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House of Commons

Monday 2 March 1992

The House met at half-past Two o'clock


[ Mr. Speaker-- in the Chair ]

Oral Answers to Questions


National Insurance

1. Mr. Evennett : To ask the Secretary of State for Social Security how many non-pensioners with annual gross incomes below £10, 000 a year would be affected by the imposition of national insurance contributions on income from savings in excess of £3,000 a year.

The Secretary of State for Social Security (Mr. Tony Newton) : We estimate that for the United Kingdom, in 1991-92, some 230,000 non- pensioners with gross incomes below £10,000 a year would have to pay national insurance contributions on their income from savings.

Mr. Evennett : I thank my right hon. Friend for that reply. Does he agree that the use of national insurance contributions as an underhand tax is fundamentally dishonest and that early retirers, widows and those on limited incomes would be hurt by the imposition of a savings tax as proposed by the Labour party?

Mr. Newton : My hon. Friend is certainly right to identify the type of people who are likely to be hit--in all,

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more than 1 million people. What is more, they would get absolutely nothing in benefit entitlement for this purported contribution.

Mr. Enright : Will the Secretary of State join me in congratulating my constituent, Archie Heptinstall, on his 80th birthday this week? Will the right hon. Gentleman further explain to my constituent why people who reach that age end up in the appalling position of having all their age allowances clawed back by the Government?

Mr. Newton : I would wish warmly to join in congratulating the hon. Gentleman's constituent on his 80th birthday, particularly as, next month, the income support premium for the over-80s will be raised in real terms for the second time in three years.

3. Mr. Riddick : To ask the Secretary of State for Social Security what would be the average cost to a non-pensioner basic rate taxpayer of the imposition of national insurance contributions at 9 per cent. on savings income in excess of £3,000 a year.

Mr. Newton : We estimate that in the United Kingdom the average cost in 1991-92 to a non-pensioner basic rate taxpayer would be £280.

Mr. Riddick : Does my right hon. Friend agree that imposing an extra 9 per cent. on savings income would almost certainly deter individuals from saving and that the knock-on effect would be to reduce the resources available for investment in industry? Does he agree that such a policy--it is, of course, Labour policy--would be sheer lunacy? Does my right hon. Friend agree that it is based on the Labour party's ideological dislike of people who are not wholly dependent on the state?

Mr. Newton : I have great sympathy with every point that my hon. Friend made. I have the greatest difficulty in finding the remotest sense in the policy of a party which says that it is in favour of investment but which goes out of its way by every possible means to penalise saving.

Mr. Flynn : Will the Secretary of State explain where is the remotest sense in the present system whereby the editor of a national newspaper pays less than 1 per cent. of his

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salary in national insurance, someone on the Prime Minister's salary pays 3 per cent. and a person on average wages pays 9 per cent? Will the right hon. Gentleman confirm that the

Government--without announcing it in any manifesto--have increased national insurance charges by 40 per cent?

Mr. Newton : I do not think that the hon. Gentleman's figures are right. He has looked at marginal rates in some cases, but not in others. The basic point about the national insurance system is that it is a contributory one whereby what is paid bears some relationship to what is received. If the hon. Gentleman wants to tax people more rigorously, he should do so openly and not in the disguised form in which that is proposed.


4. Mr. Beaumont-Dark : To ask the Secretary of State for Social Security how many self-employed people earn more than £20,280 a year.

The Parliamentary Under-Secretary of State for Social Security (Mr. Michael Jack) : We estimate that, in 1991-92 about 400,000 self- employed people will earn above the upper profit limit of £20, 280.

Mr. Beaumont-Dark : Bearing in mind the Opposition's unalloyed joy at the thought of an increase in national insurance contributions for people who earn more than that, is it time that the Opposition came clean on their plans for the self-employed, who are the engine of the power house for this country? Does my hon. Friend agree that any extra tax on the self- employed without benefits in return would damage the country's chances of growth, and would help it in no way whatsoever?

