solution must either encourage or require people to save more or to work longer.

I would like to believe—I stand at the libertarian end of the spectrum—that it is possible to encourage savings by increasing incentives, introducing better incentives or reducing disincentives. However, frankly, it would be bizarre to introduce a fresh set of incentives while retaining all the disincentives that I have just spelled out. It would be like running up a down escalator. We cannot remove the existing disincentive of means-testing if we rely on a purely voluntary system because many people will not volunteer to save enough and will retire without an adequate pension—and we will have to make provision for them, which will be means-tested. The disincentive of means-testing remains in the system: we cannot leave people destitute, even if they are destitute as a result of their failure to respond to generous incentives that would have made it worthwhile for them to save.

I reluctantly came to the conclusion that it is essential to require everyone to contribute during their working lives towards a pension that will be sufficient to ensure that, when they reach retirement, they will not depend on means-tested benefits. We already compel people to contribute towards a state pension. Everyone in work has either to contribute to that or to make an equivalent contribution to a private pension system. We also have an element of compulsion in the tax system. We tax people—generally those who have worked hard and saved for themselves—in order to pay for the means-tested benefits for those who have not chosen to save enough, even though they could have done, to secure a decent pension for their old age. Rather than compelling the prudent to pay through taxes twice to support the imprudent, we should require everyone to make sufficient provision during their working lives for a pension in retirement so that they will not require means-tested benefits.

Mr. Webb

The right hon. Gentleman advances an interesting case, which he has put to the House before, for compulsion. Will he clarify what he would do for the low earners who currently benefit from a highly redistributive basic pension and a very redistributive second state pension? How will those people who are able to contribute only a small amount of absolute cash secure a decent pension that is enough to live on?

Mr. Lilley

My system is internally redistributive and is designed precisely to achieve that and to mirror some of the redistribution that is inherent in the state pension. I propose that everyone will be required to be members of a pension fund. They will receive a flat-rate rebate paid into that fund from the national insurance fund sufficient to ensure that, over a working life, they will be part of a fund that is adequate to pay for a pension. Together with the basic state pension, it would ensure that they would not need to rely on means-tested benefits. The state would guarantee that minimum state pension so that if the fund fell short for whatever reason, the state would top up the pension to the guaranteed level, which is above the means-tested level.

Of course, there would have to be provision to ensure prudent personal investment rules so that people did not take advantage of that guarantee.

Mr. Douglas Hogg (Sleaford and North Hykeham) (Con)

I have a great deal of sympathy with what my right hon. Friend is saying. However, if he is going to make proposals that will lock people into compulsory saving schemes, does he not have to address the question of the consequence of inheritance tax on those savings? People will be locked into pension schemes and, in the absence of inheritance tax concessions, their descendants will not inherit the moneys compulsorily saved. Moreover, does he not agree that a second problem that must be addressed is the question of compulsory annuity?

Mr. Lilley

Yes, although I think that my right hon. and learned Friend raises second-order issues. As I shall explain in a moment, I believe that people would have to use the money to ensure that they have a pension that keeps them clear of dependence on means-tested benefits. However, if they died before they retired and acquired an annuity for the rest of their lives, they would be able to transmit their savings to their heirs. Whether those savings would be liable to inheritance tax would be a matter for the Chancellor of the day but, as I say, that is a second-order issue that we do not need to address at this stage. At present, most people are not in a position to pass on savings, and their heirs are not in the happy position of receiving 100 per cent., or 60 per cent., of what is left.

My proposals would have several key and valuable consequences. First, everyone in work would acquire a pension adequate to keep them above the means-testing level, and they would therefore be able to avoid means-testing when they left work. We would thus be able to allow the pensions credit system, and the means-testing associated with it, to wither away.

Secondly, everyone would have greater incentives to save. Moreover, since they would have their own pension fund, they would find saving much easier. One of the greatest inhibitions against people making additional savings is that they do not have a pension fund. Setting one up is a major process for most people, even those who are financially sophisticated.

The evidence from Australia in that respect is very encouraging. The introduction of mandatory superannuation schemes has led to the amount of voluntary saving doubling in size. People are required to save more, but their voluntary saving on top of that has doubled.

Thirdly, ownership of their own funds would give people more choice about when they retire. They would be free to retire whenever their fund could provide a sufficient basic pension that would mean that they would not depend on means-tested benefits. They would have a double incentive to work and save longer: every extra year worked would mean that people could contribute more to their funds, and that they would have a year less of retirement to finance. They would therefore be able to enjoy a better pension during retirement.

The evidence is that people with money-purchase schemes work longer, whereas people with final-salary schemes tend to end work earlier. Where people have the double incentive to work and save longer, the evidence is that they respond.

If we were to introduce such an incentive to get people to save and work longer, the only way for the Government to meet the sensible target that they have set—which is to increase the share of future pension liabilities that are met from savings from 40 per cent. to 60 per cent.—would be to require people to work longer. I challenge the Minister, or whoever winds up the debate, to tell us in what other way the Government could meet that objective.

One overall benefit from my proposal would go much wider than the benefit that would accrue to future pensioners and the pension system. Above all, my approach would lead to the greatest transfer and extension of wealth to ordinary people to have occurred since the extension of home ownership and the right to buy. As a result, more people would have independence, self-respect, and power over their lives. They would have choice about savings and the timing of their retirement, and everyone would have a common interest in the prosperity of the economy in which their savings were invested and on which they would depend for enhanced benefits in the future.

In the spirit of the two speakers who preceded me, I urge the House to look positively at my proposals, and to consider whether they should form part of a new consensus for us to work towards. That would enable us to overcome the enormous problems in respect of pensions that any future Government will inherit.

2.46 pm

Kali Mountford (Colne Valley) (Lab)

In the interests of maintaining consensus across the House, I shall keep my comments brief. However, I want to say something about my right hon. Friend the Member for Oxford, East (Mr. Smith), as I do not think that the House can praise him too highly. My only quarrel with what the right hon. Member for Hitchin and Harpenden (Mr. Lilley) said is that he could have been a little more generous about my right hon. Friend, whose experience of Government is without equal. He is a man of great diligence and, as I found when I played a brief and modest role in the Department, a delight to work with. I cannot speak of him too highly.

The right hon. Member for Hitchin and Harpenden made an interesting contribution to the debate. Much fresh thinking has been brought to the table today, but there are problems with all the proposals that we have heard. The debate began with some remarks about consensus and common thinking. The hope was expressed that we could join together in dealing with the problems posed by an increasingly ageing population. However, those problems are not new, having been identified as far back as the 1980s. None of us can stand back and say, "It wasn't me, I wasn't there, I didn't do it." That would be wrong, as none of the problems under discussion is new to any of us. The solutions to those problems are not new either, although members of different parties approach the matter from different directions.

The problem that pension schemes sometimes fold is also not new. Many people working in the textile mills in my constituency lost their jobs and pension entitlements way back in the 1980s. Thousands of textile jobs were lost when the mills closed, and thousands of people lost their pension entitlements as their pension schemes folded. What is the difference between what happened then and what is happening now?

One difference is that the people who lost their jobs in the textile industry in my area were mainly women. It was believed that they were simply earning a little pin money for their families and that they did not make a great contribution to the economy. However, I must disabuse the House of that perception. Those women contributed hugely to the economy, earning some 5 per cent. of gross domestic product, a level that continues to this day. We cannot ignore the contribution made by those women, and neither can we say that our provision for future women pensioners could be covered by the suggestions made today.

The women who did not make contributions because their pension schemes folded, or because they were ill advised about the choice of national insurance contribution, or because they had breaks in employment thanks to the natural progress of family life, could find themselves left out of any new solution that may be proposed. We need to look more imaginatively at how we can help them. Quite rightly, the second state pension has appropriate provisions, and it is good to have a Government who have looked at ways in which people who are carers in families can be deemed to have made contributions throughout their lives. In that way, they will be able to enjoy suitable pension provision in the future.

Women who make a valuable contribution have been ignored in the past, so we should look further to see how the state second pension could benefit women and what else could be done. However, while making that modest request to the Government, it is right to recognise their groundbreaking move to include women in such pension schemes.