Mr. Jack : My hon. Friend, in his inimitable style, has smoked out one of the hidden parts of the Opposition's agenda. I hope that, during this Question Time, the hon. Member for Oldham, West (Mr. Meacher) will make Labour's policy clear. The Labour party is committed to removing the upper earnings limit for employed persons, but the hon. Member for Oldham, West has not made his party's policy on the self-employed clear. We have flushed him out today. His policy is the start of Labour's hand-in-the-till tax.

Mr. Skinner : One thing that the Opposition are certain about is that those who earn more than £20,000 have every right to be called upon to pay the extra 9 per cent. Members of Parliament earn between £20,000 and £30,000. If they cannot find that extra 9 per cent.-- a few hundred quid a year--what right have Tory Members to talk about pensioners who must get by on about £56 a week? I am prepared to pay my contribution. It is time that Tory Members understood that they should pay theirs, too.

Mr. Jack : The hon. Gentleman shows the Opposition's fundamental commitment to tax, tax and tax again and then spend, spend and spend again. He ignores the fact that, as my right hon. Friend the Secretary of State pointed out, our national insurance scheme is founded on a contributory principle that has served the country well for 50 years. We now know what the Labour party's agenda is on that issue.

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National Insurance

5. Mr. Dykes : To ask the Secretary of State for Social Security what is his estimate of the time necessary to switch from the current system for collecting national insurance to one based on annual assessment.

The Parliamentary Under-Secretary of State for Social Security (Miss Ann Widdecombe) : It could take three years or even more, depending on the exact nature of the change and, of course, the priority given to it.

Mr. Dykes : Is my hon. Friend aware that that bizarre proposal, tucked into the back end of a newspaper on25 January by an Opposition spokesman, would cause total chaos and huge problems for companies making such a change, particularly small companies? It would mean devastating expense in terms of new software and the reprogramming of computers. Would my hon. Friend care to comment on the chaos proposed by the Labour party?

Miss Widdecombe : The proposal would cause a huge administrative burden not only on business--the necessity to give businesses good notice would take some time--but on the DSS and the Inland Revenue. It would also mean massive computer reprogramming and possibly the expense of other computer programmes which would have to be introduced.

Mr. Dalyell : In the absence of a member of the Scottish National party in the House, may I ask the Minister to write me a letter setting out, in terms of computer programming and related difficulties, the problems of collecting national insurance in the event of an independent Scottish Parliament?

Miss Widdecombe : Where are the Members of the Scottish National party if they are so concerned about the matter? As for the unlikely event that the hon. Gentleman sketched, he may wish to test that policy with members of the SNP to find out precisely how such a system would work. Although I am always prepared to enter discussions with the hon. Gentleman about hypothetical matters, one must also balance the amount of time and expense that it would take to comment on something that is not a reality.

Pension Funds

7. Mr. Corbyn : To ask the Secretary of State for Social Security when he last held a meeting with the Occupational Pensions Board to discuss protection of pension funds.

Mr. Newton : I have had a number of informal discussions with the chairman of the Occupational Pensions Board in recent months.

Mr. Corbyn : In those discussions, did the Secretary of State draw to the attention of the Occupational Pensions Board the loss of hundreds of millions of pounds of money owned by Maxwell and Mirror Group pensioners? Did he also draw attention to the total inadequacy of control over pension fund investments and procedures? Is he prepared to state clearly now that he will introduce legislation to ensure that the sort of scandal that occurred, which robbed the workers of the Maxwell and Mirror corporations, will not occur again and those workers and others like them will be protected in future?

Mr. Newton : The hon. Gentleman is a member of the Select Committee on Social Security, which is examining

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those matters, and I see that the Committee's Chairman, the hon. Member for Birkenhead (Mr. Field), is sitting in front of the hon. Gentleman. We have seen in the press suggestions about what members of the Committee might say, and we shall consider their proposals with interest. I spent two hours responding to questions put to me by the Select Committee only a fortnight or so ago. I made it absolutely clear that, when we know precisely what happened in that case and can draw the lessons from it, we shall be willing to learn them and take note of the need for future action, if that is shown to be necessary.