We must also recognise the huge problem of pensioner poverty that faces us; simply to move on, with one fell swoop, as though all that happened before had never occurred, is to deny the past. As I went round my constituency in 1996 and 1997, I met people who were freezing in their homes. That does not happen any more. It is right that the debate has moved on to how to encourage saving and how to find people a better standard of living for the future. At least we have moved from the debate about how on earth we could provide for the very poorest. The hon. Member for Northavon (Mr. Webb) and I have held conversations of that type across the Chamber in the past. How do we define the very poorest? Is it the person who claims no benefit at all? Is it the person who relies only on state pension and has not applied for any other benefit? Is it the person who is at least at minimum income guarantee level, or is it the person who could, but does not, claim pension credit? All those people are worthy of our consideration.

One way not to deal with the problem is to decry all the opportunities for bringing families a better household income by simply saying that means-testing is a bad thing and that we should not target pensions. We have heard today how, at least in part, the Opposition parties would try to fund their schemes. To give the Liberal Democrats some credit, we have at least heard a fuller account of what they would like to do, but we have not heard a full enough account of how they would pay for it.

We know that all Governments have to make choices—between one group of possible beneficiaries and another, one type of payment and another, or one type of service to the community and another. It is right to put all those things into the pot and consider them, but let us not pretend that unless there is some move on taxation and a promise to change other provisions, if we put extra provision in one place other services will not have to be cut. We should be clear about which they might be.

We certainly know a lot about the problems that could arise from the Tories' proposals. They have no real pension proposals, but their overall social policy proposals cannot be funded except by cutting other services. We have heard half a story from the Liberal Democrats and I should like to hear the rest. What would happen to the Department of Trade and Industry? Which young people would, or would not, have opportunities in the future? To rob one generation to pay for another is not the right way forward. We will not encourage people to stay in employment, to earn their living and save properly by taking away the means for them to obtain employment. I should be wary of any cuts in the DTI budget without knowing precisely what they would be.

We must also be careful not to discourage people from taking up the opportunities that could be available through the Pension Service. I want to say a few words about how marvellous the administration of that new department is. Staff from the service come to my constituency regularly to meet community groups. They do not simply sit behind a desk waiting for somebody to phone or turn up; they are proactive. They go into communities in rural areas such as mine and seek people out to advise them about what their benefits could be. They make it clear that those benefits are not a charitable donation or a Government handout to unworthy people who have not saved for their retirement or who have not worked and made proper contributions. There is a clear recognition of people as citizens. The service offered is a good one and people are surprised at how much benefit they can receive.

David Taylor (North-West Leicestershire) (Lab/Co-op)

I endorse the point my hon. Friend makes and pay tribute to the staff of the DWP at Loughborough, who are incredibly effective in North-West Leicestershire in targeting the sort of people to whom she refers. The proportion of take-up will increase significantly due to a sea change in attitudes.

Kali Mountford

Absolutely; my hon. Friend is correct. The consensus that is growing—at least on the Labour Benches—will build opportunities for pensioners in all communities, whether or not their MP has recognised the brilliance of that service delivery. I recommend it to everyone.

As time is short, I shall end on a happy note and repeat that the Pension Service is marvellous. I commend my hon. Friend the Minister for Pensions for his administration of that service and, in particular, my right hon. Friend the Member for Oxford, East for his vision for it in the future.

2.55 pm

Mr. Stephen Dorrell (Charnwood) (Con)

I begin by declaring a personal interest. Like all MPs, I am a member of the final salary scheme of the House, but I am also a member of the final salary scheme of a private company of which I am a director and shareholder, and in that capacity I am involved in how to work through the pension funding crisis that is the main focus of the debate.

One of the most attractive aspects of the House is that although we can have passionate arguments across the political divide, when people leave office we usually find something nice to say about them. It is not difficult in the case of the right hon. Member for Oxford, East (Mr. Smith) to recognise the obvious decency and humanity of the man, but that should not in any way detract us from recognising the central failure of the Government that was accurately described by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley).

The Prime Minister has clearly noticed that failure, because the No. 10 briefing machine was in overdrive during August, making it clear that the pensions crisis was the responsibility of anyone in the Government but the Prime Minister. The main concern was to ensure that responsibility attached to the previous Secretary of State, seeing him, to a degree, as a surrogate for the Chancellor of the Exchequer. For the reasons to which my right hon. Friend referred, this developing crisis is indeed a key responsibility of the Chancellor.

Let us understand the key elements in the background to the present pensions issue. My right hon. Friend rightly referred to the fact that until the end of the 1990s, under Governments of both political complexions, we had built up a system of co-funding of pension liabilities between the state and a growing private sector. That was healthy in principle, because it encouraged saving self-help, and was attractive in practice, because it meant that each new generation of retirees was able to look forward to better-funded retirement—better retirement benefits—than previous generations. That is not to detract from the fact that there was a continuing problem of pensioner poverty for those who had been retired for some time, but until 1997 we were able to point out that each new generation saw that problem decrease because benefits for new generations of retirees were on a continuously improving trend.

Since 1997, we have seen that process go sharply into reverse. In July, Mercer estimated that, even after the considerable stock market recovery that has taken place, the FTSE 350 companies between them had a £64 billion deficit in their pension funds. According to the CBI earlier this year, all companies had a total deficit of £100 billion in their pension funds. That means that those companies have made commitments of £100 billion to their former and current employees that they cannot finance.

Against that background, it is no surprise that we have seen the majority of final salary schemes close to new members. Replacement schemes are less generous in the benefits they provide and there is a continuing and developing problem of how we deal with unfunded deficits when companies get into difficulties—as happens occasionally, hence the discussion earlier this afternoon about the pension protection fund and the way in which the Government's financial assistance proposals will work.

I do not blame the Government entirely. It is clearly true that a number of other factors have been involved: declining investment returns and increased longevity, unmatched by increasing working lives, as my right hon. Friend the Member for Hitchin and Harpenden said. All those things are true and have contributed, but the Government cannot escape from the fact that it was their choice that imposed a £5 billion additional burden on pension schemes. If we apply the minimum funding requirement rules, for which my right hon. Friend was responsible when he was the Secretary of State, to express the net present value of the reduced contribution that the Government are making through dividend tax relief to those pension funds, we find that roughly £40 billion of the £100 billion deficit in today's pensions funds is the result of the Government's policy choice. So although the Government are not the sole author of the developing crisis, they are a very major contributory factor.

My central point, therefore, is that against the background of a developing crisis, in which huge additional burdens have been put on employers and new generations of retirees face declining benefits into the future instead of improving benefits, the time has come—indeed, it has long since passed—when we urgently need a new approach to rebuild the public-private partnership strategy. The Government love to talk about partnership, but they inherited a partnership strategy—a co-funding strategy—in pensions that was broadly working. That is not to say that it did not need to be maintained and refined; of course, it did.

We urgently need to rebuild the co-funding of pension liabilities that was the cornerstone of the policy pursued by my right hon. Friend when he was the Secretary of State. The rebuilding of that partnership requires individual employers and employees, the private sector and the state to play a part in rebuilding a new consensus. There has been a fair amount of talk this afternoon about the need for a new consensus, and I wholeheartedly endorse that, but it must be based on a move away from the mass means-testing of pensioner benefits.

It is ironic that the Chancellor loves to talk about the need to give people incentives when they are in work—he loves to talk about welfare-to-work—but his policy has created the deep problem of disincentives for people to save. I listened with great respect to my right hon. Friend make the case that we cannot get out of the hole without compulsion. Like him. I am instinctively resistant to that case; but, like him, I suspect that, in the end, that will be an important part of the new consensus that must be built.

Finally, I urge on the House the proposition that all this is part of a much bigger issue. I strongly believe that the modern welfare state, given our constituents' expectations, is affordable only on the basis of co-payment. I have spoken in health debates, along with my right hon. Friend, and in education debates about the need to establish co-payment—individuals and the private sector contributing to the cost of those services—as the only basis on which the welfare state of the future can be built. Pensions funding is but a part of that issue, and the most serious charge against the Government on pensions is that they have allowed the co-funding, the partnership between the public and the private sector on which my right hon. Friend's policy was built, to crumble. In doing so, they have done no favours either to this or to future generations of pensioners. Furthermore, they have undermined the principle that is important way outside the pensions issue, but goes across the whole of the future planning of the welfare state.