Mr. Hind : In the light of the serious situation which has arisen in relation to the Maxwell case, will my right hon. Friend take a good look at the pension funds of ABG Research, which is about to be wound up? Hundreds of pensioners in the north and south of England who work for that company are about to lose their pensions, including a 79-year-old widow. Will my right hon. Friend consider the problem to see whether the Government can help?

Mr. Newton : I am concerned about the position in which some people find themselves as a result of problems with the funds. That is why, among other matters, I made it clear that, in the appropriate circumstances, we would expect to operate the provisions--through state scheme premiums--to ensure that people at least receive their state earnings-related pension scheme entitlement.

Mr. Kirkwood : Although I fully understand why the Secretary of State needs to be cautious about the Maxwell case, will he be more firm on the need for change? His earlier answer suggested that there was some doubt in his mind about whether that was necessary. Is he having any discussions with the Treasury to find ways of getting some compensation for pensioners, who stand to lose millions of pounds?

Mr. Newton : I have made the point about the SERPS buy-back provisions and the guarantee involved, but I cannot go beyond that. On the wider issue, it has been made clear, not simply from what I have said but through what I have done over many years--in an earlier ministerial capacity and in my present one--that we are more than willing to take action where it is shown to be necessary, once we are sure that such action would be well-judged. We are some way short of being able to judge precisely what is required, especially as questions have been raised about the regulatory machinery under the Financial Services Act 1986, as well as the arrangements of the Occupational Pensions Board.

Mr. Irvine : My right hon. Friend will know that the Serious Fraud Office is conducting investigations into fraud and dishonesty in this sphere. However, there is also the related issue of possible negligence and breach of duty on the part of the supervisory authorities. Will my right hon. Friend give the several hundred Maxwell pensioners in my constituency an assurance that he will scrutinise carefully the role of those supervisory authorities--such as the Occupational Pensions Board--in relation to that subject? If those authorities were negligent or in any way in breach of duty, it is important that that fact should be uncovered at an early stage.

Mr. Newton : I can certainly give my hon. Friend an assurance that, were the investigations by the Serious

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Fraud Office to produce evidence of fraud that would have to be considered by those involved in criminal prosecutions of if there were claims that the Occupational Pensions Board had been negligent or in any other way culpable of failure to carry out its duties as imposed by the law, those matters would be considered with great care.

Mr. Frank Field : Does the Secretary of State accept that the answer that he has given on paying the guaranteed minimum pension to the Maxwell pensioners is wholly inadequate? Does he accept that many of the constituents of his hon. Friend the Member for Ipswich (Mr. Irvine) face losing their houses if they do not receive the full pension? Once the facts are established, will the Government be prepared to move beyond carrying out what they are, after all, required to do by law?

Mr. Newton : I certainly cannot go beyond what I have said this afternoon and on earlier occasions, including what I have told the hon. Gentleman in the Select Committee, about the guarantee of SERPS rights--to put it in shorthand terms--in respect of the guaranteed minimum pension. As I told the Select Committee--I make no apologies for reminding the hon. Gentleman of it--anything going beyond that would raise huge implications for all kinds of investments.

Mr. Dickens : Does my right hon. Friend agree that the Robert Maxwell episode has vividly illustrated to the nation the fact that an unscrupulous director can put his hand in the till and get hold of pension fund money? That being so, many people throughout the nation who are in pension schemes are frightened. Will my right hon. Friend go as far as to say that we definitely intend in the fulness of time to bring in legislation and, I hope, include in the legislation the provision that there should be at least one employee representative among pension fund trustees?

Mr. Newton : To take the latter point first, if my hon. Friend looks at many, perhaps all, of the Maxwell pension fund trustee bodies, he will find that they were split 50 : 50--there was employee representation. I do not think that that would necessarily solve the problem. I cannot go beyond what I have said, except to make it clear once again that if and when it is clear that a further legislative change will materially assist in ensuring that this sort of thing does not happen again, we will be ready to make it. But there is still a great lack of clarity and we are not prepared to pretend that we know the answer, thereby running the risk of causing at least as much damage as we do good.