3.4 pm

Mr. Tony McWalter (Hemel Hempstead) (Lab/Co-op)

I will try not to use up my full time, to allow other hon. Members to take part.

Like many other hon. Members, I very much want to commend the record of my right hon. Friend the Member for Oxford, East (Mr. Smith), who was not only a man of deep compassion and responsiveness to the concerns of Back-Bench Members, but was highly numerate—a virtue that is not always displayed in such debates, particularly by the Liberal Democrats.

In the short time available to me, I want to concentrate on the fact that, in a pensions system, we look for justice and responsiveness to need. Reconciling those two things can be very difficult. Certainly, it is pretty easy to have a system that gives people incentives, thus rewarding those who have saved and worked hard all their lives. The best way to give an incentive is to do what the last Conservative Government did: to put people who have not managed to save and build up a strong pensions record on income support, which, I seem to recall, was about 50 quid a week. Of course, that was not the only taxpayers' contribution. People got some council tax benefit and, if appropriate, housing benefit and so on, but the reality was that they were forced to live on poverty incomes. Sure, that was a great incentive for people to fear those conditions and to save; but, as a result, large numbers of our citizens were in fear, want and in the cold.

I speak with some passion because I recall the plight of my own parents—now, sadly, some years deceased. They died at a time when my earnings were relatively humble, and I was unable to help them from the condition of living on income support under a Conservative Government. I do not want to go back to those days. The Government saw that need, and we acted and sorted it out.

I was at a lunch the other day with a woman of 82, who told me that she has never in her life been less concerned or worried about money. The result of our policies has raised her income from that derisory 50 quid to £105 a week. That is not a fortune; she has financial problems, of course. There are things that she would like to do—visit her grandchildren more often and so on— that she finds hard to do on that money, but she has a degree of confidence and assuredness about that £105. The only thing that she did not want to do—other people do not want to do it either, but she bit the bullet and did it—was to ask for it. It is true that many people still will not ask for that money, but our system says that, if people do not have a full pensions contribution record, we will still ensure that they have the money to live on in some level of comfort and decency.

The National Pensioners Convention, which is lobbying outside today, goes on and on about the basic pension. Well, the basic pension was no good for that 82-year-old woman; it was no good for my mother; and it was no good for people who worked hard all their lives because the pension system is contributory and, under the rules, they were regarded as non-contributors. The basic pension never addressed their concerns.

I can think of a fairly old Labour solution: first, it says, "Money is no object," and, secondly, its asks, "Why not raise the basic pension to exactly the same level as the minimum income guarantee?" That is what the National Pensioners Convention leaflet says. It also says, "By the way, ignore the contributions principle, because that principle will still create a differential."

That is a nice response to need and it would certainly simplify the system. I do not know whether the Liberal Democrats have quite reached that point. That policy is very old Labour in that it does not worry about the cost, but the crucial point is that it is grotesquely unjust. How would it distinguish between those who have worked hard to contribute all their lives and those who have not? For a working man to receive the full pension of £80 at 65, he has to have contributed for 44 years. I will not get the full pension myself, unless I do something about that. If someone starts work after 21—I did a post-graduate course and started full-time work after that age—they will not have a full pensions record. I may decide to make up those contributions, but under the old Labour policy that I have described, there would be no incentive for anyone to do so.

Those people who paid for 44 years—or perhaps made additional contributions to build up their record—would get the same as everybody else. That is not fair, and that is why the Government introduced the pension credit. If people have savings, the Government will not rip them off, but give them credit for those savings. If people have additional pensions, the Government will give them additional money to recognise the contribution that they have made and the extent to which they are not claiming state benefits, such as council tax benefit.

People need to ask for the means-tested benefits, but if they do so they will receive a sum that most pensioners feel is comfortable. If people have saved or made additional provision for themselves, that is taken into account. In that way, we try to combine responsiveness to need with justice. All the other solutions we have heard today are based on violating the principle of responsiveness to need. The Hitchin and Harpenden solution—I remember it well—was to lower the amount people received in income support to an appalling level to frighten them sick at the prospect of having to rely on it, and thus encourage them to save.

Mr. Lilley

The hon. Gentleman is getting a little worked up and he seems to think that I was arguing for lower pensions. On the contrary, I argued for increased pensions for everybody with a redistributive element to ensure that even those on low earnings ended up with a better pension, above the means-tested level.

Mr. McWalter

Is the right hon. Gentleman saying that he believes that the basic pension should be £105 for everybody? Or does he think that those who do not receive a full basic pension should be worse off than those who do? The Conservative party did not even understand the question about women who have worked hard all their lives but do not have a contributions record. My hon. Friend the Member for Northampton, South (Mr. Clarke) asked what the Conservatives would do for such women, but none of them seemed to understand or be able to respond to that question.

We call the Government's policy responding to people's needs, but the Opposition call it means testing. If means testing sorts out poverty and gives people a decent quality of life—as well as rewarding people who have worked hard and saved all their lives—it is fair, just and responsive to need. I have heard nothing from the Opposition, or from my right hon. Friend the Member for Birkenhead (Mr. Field), that remotely begins to address the agenda that my right hon. Friend the Member for Oxford, East adopted—he did a very good job—in order to reconcile those principles.

3.14 pm

Mr. Roger Gale (North Thanet) (Con)

I wish to move away briefly from the mainstream of the debate and concentrate on those words on the Order Paper about competence of delivery. I wish to introduce the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond) who will shortly respond to the debate, to Mrs G. She is a real person who lives in Birchington in my constituency and who telephoned my office today. She is in her 70s and is very proud and independent. She has inoperable cataracts and suffers from tinnitus. She is on her last post office order book, and she represents thousands like her in this country. She has been told that she cannot have another book. She has also been told by Post Office staff that for reasons of confidentiality they cannot help her to access her money through her PIN number. She cannot read her PIN number because of her eyesight.

The Government documents that Mrs G has received have simply told her that all the help she needs will be available. Her experience is that such help is not available. When she telephoned my office today she said that she had met an elderly gentleman in floods of tears in the post office because he could not access his money under the new system.

The system that the Government are introducing is not ready and it is not working. It is being imposed on thousands of elderly people. I have no problem with its introduction from now on, but it should not be done retrospectively. It is being introduced in a manner that is unfeeling, uncaring, insensitive and causes distress.

The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond)

I would like to assist both of the constituents the hon. Gentleman mentions by suggesting that he alerts them to the fact that those who cannot operate any form of account, including the Post Office card account, can be paid by cheque. We have ensured that there are no circumstances in which people who cannot operate an account will be left without their money. I hope that he will communicate that to his constituents quickly.

Mr. Gale

Some people do not have accounts into which to pay cheques, so that does not help, unless the Minister is talking about a money order. There is a modest group of people for whom the present system does not work. Those people should be able to retain their order books for the rest of their lives. That would work. What is proposed at present is not working.

3.17 pm

Tom Levitt (High Peak) (Lab)

About 100 years ago, a gentleman by the name of Frood developed a successful line of brake linings. The company became Ferodo, a name synonymous with brake linings. In turn, it became part of the Turner and Newall group and remained so for many years. Some 10 years ago, Ferodo—which is still known by that name in the High Peak—became part of the Federal Mogul group, an American-led consortium. To this day, of the 20-odd sites that Federal Mogul has across the UK, the one at Chapel-en-le-Frith is one of the most successful and profitable. Indeed, just a few years ago, it could boast a thousand employees. Although it does not have so many today, it is still—by some way—the largest private sector employer on a single site in my constituency.

I do not need to remind the House that the Turner and Newall pension fund that Federal Mogul inherited is in considerable difficulty. However, it has not yet folded and talks continue on how best the company can meet its obligations to its work force, past and present and across the globe, not just in Chapel-en-le-Frith. Some 40,000 people in this country are members of the Turner and Newall pension fund. Only 10 per cent. currently work for Federal Mogul. Half of them are existing pensioners and the remainder are deferred pension holders, who have at some point made a contribution to the fund but have not yet started to draw their pensions.

All those 40,000 people were led to believe throughout, no matter when they worked for the company, that in return for their contributions and those put in by the employers, there would be a pension when they came to retire.

Until a little while ago, there was no reason to think that there was a problem, but in fact problems arose about three years ago when the American company Federal Mogul—not Ferodo or Turner and Newall—put itself into chapter 11 administration in the United States for reasons to do with protection against insurance claims on asbestos cases, as my hon. Friend the Minister said, and the company's situation in the United States. The reasons for going into administration had precious little to do with the way in which the company was operating in the United Kingdom.

Nevertheless, even when the company went into administration, it was not flagged up that that could lead to a problem with the pension fund. Indeed, as far as we know, that pension fund was muddling along, no better and no worse than any other, and people had a full expectation of receiving their pension. Indeed, a letter went out in July to all fund members from the trustees and the company's administrators to say that some issues had to be addressed. However, it was not until about three weeks later that a second letter went out saying that there was a crisis and that it was impossible to see how the pension fund could meet its obligations. Again, that is an interesting issue because no real problems were mentioned before.

The problem is that the company has been in administration for three years and needs to come out of it. Its situation is not sustainable and it has been in administration for longer than originally anticipated. If I understand the rules correctly, the pension fund of a company in administration has to be performing at a higher level, more effectively and profitably, than the pension fund of a company that has not gone into administration if it is to make the leap out of administration. It is that required level of funding and performance that is causing all the problems.

In response to the situation in Chapel-en-le-Frith, across High Peak and elsewhere, a local Conservative councillor in Chapel-en-le-Frith has started going around doing a passable impression of Mr. Frazer of "Dad's Army", taking a "We're all doomed" approach to solving the problem. That has done nothing other than generate panic, concern and unnecessary worry. We need all groups to work together to ensure that the company meets its obligations.

Over the past few weeks, I have met fund members, corresponded with pensioners and deferred members, visited the site several times—I am going there again next week—and contacted other Members of Parliament. My hon. Friends the Members for Coventry, South (Mr. Cunningham) and for Coventry, North-West (Mr. Robinson) and I have established an all-party support group for pension fund members of Turner and Newall. As a group, we met my hon. Friend the Pensions Minister in the middle of August to ensure that he was fully acquainted with our concerns and those of our constituents. I assure the House that he was and that he takes the matter seriously, as he described earlier. Next week, our group has meetings with the trustees of the pension fund and the company's administrators to express the concerns, which I know from today's comments are shared by hon. Members on both sides of the House, about the future of that pension fund and the 40,000 people who are its members in one way or another.

Mr. Nigel Waterson (Eastbourne) (Con)

I am listening carefully to the hon. Gentleman. From his discussions with Ministers, has he discovered whether the pension scheme will come under the terms of the financial assistance scheme if it goes into wind-up, which we all hope does not happen, between now and next April?

Tom Levitt

As a group and as individual Members of Parliament we have made the case strongly to Ministers that for all sorts of reasons—short term, long term, political and personal—the pension fund should not be allowed to collapse in ruins. As I said in an intervention, it is principally the responsibility of the people who led the fund members to believe that there would be a pension at the end, because they were partners in creating that pension, to ensure that those pensions are paid. To talk about finding them a convenient and easy way out, which allows them to throw their hands up in the air and say, "Well, in that case we wash our hands of the pension scheme and will rely on the Government to bail us out", would not be a responsible approach.

I do not prejudge what will happen because I want the scheme to be rescued and, if at all possible, I want it to be rescued by those who were involved in making promises about the outcome of the scheme in the first place. Incidentally, those same people have awarded Federal Mogul a contributions holiday in 18 of the past 25 years. I do not know whether that was irresponsible or a result of complacency, based on the best possible financial advice, but I do know that when the pension fund trustees advised the company only a year ago that it should continue to make contributions, that advice was not heeded.

Mr. McWalter

Is my hon. Friend aware that such situations are not usually the result of company profligacy or meanness, but the result of the 105 per cent. rule introduced by the Conservative party? It meant that companies were not allowed to have assets to cover liabilities above 105 per cent. That is the main reason why most companies had to give themselves contributions holidays.

Tom Levitt

I understand that that may be the explanation and I would be interested to hear that confirmed for this specific case. However, the fund's investments were in stocks when stocks were falling, in gilts when gilts were not doing well and in bonds when they were not doing well. A report in the national press a few weeks ago said that because of a rising stock market and rising interest rates, typical pension funds this year are 25 per cent. better off than they were last year, but that does not apply to the Turner and Newall pension fund, which has not been sufficient for what is necessary to cover even normal expectations, let alone the worst-case scenario.

Some money is on the table from the Federal Mogul company in America, but it is not sufficient. There were meetings in the middle of August and at the beginning of September, and there will be further meetings between the trustees, the administrators and the trade unions. The Transport and General Workers Union and Amicus in particular have done a thorough, responsible and effective job in keeping the issues going to set the basis for a settlement on the grounds that I mentioned.

I wish those talks well. I understand that there are considerable assets in the company, and I am adamant that the first line of defence for those 40,000 members of the pension fund has got to be to ensure that this huge international company with significant assets throughout the world meets the moral obligations it had when it took on every single employee in the first place and agreed a deal under which a pension would be paid.

3.29 pm

Hywel Williams (Caernarfon) (PC)

I would like to ground the debate in the experience of my constituents, many of whom depend on Turner and Newall pensions.

There is a particularly acute circumstance in my constituency, in that people who used to work for Ferodo were persuaded to stay with the Turner and Newall scheme when the company was taken over by Friction Dynamics. Hon. Members on both sides of the House will be familiar with the long-running dispute at the Friction Dynamics plant at Caernarfon. It is particularly ironic and cruel that the workers at Friction Dynamics on strike—or locked out, if you will—for three years are now facing uncertainty, having won their industrial tribunal case, defeated the new employer, seen that company go into administration and been denied the compensation that they are due. I accept the point made by the hon. Member for High Peak (Tom Levitt) earlier that it is a question of uncertainty. I do not think that we are all doomed, and I do not want to contribute to such a picture.

My constituents joined the Turner and Newall scheme. They had to do so, and there were advised that it was very safe. Many of them deferred their pensions when Friction Dynamics took over, and they are now ruing their loss. I understand that the current deficiency in the Turner and Newall scheme is £875 million, which puts the offer of £400 million to the initial scheme referred to by the Prime Minister earlier in some context.

Tom Levitt

For the record, the figure the hon. Gentleman cited is the buy-out figure if the whole thing collapses. To keep the scheme running would involve significantly less than that, but it would still be a substantial figure, and more than the one currently on the table.

Hywel Williams

I thank the hon. Gentleman for that point. I accept that a substantial amount of money would still be required. I have received correspondence from several constituents, including Mr. Gerald Parry, who led the workers during the lockout. I shall not name the others owing to the pressure of time, but they are all pressing the Government to work with the trade unions and the company to resolve the matter, to ensure that the company administrator and the independent trustee take full account of their long-term needs, and to ensure that funds are provided for the pension assistance scheme if necessary.

I shall briefly quote another of my constituents, Mr. David Bartram of Y Groeslon. Perhaps this is the most significant thing I can add in my brief contribution. He says: The current situation has shaken everyone's faith in the pension industries' abilities to deliver the promised long term benefits. That is a very significant statement, as it is indicative of the corrosion of people's faith in the system created by the whole affair. Significantly, he closes by saying: If I were now starting my working career, I would be taking a very different view of the pension industries or looking for a job in government/local authority service. We do not want to encourage such attitudes in Caernarfon, where the public sector looms very large, and where there is a certain lack on entrepreneurship, or in the other objective 1 areas in Wales for that matter. My constituents are worried and concerned, and they are looking for help and reassurance.

3.33 pm

Mr. Ian Liddell-Grainger (Bridgwater) (Con)

I want to follow on where the hon. Member for High Peak (Tom Levitt) left off. There is a company in my constituency that used to be called Wellman, which became Turner and Newall, and ultimately Federal Mogul. Currently, 80 of my constituents are in the situation described by the hon. Gentleman as the company's ongoing situation.

The hon. Gentleman was being almost kind about the level of deficit we could be facing if things go wrong. I have looked into the matter, and the shortfall world wide is just under £1 billion, of which the deficit in this country is £300 million. The initial discussions that Amicus has had have been absolutely first class—the hon. Gentleman is right about that. The company has already offered to pay £65 million, which is woefully inadequate at any level. About £29 million a year will be needed for the next eight years, which adds up to a total of £232 million, to sustain the current level of the scheme.