Mr. Meacher : Does the right hon. Gentleman recognise that the banks and the Government have treated Mirror Group Newspapers pensioners extremely shabbily? Will he seek to ensure that the banks hand back the pension fund assets which belong to scheme members and which the banks have no right to keep, given their reckless lending practices? Is not the right hon. Gentleman culpably negligent in that, 20 months after the Social Security Act 1990 became law, he has still not introduced the regulations that would protect pension funds in the event of bankruptcy? Although the right hon. Gentleman has said again--several times today--that he will pay MGN pensioners their guaranteed minimum pension, will he accept that it is a mere pittance, and that if Barlow Clowes group shareholders who knowingly took the risk of

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speculating offshore can be compensated by the Government, the pensioners in MGN and other pension funds are no less deserving?

Mr. Newton : On the latter point, the hon. Gentleman is well aware of what was said at the time of the Barlow Clowes affair, following an investigation by the ombudsman into what was seen to be a unique set of circumstances.

To answer the hon. Gentleman's other points--I hope, not taking too much time over it--the debt-on-wind-up provisions were originally linked, as I think the hon. Gentleman knows, with the wider provisions for limited price indexation. As they involved a great deal of the same work to bring them into effect--work that would have taken a considerable time--and would have imposed further contingent or actual liabilities on funds at a time when there was already considerable anxiety because of the uncertainty over the Barber judgment--

Mr. Meacher : The Government dropped limited price indexation.

Mr. Newton : We did not. We made it clear that we would give further consideration to it once the Barber judgment was clear, and that is precisely what we are beginning to do.

On the hon. Gentleman's first question, he will understand that I have no power to order banks to take particular actions. However, he will have noted what some banks have said in recent days about their attitude to this matter.

National Insurance

8. Mr. Squire : To ask the Secretary of State for Social Security how many more people would be liable for payment of employees' national insurance contributions if the atypical work directive were adopted.

Mr. Jack : We estimate that a further 1,750,000 people would have to pay national insurance contributions if the directive were adopted.

Mr. Squire : I thank my right hon. Friend for that answer. Will he confirm that the directive, which is strongly supported by the Labour party, would discriminate heavily against part-time workers, especially women who are trying to combine a job with family responsibilities? Is this yet another instance of the anti-choice nature of the Labour party which, in the guise of new-found moderation, seeks to deny that which is currently available?

Mr. Jack : Again, the Opposition seem to be confused on the issue. They seem to have signed up to the work directive from which the measure comes. As my hon. Friend says, the proposal would bring another 1,750,000 people into the position that he describes. My hon. Friend is right. Many people take a part-time or lower-paid job because it suits their circumstances and is a good choice for them. Those people benefit from the fact that they do not have to make national insurance contributions. Again, the Opposition are recommending a "take" society.

Mr. Frank Field : Will the Minister confirm that even if the work directive came into force, the Government could still levy national insurance at a zero rating of 1 per cent. instead of the full rate? Would not many of those workers

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prefer that option, with all the benefits that would come from it, rather than the scare stories that the Government are putting over in this pre-election period?

Mr. Jack : I know that the hon. Gentleman is assiduous about detail, and I recommend that he reads article 2 of the directive. It is not disputed by any member of the European Community that if that part of the directive were to be implemented everybody would have to pay for the associated benefits. I refer the hon. Gentleman to his hon. Friend the Member for Derby, South (Mrs. Beckett) who, if I have understood her words, made it clear that she did not think that it was a very good idea for people below the lower earnings limit to pay small amounts of national insurance. The hon. Gentleman should look at the detail.

Mr. Ian Taylor : Does my hon. Friend agree that the directive would force employers to pay national insurance for employees who were below the lower earnings limit and that, effectively, that would be a tax on businesses that wish to employ part-time workers? Given that we wish to give British industry the flexibility to employ part-time workers, is not this another effort by Labour to hit the people who most want to seek jobs?

Mr. Jack : My hon. Friend has put his finger on an interesting point. The measure, coupled to Labour's proposal for a minimum wage, is a straightforward attack on jobs. The receipts received by us on the consultation document about the directive show that the Contract Cleaning and Maintenance Association claims that some 40 per cent. of those employed in its industry would be sacked in the first year. That is the kind of enlightened policy to which the Opposition are signing up.

State Earnings-Related Pension Scheme

9. Mr. Andrew F. Bennett : To ask the Secretary of State for Social Security if he will revise the state earnings-related pension scheme to make higher pensions available for those people made redundant in their late 50s who are unlikely to obtain another job.

Mr. Newton : We have no plans to do so.

Mr. Bennett : The Minister will recall that during the first Tory recession, Ministers claimed that making many people redundant was a price worth paying to make British industry leaner and fitter. For many of my constituents who were made redundant, it was not a price worth paying. They lost their jobs and the chance to get another job and contribute to their pensions. Now, when they are at pensionable age, their pension is much below that of people who were fortunate enough to keep their jobs. Is not it time for the Government to compensate the people whom they damaged in their first Tory recession?

Mr. Newton : That is a slightly odd point from a Labour Member in view of the fact that the SERPS entitlement of such people, which is what the original question was about, is precisely as it was left by the Labour Government. None of the changes made to SERPS affects anybody who is retiring this century. It is even odder that many of the people about whom the hon. Gentleman expresses concern are precisely those who would suffer from Labour's proposed savings tax.

Mr. Ian Bruce : Will my right hon. Friend confirm that, under the current rules for SERPS, there is a cut-off in the

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amount which is the same as the cut-off for the earnings limit? Will he confirm that all the figures published so far by the Labour party, in attempting to collect more money from the national insurance contribution, show that it will not put a penny of that money into increased SERPS for people who retire? Is that not a clear case of fraud?

Mr. Newton : Even in these relatively heated times, I am not sure that I would wish to use such a word as fraud against the hon. Member for Oldham, West (Mr. Meacher). However, I endorse my hon. Friend's suggestion that the SERPS entitlement accrues on earnings between the lower earnings limit and the upper earnings limit and that the Labour party's proposal to scrap the upper earnings limit for contribution purposes is associated with no increase in benefit for those persons.

Pensioners (Owner-Occupiers)

10. Mr. Gerald Bowden : To ask the Secretary of State for Social Security what proportion of pensioners are owner-occupiers and have paid off their mortgage.

Miss Widdecombe : The latest figures available show that in 1988, 50 per cent. of pensioners were owner-occupiers, of whom 46 per cent. owned their homes outright. That compares well with 1979, when only 38 per cent. owned their homes outright.

Mr. Bowden : With more and more pensioners owing their homes outright, and with eight out of 10 recently retired pensioners having an income from investment and savings, is it not reasonable to recognise a measure of prosperity among pensioners? If resources are to be used to increase pensions, should they not be used to target those in greatest need, rather than spreading across the board and benefiting both rich and poor? Does not the idea of giving out a blanket provision look like political bribery in an election year?

Miss Widdecombe : My hon. Friend is absolutely right. It not only looks like political bribery--it probably is. It is perhaps worth pointing out that in the past three years we have spent some £350 million on the poorer pensioners. Whereas it is right to make sure that the value of the basic state pension is preserved for all income brackets we believe that any extra resources should be directed to the poorer end. The Labour party may well find that by the time it has spent billions of pounds on all income levels it will not have the extra money to spend on those who need it most. That is the price that Labour will have to pay for its policy, in the unlikely event of its ever being able to implement it.

Mr. Bradley : Is the Minister not aware that a significant number of pensioners who own their own homes are among the poorest in the country? Many have all their capital tied up in their homes and have to use the meagre resources of the basic state retirement pension to repair and restore their homes and to pay their heating bills? Is not that situation made even worse by the massive Government cuts in renovation grants for elderly people? Will the Government recognise that the only way that many of those pensioners will have a happy and healthy retirement is through a substantial increase in the basic rate of income of at least £5 for a single person and £8 per couple, which is the commitment of the Labour party and which is supported by pensioner groups throughout the

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country as was shown by a recent lobby of Parliament by pensioners from the north-west which was supported by many Conservative Members?