Yet again, I urge the Minister to look at the problem, because unless the rules for the pension protection fund are changed, at least eighty of my constituents, and perhaps up to 400 people in my constituency and that of my hon. Friend the Member for Taunton (Mr. Flook), could be affected. I do not know exactly how many people who have taken earlier retirement or opted for other forms of retirement are involved, but I receive letters almost daily from individuals affected by the problem.

Will the Minister look at the issue as a matter of urgency, because 40,000 people—an awfully high number—will be affected? The company said that it was moving from my constituency to Poland, but in fact it had already filed for bankruptcy under chapter 11, although it did not make that clear. Many employees were given leaving packages before the company moved, and were removed from the company scheme. People who took early retirement are not angry, but perturbed and concerned. There is, however, obviously concern among pensioners.

Unusually for a Conservative MP, I represent an industrial town that is home to British Cellophane, Trig Engineering and many other multi-national or international companies. Many people wonder whether the current problem is the tip of the iceberg, as world wide there are a terrifying number of company wind-ups. I do not expect the Minister to give us an assurance now, but can he tell us in the next few months, or years if necessary, how many companies will be affected? Many people do not believe that their scheme is secure but, as has been argued eloquently by Members on both sides of the House, the Government cannot be blamed because the problem goes back many years. However, people would be grateful for an assurance that the Government will look at their schemes.

In conclusion, I urge the Government to look at the protection fund, as that is extremely important to many people who worked in good faith for a company which has filed for chapter 11 in America and will ultimately fall into administration.

3.37 pm

Mr. Nigel Waterson (Eastbourne) (Con)

I am delighted to take part in this debate, and to follow my hon. Friend the Member for Bridgwater (Mr. Liddell-Grainger), who spoke about the subject with passion and knowledge.

It is difficult not to have considerable sympathy with the former Secretary of State, the right hon. Member for Oxford, East (Mr. Smith), and I join the Members who have queued up to pay him abundant plaudits today. On Monday morning, he woke up and faced a triple whammy. He was supposed to appear before the Work and Pensions Committee this morning, would meet the pensioners' lobby today, and speak in our debate this afternoon. No wonder he resigned. However, we do not need the resignation of the Secretary of State to tell us that the Government's policies on pensions are in deep trouble. Means-testing is set to rise inexorably, and only a couple of days ago, the latest figures on the pension credit showed that almost 2 million pensioners are still not receiving the benefits to which they are entitled. As we know, the Department itself assumes that 1.4 million pensioners will not claim pension credit even though they are entitled to it. No wonder a recent poll by Age Concern revealed that the majority of people who receive pension credit do not like it at all.

The collapse of a savings culture was discussed eloquently by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), and the problems of the computer crash and direct payments more generally were discussed by my hon. Friend the Member for North Thanet (Mr. Gale). Recent figures confirm that more than 1 million workers are working beyond the usual retirement age, which is another sign of the crisis in pensions. Importantly, my right hon. Friend the Member for Charnwood (Mr. Dorrell), discussed the need to rebuild co-funding to tackle the crisis. Demonstrators have come to Parliament today because they want a decent state pension, and support our policy of restoring the link between the state pension and earnings. I am pleased that in our debate the right hon. Member for Birkenhead (Mr. Field) supported that policy.

There are therefore many problems, but every time Ministers think that the situation cannot get worse, it does.

Just today it is revealed that the main steel union is pressing ahead with its court case against the Government over the inadequacy of their rescue package. On occupational pensions, the sad truth is that the Government's plans are fundamentally flawed and the PPF is likely to end up as a clumsy and unstable political creation that cannot deliver the guarantee of which Ministers have boasted.

Ministers claim to have drawn lessons from the Pension Benefit Guaranty Corporation in America, but they are not starting off with a fully risk-based levy so that the PPF is properly funded and good schemes do not subsidise the bad. In the first few years there will be a flat-rate levy for the PPF. We believe that will make it financially vulnerable.

As my hon. Friend the Member for Havant (Mr. Willetts) said in opening the debate, perhaps the most disturbing aspect of all this is the growing gap between the Government's spin on the lifeboat that it is creating for individuals through the PPF, and the reality. As we heard, people who have not yet retired will get only 90 per cent. of their entitlement at best. Indeed, there is to be a cap on the compensation payable in each case. Also, the Government are diluting the indexation rules so pensioners will receive even less. As if all this were not enough, the Government are taking powers, as we heard, to cut benefits payable under the scheme if the resources are not available—a point that has clearly not been lost on the new chairman of the PPF and which was, in effect, conceded by the Minister during his speech. The PPF is very far from being a total guarantee.

We, the CBI and the National Association of Pension Funds, among others, have been warning that the totality of the Government's proposals, including the ill-considered anti-avoidance provisions, may well have unintended consequences and deny decent pension security to future generations. With her typical delicacy, Christine Farnish of the NAPF said of the Department for Work and Pensions: I think they are very challenged by the complexities of these issues. A recent survey by the Engineering Employers Federation shows that one in three employers might scrap their final salary schemes if the Bill goes through in its present form. That is on top of all the final salary schemes that have already closed under the Government.

The Bill has been largely overshadowed by legitimate concerns about the 65,000 workers who have already lost substantial pension rights when their companies went bust and who will not receive any compensation from the PPF. We have always recognised that we cannot use the levy of the PPF retrospectively, but we have consistently argued for compensation to be provided through the use of so-called unclaimed assets. At the very last moment, when they were facing defeat in the Commons by a cross-party coalition, the Government cobbled together their rescue package, but details of that package are still in short supply. One aspect that has emerged is that there is to be no cash for the victims of solvent wind-ups. Once the Government deemed that workers who had lost out were deserving of help, what moral basis can there be to exclude those who were involved in wind-ups of solvent companies that still left them potentially destitute?

More workers are continuing to become potential claimants on the £400 million before the PPF is up and running in April next year. It is already clear that £400 million will not be enough to go round. Assuming a pensioner lives for 20 years, it will provide less than £1 a day on average. Over the summer the Government promised to put more flesh on the bones of their financial assistance scheme, but what has begun to emerge is deeply disturbing. I have touched on the blatant unfairness with respect to solvent wind-ups, but there are other questions. Will compensation paid under the scheme be subject to tax and will it be means-tested? People need to know the answer to such questions. If further funds are not available from the pensions industry or industry more generally, do the Government intend to top up the £400 million if it proves inadequate? Will they reconsider the issue of unclaimed assets?

As the hon. Member for High Peak (Tom Levitt) and others eloquently described, in the early summer massive problems came to light at Turner and Newall.

Forty thousand pensioners and future pensioners could be affected. The possible shortfall could be £875 million. I am meeting a delegation from Derbyshire tomorrow, including the Tory prospective candidate for High Peak, Mr. Andrew Bingham, who has been very energetic on the issue. I shall be interested to hear what he has to say.

On the face of it, such a massive pensions failure could swamp the PPF, if it happens on its watch. In the short term, it demonstrates the inadequacy of the financial assistance scheme. It has been suggested that schemes that collapse between May this year and April next year, when the PPF is supposed to open its doors, will not benefit from the financial assistance scheme. The Government's briefing suggests that those people will be protected by the new priority order on wind-up, but all that does is change how the cake is divided up; it does not increase the size of the cake.

Will those people risk falling between two stools? The Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond), should come clean about that matter, because the Minister for Pensions carefully avoided the question. Will the workers of a company such as Turner and Newall benefit from the financial assistance scheme—yes or no?

Tom Levitt

I shall put the hon. Gentleman's question straight back to him: if he were in the Minister's shoes, would he find £875 million of taxpayers' money to bail out that scheme?

Mr. Waterson

Unlike the Labour party, we have a policy. We would re-examine the use of unclaimed assets to compensate people, and I shall tell that to the delegation tomorrow.

We currently have no Secretary of State—the Department is rudderless; everyone except Ministers agrees that the financial assistance scheme is inadequate; the Pensions Bill lurches from disaster to disaster; the PPF will not provide a full guarantee; and the pensions crisis deepens and worsens as Ministers come and go. In the past few days, we have finally learned just how much the Government really care about pensions. The Government have spun the idea that they are prepared to jettison their Pensions Bill in its entirety to allow the hunting Bill on to the statute book, which is designed to pacify their own Back Benchers. They should ask the workers at Turner and Newall whether they prefer a hunting Bill or a Pensions Bill—I can imagine the workers' answer.