Miss Widdecombe : When those same pensioners understand that blanket commitments of that type will erode the extra money available to help the poorer end, they may take rather a different view. When they also understand that housing costs play a proportionately lower part in pensioners' expenditure in England than in the rest of Europe, they may be grateful for the way in which we have promoted home ownership. If 50 per cent. of those retiring now own their own homes, they do so thanks almost solely to the policies pursued and enacted by the Government. We have made a major contribution to the overall income of pensioners, while all that the Labour party has to offer is inflationary erosion of savings, a failure in home ownership and many other schemes that Labour has offered ; although such proposals make it seem that pensioners are better off, because they are offered with other features, in reality it is a small percentage rise. Labour has nothing new to offer. We saw the effects of those policies and, in the unlikely event of the Labour party taking power, we shall see them again.

Pension Levels

11. Mr. Matthew Taylor : To ask the Secretary of State for Social Security if he will make a statement about pension levels.

The Minister for Social Security and Disabled People (Mr. Nicholas Scott) : We have maintained the real value of the basic retirement pension since we took office in 1979 and we are pledged to continue this policy.

Mr. Taylor : At my weekend surgery three pensioners came to see me in considerable distress because of the difficulty that they faced in paying their water and electricity bills and other bills from private utilities following the large price increases. Is it not time that those pensioners, including the one who told me that she was keeping warm during the day by clutching a hot-water bottle because she could not afford heating bills, were given a decent state pension as of right, without the humiliation of a contributory test, which involves means-testing for those who are in greatest need?

Mr. Scott : If the hon. Gentleman examines the incomes of retirement pensioners since the Government took office, he will find that they have increased substantially. From 1979 to 1988 they increased by about 34 per cent., and there have been further improvements since 1988. Under this Government, the income of retirement pensioners as a whole has increased more in each year than it did throughout the Labour Government's administration.

Mr. Dunn : Would my right hon. Friend care to speculate as to the impact on pensioner living standards of the suggestion that petrol prices be increased by 50p per gallon, and especially the impact on pensioners who live in the country and who need a motor car for shopping and other aspects of life? Will my right hon. Friend remind the House that the 50p tax on petrol is a Liberal Democrat idea?

Mr. Scott : I am sure that the House needs no reminding of that. None the less, I am grateful to my hon. Friend for

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doing so. He will realise the concern that I have for disabled people, who would be hit by such an increase in petrol tax.

Mr. Meacher : In the light of the current Conservative "Newsline" pledge that the Conservative party, if it wins the election, will "target social security" so that it is

"not a handout to those who do not need it",

will the Minister confirm that that is a Tory pledge to means test pensions after the election? Will he also confirm that that is exactly what a previous Tory Chancellor of the Exchequer--the right hon. Member for Blaby (Mr. Lawson)--said that he intended to do during a notorious private briefing? Before the right hon. Gentleman issues a denial, will he confirm that before the previous election the Tories said that they would continue to pay child benefit as before--only to freeze it immediately for three years when they took office? Does he recall that before 1979 the Tories said that they would maintain the value of the retirement pension in line with rising living standards--a pledge which was promptly broken when they took office? As a result, a single pensioner has lost £17 a week under the Government while a married couple have lost £28.

Mr. Scott : I can say unequivocally and without a shadow of doubt that the Conservative party has no intention whatever, when it is returned to office, to means test the basic retirement pension. As I have already said, we have pledged ourselves to maintain the pension's real value. What we shall do, as we have done over the past three years, is to ensure that poorer pensioners--those who have not benefited from the result of our general policies towards pensioners which have increased pensioners' real living standards by over 34 per cent.--will be helped. To that end, as my hon. Friend the Under-Secretary of State has already said, we have contributed about £350 million since October 1989.

Mr. Speaker : I call Mrs. Alice Mahon. I call Mr. John Evans. [ Hon. Members :-- "Where are they?"] I call Mrs. Teresa Gorman.

Mrs. Gorman : No. 15, Sir.

Mr. Campbell-Savours : On a point of order, Mr. Speaker. Sometimes you shout out the names of hon. Members who are caught up in British Rail delays. It is most unreasonable-- [Interruption.]

Mr. Speaker : That is not a matter for me.

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