Under this Government, things are rarely as they seem on the surface. Perhaps it has finally dawned on those deep in the Department for Work and Pensions that their strategy is hopelessly flawed and that Ministers have been pursuing the wrong issues, in the wrong way and at the wrong time. Perhaps it is with quiet relief that they prepare to sacrifice the Pensions Bill and return to the drawing board, hoping that they can blame somebody else.

Oscar Wilde described hunting as the unspeakable in full pursuit of the uneatable. Under this Government, pensions policy has become the incompetent in pursuit of the unworkable.

3.48 pm

The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond)

This has been a good debate on a subject of great importance to all our constituents. We have heard contributions from two former Secretaries of State and a former Minister of State, and most hon. Members have paid tribute to the most recent Secretary of State, my right hon. Friend the Member for Oxford, East (Mr. Smith), with whom I had the privilege to work, and I can confirm that those tributes are well deserved.

We have heard thoughtful and moving speeches from my hon. Friends the Members for Hemel Hempstead (Mr. McWalter), for Colne Valley (Kali Mountford) and for High Peak (Tom Levitt). My hon. Friend the Member for High Peak described the plight of his constituents who are affected by Turner and Newall's difficulties, as did the hon. Member for Caernarfon (Hywel Williams).

I thank the Opposition for their generosity in using their parliamentary time on a subject that we are delighted to debate in the House, in the country and on the doorsteps in the months ahead. We are happy to debate it because, as my hon. Friend the Minister for Pensions told the House, we are proud of our record. This year, pensioner households will be £26 per week better off in real terms than they were when we took over, and the poorest pensioner households are £33 per week better off than they were under the Tory Government.

We are proud that as a result of pension credit and the other measures we have taken there are now 1.8 million fewer pensioners living in poverty: poverty that not only disfigured their lives in their final years but was a scar on the nation; an injustice made worse during the years in which the Conservatives were in government.

We are proud that we have boosted pensioner incomes by £10 billion a year, compared with the £10 billion that the Conservatives lifted from the pockets and purses of pensioners when they were in office.

We are proud that it is a Labour Government who have brought forward measures to restore security and public confidence in pensions. We are doing that through our proposals in the Pensions Bill, to which Conservative Members declined to give a Second Reading, as we will continue to remind them, which sets up a pension protection fund giving protection to more than 10 million members of defined benefit schemes to ensure that the tragedy faced by thousands of people left with neither a job nor a pension should never happen again. We are doing it through the £400 million that my right hon. Friend the Member for Oxford, East, when he was Secretary of State, secured for the financial assistance scheme to help many of those who have already lost out.

So we are very happy to debate these issues on the basis of our own record and our plans for the future, which, despite the demographic challenges outlined by my hon. Friend in his opening remarks, provide a firm foundation for secure retirement in the future. We are also happy to debate them because of the record and plans of the Opposition parties, both of which would have pensioners believe that they will spend an extra £16 billion on their plans, given the chance. The question has to be: who will pay for it and how?

The Tories would abolish the state second pension, which gives 20 million people the chance to build up a decent second pension for the first time. Five million of them are low earners, 2.5 million are carers, most of them are women, and 2.5 million are disabled people with broken work records. The Conservatives, if they had their way, would let pension credit, in the phrase of the hon. Member for Eastbourne (Mr. Waterson), "wither on the vine"; or, in the words of the hon. Member for Havant (Mr. Willetts), "die a natural death". I will look forward to seeing them on the doorsteps in the weeks and months ahead telling that to the 3 million pensioners who are each receiving, on average, £42 in pension credit. Perhaps those hon. Gentlemen would like to come with me to Kent to tell the pensioner in her 90s who was recently visited by the Pension Service to be told that she was entitled to £66.92 a week in pension credit, with a back payment of £2,678, that she will get no help at all from their plans for basic state pensions. If they would like to come with me, I will give them a lift.

Around half of those entitled to pension credit are single women and more than a quarter are women aged over 80. Those are the people who would pay the price for Tory pension plans.

We have heard certain right hon. and hon. Members allege that pension credit discourages people from making proper provision towards their pensions. I have to tell the House that the reality is quite the opposite. The purpose of the pension credit is to encourage people to make some provision for themselves. Indeed, the Financial Services Authority concludes: The Pension Credit will mean that for most people, most of the time, it will pay to have saved". That is the very basis of our policy.

I have said who will lose from the Opposition's plan to uprate basic state pensions in line with earnings.

Now there's an idea, but I wonder who scrapped the earnings link in the first place. Who called such a policy "wild and uncosted"? Who called it, "not well targeted" and "not affordable"? Who said in January: Breaking the earnings link in 1980 played a crucial role in this picture of British success … a triumphant success"? We all know that it was the hon. Member for Havant, who tries to persuade us and pensioners that he is a reformed character. He is going through a form of restorative justice, telling pensioners how sorry he is to have cut their pensions in the past. He is a reformed character, and so, apparently, is his current leader, who was in government throughout the period when pensioners' incomes were decimated.

We are not daft and neither are millions of Britain's pensioners, many of whom are here today to lobby the House. The hon. Member for Eastbourne, who is sitting next to the hon. Member for Havant, let the cat out of the bag when, in the presence of my hon. Friend the Under-Secretary with responsibilities for the disabled, he told the National Pensioners Convention: I'm here for your votes". Nice try, but I am sure that members of the convention will see through such opportunism, as we do.

The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle)

They booed him.

Mr. Pond

I fear that the hon. Gentleman was booed. The Opposition will be judged on their record, not the flannel that they produced today.

I have respect for many of those who argue for reintroducing the earnings link, including many who lobbied the House today, but not the opportunists on the Opposition Benches. However, it would take 14 years for a basic pension that was uprated by earnings to reach the guaranteed level of pension credit. In that time, the poorest pensioners would gain nothing. Many of them do not have that time to spare. The earnings link is promised only for the first Parliament—perhaps four or five years—of a Tory Government.

The Liberal Democrats also want to spend £16 billion on what they call a citizens pension. It would mean an extra £100 a month for those over 75, no questions asked. How will they pay for it? They intend to scrap the Department of Trade and Industry: out goes investment in world-class science and technology; out goes the £2 billion that the Government are investing in the post office network, and out goes the Department that administers the national minimum wage and protects the rights of working people and consumers. Of course, those plans, too, would do nothing for the poorest pensioners.

Those are the plans of the Opposition for state pensions. They are opportunist, half-baked and barely half-believable. What are their plans for private and occupational pensions? Silence. They have none. They had nothing to offer today and they have nothing to offer for building security in the long term.

Pensions are of vital concern to all our constituents, of all ages, and the debate has highlighted again the challenges that we face. Those challenges—the changing landscape of occupational pension provision, stock market pressures, and the demographics of increasing longevity—are very real. They have to be taken seriously and we must have the long-term plans to deal with them. We are prepared to have the courage to take on those difficult challenges: to rebuild confidence and security in occupational and private pensions; to ensure that we do not use the threat of poverty in retirement as the only incentive—as offered by Opposition parties—to save. We want to give people genuine incentives to save.

Sir John Butterfill (Bournemouth, West) (Con)

Will the Under-Secretary give way?

Mr. Pond

I cannot give way because I am short on time.

Conservative Members came to the House today with no substantive plans to provide security such as that which the pension protection fund and other provisions in the Pensions Bill offer. They declined to give that measure a Second Reading. Today, they argued against our proposals but offered nothing in their place. The House will see through the Opposition's cynical opportunism and so will pensioners.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 191, Noes 310.

Division No. 238]	[3:59 pm
AYES
Ainsworth, Peter (E Surrey)	Fallon, Michael
Allan, Richard	Field, Mark (Cities of London &
Amess, David	Westminster)
Ancram, rh Michael	Flight, Howard
Arbuthnot, rh James	Flook, Adrian
Atkinson, David (Bour'mth E)	Foster, Don (Bath)
Bacon, Richard	Francois, Mark
Baker, Norman	Gale, Roger (N Thanet)
Baldry, Tony	George, Andrew (St. Ives)
Baron, John (Billericay)	Gibb, Nick (Bognor Regis)
Barrett, John	Gidley, Sandra
Boswell, Tim	Gill, Parmjit Singh
Bottomley, Peter (Worthing W)	Goodman, Paul
Bottomley, rh Virginia (SW	Gray, James (N Wilts)
Surrey)	Grayling, Chris
Brady, Graham	Green, Damian (Ashford)
Brake, Tom (Carshalton)	Green, Matthew (Ludlow)
Brazier, Julian	Greenway, John
Breed, Colin	Grieve, Dominic
Brooke, Mrs Annette L.	Hague, rh William
Browning, Mrs Angela	Hammond, Philip
Burns, Simon	Hancock, Mike
Burstow, Paul	Hawkins, Nick
Burt, Alistair	Hayes, John (S Holland)
Butterfill, Sir John	Heald, Oliver
Cable, Dr. Vincent	Heath, David
Calton, Mrs Patsy	Heathcoat-Amory, rh David
Cameron, David	Hendry Charles
Campbell, Gregory (E Lond'y)	Hermon, Lady
Campbell, rh Sir Menzies (NE	Hoban, Mark (Fareham)
Fife)	Hogg, rh Douglas
Carmichael, Alistair	Holmes, Paul
Cash, William	Horam, John (Orpington)
Chope, Christopher	Howarth, Gerald (Aldershot)
Clappison, James	Jack, rh Michael
Clarke, rh Kenneth (Rushcliffe)	Jackson, Robert (Wantage)
Clifton-Brown, Geoffrey	Jenkin, Bernard
Collins, Tim	Jones, Nigel (Cheltenham)
Conway, Derek	Keetch, Paul
Cormack, Sir Patrick	Kennedy, rh Charles (Ross Skye &
Cotter, Brian	Inverness
Cran, James (Beverley)	Key, Robert (Salisbury)
Curry, rh David	Kirkwood, Sir Archy
Davey, Edward (Kingston)	Knight, rh Greg (E Yorkshire)
Davies, Quentin (Grantham &	Laing, Mrs Eleanor
Stamford)	Lamb, Norman
Davis, rh David (Haltemprice &	Lansley. Andrew
Howden)	Laws, David (Yeovil)
Djanogly, Jonathan	Leigh, Edward
Donaldson, Jeffrey M.	Letwin, rh Oliver
Dorrell, rh Stephen	Lewis, Dr. Julian (New Forest E)
Doughty, Sue	Liddell-Grainger, Ian
Duncan, Alan (Rutland)	Lidington, David
Duncan, Peter (Galloway)	Lilley, rh Peter
Ewing, Annabelle	Llwyd, Elfyn
Fabricant, Michael	Loughton, Tim

Luff, Peter (M-Worcs)	Smyth, Rev. Martin (Belfast S)
McIntosh, Miss Anne	Soames, Nicholas
Mackay, rh Andrew	Spelman, Mrs Caroline
McLoughlin, Patrick	Spicer, Sir Michael
Malins, Humfrey	Spink, Bob (Castle Point)
Maples, John	Spring, Richard
Mates, Michael	Steen, Anthony
Mawhinney, rh Sir Brian	Streeter, Gary
May, Mrs Theresa	Stunell, Andrew
Mercer, Patrick	Swayne, Desmond
Mitchell, Andrew (Sutton	Syms, Robert
Coldfield)	Tapsell, Sir Peter
Moore, Michael	Taylor, Ian (Esher)
Murrison, Dr. Andrew	Taylor, John (Solihull)
Norman, Archie	Taylor, Sir Teddy
Oaten, Mark (Winchester)	Teather, Sarah
O'Brien, Stephen (Eddisbury)	Thomas, Simon (Ceredigion)
Öpik, Lembit	Thurso, John
Osborne, George (Tatton)	Tonge, Dr. Jenny
Ottaway, Richard	Trend, Michael
Paice, James	Trimble, rh David
Paterson, Owen	Turner, Andrew (Isle of Wight)
Pickles, Eric	Tyler, Paul (N Cornwall)
Price, Adam (E Carmarthen &	Tyrie, Andrew
Dinefwr)	Walter, Robert
Prisk, Mark (Hertford)	Waterson, Nigel
Pugh, Dr. John	Watkinson, Angela
Randall, John	Webb, Steve (Northavon)
Redwood, rh John	Weir, Michael
Reid, Alan (Argyll & Bute)	Whittingdale, John
Rendel, David	Wiggin, Bill
Robathan, Andrew	Wilkinson, John
Robertson, Angus (Moray)	Willetts, David
Robertson, Hugh (Faversham &	Williams, Hywel (Caernarfon)
M-Kent)	Willis, Phil
Robertson, Laurence (Tewk'b'ry)	Wilshire, David
Robinson, Mrs Iris (Strangford)	Winterton, Ann (Congleton)
Ruffley, David	Winterton, Sir Nicholas
Russell, Bob (Colchester)	(Macclesfield)
Sanders, Adrian	Wishart, Pete
Selous, Andrew	Yeo, Tim (S Suffolk)
Shephard, rh Mrs Gillian	Young, rh Sir George
Shepherd, Richard	Younger-Ross, Richard
Simmonds, Mark
Simpson, Keith (M-Norfolk)	Tellers for the Ayes:
Smith, Sir Robert (W Ab'd'ns &	Mr. Peter Atkinson and
Kincardine)	Gregory Barker

NOES
Adams, Irene (Paisley N)	Blears, Ms Hazel
Ainger, Nick	Blizzard, Bob
Ainsworth, Bob (Cov'try NE)	Boateng, rh Paul
Alexander, Douglas	Borrow, David
Allen, Graham	Bradley, rh Keith (Withington)
Anderson, Janet (Rossendale &	Bradley, Peter (The Wrekin)
Darwen)	Bradshaw, Ben
Atherton, Ms Candy	Brown, rh Nicholas (Newcastle E
Atkins, Charlotte	Wallsend)
Austin, John	Brown, Russell (Dumfries)
Bailey, Adrian	Browne, Desmond
Baird, Vera	Buck, Ms Karen
Banks, Tony	Burden, Richard
Barnes, Harry	Byrne, Liam (B'ham Hodge H)
Barron, rh Kevin	Cairns, David
Battle, John	Campbell, Alan (Tynemouth)
Bayley, Hugh	Campbell, Mrs Anne (C'bridge)
Beard, Nigel	Campbell, Ronnie (Blyth V)
Beckett, rh Margaret	Caplin, Ivor
Begg, Miss Anne	Casale, Roger
Bell, Sir Stuart	Caton, Martin
Bennett, Andrew	Cawsey, Ian (Brigg)
Benton, Joe (Bootle)	Challen, Colin
Berry, Roger	Chapman, Ben (Wirral S)
Best, Harold	Chaytor, David
Betts, Clive	Clapham, Michael
Blackman, Liz	Clark, Mrs Helen (Peterborough)

Clark, Dr. Lynda (Edinburgh	Hendrick, Mark
Pentlands)	Heppell, John
Clark, Paul (Gillingham)	Hesford, Stephen
Clarke, rh Tom (Coatbridge &	Hewitt, rh Ms Patricia
Chryston)	Heyes, David
Clarke, Tony (Northampton S)	Hodge, Margaret
Clelland, David	Hoon, rh Geoffrey
Clwyd, Ann (Cynon V)	Hope, Phil (Corby)
Coffey, Ms Ann	Hopkins, Kelvin
Cohen, Harry	Howarth, rh Alan (Newport E)
Colman, Tony	Howarth, George (Knowsley N &
Cook, Frank (Stockton N)	Sefton E)
Cook, rh Robin (Livingston)	Howells, Dr. Kim
Corbyn, Jeremy	Hughes, Beverley (Stretford &
Corston, Jean	Urmston)
Cousins, Jim	Humble, Mrs Joan
Crausby, David	Hurst, Alan (Braintree)
Cruddas, Jon	Hutton, rh John
Cryer, John (Hornchurch)	Iddon, Dr. Brian
Cummings, John	Ingram, rh Adam
Cunningham, Jim (Coventry S)	Jackson, Glenda (Hampstead &
Cunningham, Tony (Workington)	Highgate)
Curtis-Thomas, Mrs Claire	Jackson, Helen (Hillsborough)
Dalyell, Tam	Jamieson, David
Davey, Valerie (Bristol W)	Jenkins, Brian
David, Wayne	Johnson, Miss Melanie (Welwyn
Davidson, Ian	Hatfield)
Davies, rh Denzil (Llanelli)	Jones, Helen (Warrington N)
Davies, Geraint (Croydon C)	Jones, Jon Owen (Cardiff C)
Dawson, Hilton	Jones, Lynne (Selly Oak)
Dean, Mrs Janet	Jowell, rh Tessa
Denham, rh John	Joyce, Eric (Falkirk W)
Dhanda, Parmjit	Kaufman, rh Sir Gerald
Dismore, Andrew	Keeble, Ms Sally
Dobbin, Jim (Heywood)	Keen, Alan (Feltham)
Dobson, rh Frank	Keen, Ann (Brentford)
Donohoe, Brian H.	Kelly, Ruth (Bolton W)
Doran, Frank	Kennedy, Jane (Wavertree)
Dowd, Jim (Lewisham W)	Khabra, Piara S.
Drew, David (Stroud)	Kidney, David
Drown, Ms Julia	Kilfoyle, Peter
Eagle, Angela (Wallasey)	King, Ms Oona (Bethnal Green &
Eagle, Maria (L'pool Garston)	Bow)
Edwards, Huw	Knight, Jim (S Dorset)
Efford, Clive	Ladyman, Dr. Stephen
Ellman, Mrs Louise	Lammy, David
Ennis, Jeff (Barnsley E)	Laxton, Bob (Derby N)
Farrelly, Paul	Lazarowicz, Mark
Field, rh Frank (Birkenhead)	Lepper, David
Fisher, Mark	Leslie, Christopher
Fitzsimons, Mrs Lorna	Levitt, Tom (High Peak)
Flint, Caroline	Lewis, Ivan (Bury S)
Follett, Barbara	Lewis, Terry (Worsley)
Foster, rh Derek	Linton, Martin
Foster, Michael (Worcester)	Lloyd, Tony (Manchester C)
Foster, Michael Jabez (Hastings	Love, Andrew
& Rye)	Lucas, Ian (Wrexham)
Foulkes, rh George	Luke, Iain (Dundee E)
Francis, Dr. Hywel	McAvoy, Thomas
Gapes, Mike (Ilford S)	McCabe, Stephen
George, rh Bruce (Walsall S)	McDonagh, Siobhain
Gerrard, Neil	McDonnell, John
Gibson, Dr. Ian	McFall, rh John
Gilroy, Linda	McGrady, Eddie
Godsiff, Roger	McIsaac, Shona
Goggins, Paul	McKechin, Ann
Griffiths, Jane (Reading E)	Mckenna, Rosemary
Griffiths, Win (Bridgend)	McNamara, Kevin
Grogan, John	McNulty, Tony
Hain, rh Peter	MacShane, Denis
Hall, Mike (Weaver Vale)	Mactaggart, Fiona
Hall, Patrick (Bedford)	McWalter, Tony
Hanson, David	McWilliam, John
Harman, rh Ms Harriet	Mahmood, Khalid
Harris, Tom (Glasgow Cathcart)	Mahon, Mrs Alice
Healey, John	Mallaber, Judy

Mann, John (Bassetlaw)	Shaw, Jonathan
Marsden, Gordon (Blackpool S)	Sheerman, Barry
Martlew, Eric	Sheridan, Jim
Meacher, rh Michael	Shipley, Ms Debra
Merron, Gillian	Short, rh Clare
Michael, rh Alun	Simpson, Alan (Nottingham S)
Milburn, rh Alan	Singh, Marsha
Miliband, David	Skinner, Dennis
Miller, Andrew	Smith, Angela (Basildon)
Mitchell, Austin (Gt Grimsby)	Smith, rh Chris (Islington S &
Moffatt, Laura	Finsbury)
Moran, Margaret	Smith, Llew (Blaenau Gwent)
Morgan, Julie	Southworth, Helen
Morley, Elliot	Spellar, rh John
Mountford, Kali	Squire, Rachel
Mudie, George	Starkey, Dr. Phyllis
Mullin, Chris	Steinberg, Gerry
Munn, Ms Meg	Stewart, David (Inverness E &
Murphy, rh Paul (Torfaen)	Lochaber)
Naysmith, Dr. Doug	Stewart, Ian (Eccles)
Norris, Dan (Wansdyke)	Stinchcombe, Paul
O'Brien, Bill (Normanton)	Stoate, Dr. Howard
O'Brien, Mike (N Warks)	Strang, rh Dr. Gavin
O'Neill, Martin	Stringer, Graham
Osborne, Sandra (Ayr)	Sutcliffe, Gerry
Perham, Linda	Tami, Mark (Alyn)
Picking, Anne	Taylor, David (NW Leics)
Pickthall, Colin	Taylor, Dr. Richard (Wyre F)
Pike, Peter (Burnley)	Thomas, Gareth (Clwyd W)
Plaskitt, James	Thomas, Gareth (Harrow W)
Pollard, Kerry	Tipping, Paddy
Pond, Chris (Gravesham)	Todd, Mark (S Derbyshire)
Pope, Greg (Hyndburn)	Touhig, Don (Islwyn)
Pound, Stephen	Trickett, Jon
Prentice, Ms Bridget (Lewisham	Truswell, Paul
E)	Turner, Dennis (Wolverh'ton SE)
Prentice, Gordon (Pendle)	Turner, Dr. Desmond (Brighton
Prescott, rh John	Kemptown)
Primarolo, rh Dawn	Twigg, Derek (Halton)
Prosser, Gwyn	Twigg, Stephen (Enfield)
Purchase, Ken	Tynan, Bil (Hamilton S)
Quin, rh Joyce	Vis, Dr. Rudi
Quinn, Lawrie	Walley, Ms Joan
Rammell, Bill	Ward, Claire
Rapson, Syd (Portsmouth N)	Wareing, Robert N.
Reed, Andy (Loughborough)	Watson, Tom (W Bromwich E)
Reid, rh Dr. John (Hamilton N &	White, Brian
Bellshill)	Wicks, Malcolm
Robinson, Geoffrey (Coventry	Williams, Betty (Conwy)
NW)	Wills, Michael
Roche, Mrs Barbara	Winnick, David
Rooney, Terry	Winterton, Ms Rosie (Doncaster
Ross, Ernie (Dundee W)	C)
Roy, Frank (Motherwell)	Wood, Mike (Batley)
Ruane, Chris	Woolas, Phil
Ruddock, Joan	Worthington, Tony
Russell, Ms Christine (City of	Wright, David (Telford)
Chester)	Wright, Tony (Cannock)
Salter, Martin	Wyatt, Derek
Sarwar, Mohammad
Savidge, Malcolm	Tellers for the Noes:
Sawford, Phil	Jim Fitzpatrick and
Sedgemore, Brian	Joan Ryan

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

MR DEPUTY SPEAKER

forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House supports the Government's strategy to enable people to save securely for their retirement and to promote retirement flexibility and informed choice; welcomes the Government's Pensions Bill and Pension Protection Fund, which will bring real security for over 10 million defined benefit pension scheme members if their employer becomes insolvent and their pension scheme winds up; further welcomes the £400 million Financial Assistance Scheme which will help people who have already lost out; believes that the Pensions Bill will enable many more people to save with confidence with a new proactive pensions regulator, measures to simplify pensions legislation and improved incentives to work past the state pension age; supports the pensions tax simplification proposals being taken forward in the Finance Act 2004, which will replace eight tax regimes with one simplified system; commends proposals in the Pensions Bill to allow individuals to defer their state pension and draw it as a lump sum; welcomes measures to enable people to make an informed choice in pension provision, including new pilots to provide information and advice in the workplace; condemns the inheritance of 1997, with the legacy of pension mis-selling and millions in poverty, whereby many were expected by the previous Government to live on under £69 a week; believes that the Opposition parties' policies will be unfair to the poorest pensioners, unaffordable and unsustainable; commends the Government's historic commitment to tackling pensioner poverty; and welcomes the extra £10 billion that the Government is spending on pensioners in 2004–05 compared with the 1997 system.