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Points of Order
3.31 pm
Mr. David Winnick (Walsall, North) : On a point of order, Madam Speaker. The report by the royal commission on standards of conduct in public life published in 1976 referred to the membership of Parliament as a great honour carrying with it a special duty to maintain the highest standards--a duty which applies no less to Ministers. Can you give us a ruling on the need to separate the daily workings of Departments of State from purely party matters? I shall not refer to special cases, including the one involving the Home Office searching for records relating to President-elect Clinton, but could you make it clear--arising out of Lord Salmon's report, much discussed at the time inside and outside this House-- that there must be such a separation? If there is not, Departments of State such as the Home Office and the Treasury will be seen as no more than extensions of Conservative Central Office. No matter whether we think of recent events surrounding the Chancellor or of the problem of who authorised the inquiries into President-elect Clinton's past, would it be possible for you to make it clear that there must be a separation between Departments of State and purely Conservative party matters?
Madam Speaker : This is a matter on which the House itself must debate and arrive at conclusions. Rulings on a subject as wide ranging as that which the hon. Gentleman has raised cannot come from the Chair. It is for the House itself to come to conclusions on these matters.
Mr. Tony Marlow (Northampton, North) : On a different point of order, Madam Speaker, concerning an area on which I would very much like your advice and quite possibly your help.
You will be aware that the BBC has conducted a massive survey of public opinion. We all know that public opinion surveys are quite often inaccurate, but this one was so large that there must have been an element of accuracy about it. You will know that 75 per cent. of the people interviewed believe that this House should allow them a referendum on the Maastricht treaty. We had one on joining the Common Market. This is about joining a European union-- [Interruption.]
Madam Speaker : Order. I am trying to listen to the hon. Gentleman's point of order.
Mr. Marlow : Having seen what has happened in France, Denmark and Ireland where there have been referendums, your constituents and mine, Madam Speaker, would be miffed, to put it mildly, if the House was not able to debate such an issue. Can you say how you can help us to get something in order so that the House may debate this issue, which is important for your constituents and mine?
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Madam Speaker : In short, no. The hon. Gentleman knows that that is not a matter for the Chair and he should not try such back-door methods to suggest that I should make other pronouncements. The answer from the Chair is a firm no.
Mr. Dennis Skinner (Bolsover) : Further to the point of order raised by my hon. Friend the Member for Walsall, North (Mr. Winnick) about the question of the register, you will have noticed, Madam Speaker, that, during business questions, since the election some of my hon. Friends have made requests about publication of the register. It seems to be taking a long time. We would like to see the entries. Could it be that publication is being held up because of the Chancellor of the Exchequer's entry and so on? May I draw your attention to the fact that it may also be because the President of the Board of Trade, as he calls himself, has a problem since his last entry in the register was different from his entry about Haymarket Press--
Madam Speaker : Order. I doubt that it is any of those reasons. I am sure that the Register of Members' Interests will be produced as soon as possible. The hon. Gentleman's ideas do not hold very much water.
Mr. Jeremy Corbyn (Islington, North) : Further to the point of order raised by my hon. Friend the Member for Walsall, North (Mr. Winnick), I appreciate your ruling, Madam Speaker. You seemed to intimate that the issue would have to be debated. May I have your assurance that not just the fact of the investigation of Bill Clinton's records within the Home Office but the fact of the existence of those records will be legitimate subjects for debate in the House?
Madam Speaker : The hon. Gentleman should look at what I said. I said that it was not a matter on which I could give advice, but that it was a matter for the House to debate should it wish to do so.
Mr. Tony Banks (Newham, North-West) : On a point of order, Madam Speaker. As you are aware, the Metropolitan police have been conducting a number of stop-and-search exercises in connection with cowardly acts of terrorism perpetrated in London. Have you been consulted by the Metropolitan police on such searches taking place well within the one-mile radius of the House of Commons and about the fact that a number of hon. Members have been stopped? There is no reason why they should not be stopped
Mr. Geoffrey Dickens (Littleborough and Saddleworth) : Quite right.
Mr. Banks : They were Conservative Members. Have you been consulted, Madam Speaker?
Madam Speaker : As the hon. Gentleman will understand, and as I am sure the entire House will appreciate, I have no intention whatever of discussing security matters across the Floor of the House.
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Orders of the Day
Social Security Bill
Considered in Committee.
[ Mr. Geoffrey Lofthouse-- in the Chair ]
Clause 1
Pension schemes : payments by Secretary of State under Part I of Social Security Act 1986
3.37 pm
Mrs. Llin Golding (Newcastle-under-Lyme) : I beg to move amendment No. 2, in page 1, line 14, at end insert
(aaa) notwithstanding the terms of subsection (aa) above, no account shall be taken in making the minimum calculation of one per cent. of earnings, referred to in the said subsection unless the earners' chosen scheme--
(1) guarantees a minimum pension as defined by regulations ; (2) fully discloses all commission and management charges to be paid in connection with the scheme ; and
(3) incorporates the terms of any statutory Code of Practice that may be in force.'.
This is a probing amendment. We are aware of existing regulations but we are not convinced that the Government are being sufficiently diligent. Our amendment provides that the only schemes covered by the legislation will be those which, first, guarantee a minimum pension as defined by regulation. That is to ensure that it provides a pension that is at least equal to SERPs. Secondly, the schemes must fully disclose all commission and management charges to be paid in connection with the scheme. That is a self -evident right for anyone entrusting his money to others. Thirdly, the schemes will incorporate the terms of any statutory code of practice that may be in force. That code would be all-embracing and would include all measures thought necessary to protect the individual investor.
As you will know from Second Reading, Mr. Lofthouse, we do not like the payment of these incentives. We think that it would be preferable not to spend so much money in an attempt to undermine SERPS. We believe that SERPS is safer and more reliable than personal pension schemes. It does not need the small-print warning that benefits can go down as well as up. It is not sold to individuals by salesmen whose standard of living depends upon their ability to talk people into signing up. The rules by which SERPS operates are subject to scrutiny in the public interest. However, if the Government are, however misguidedly, going to spend so much money on encouraging people to take out personal pensions, they have a responsibility to ensure that the schemes are of a high standard.
On Second Reading, the Under-Secretary of State conceded that viability, reliability and safeguards are necessary to protect people taking out personal pensions. She read out to us the usual official jargon about continual contact between the Department and the regulators, with the regulators constantly reviewing the monitoring process, but she had to admit that it was necessary for the Government to produce regulations to command the confidence of those who wished to take out personal pensions.
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I hesitate to describe the Under-Secretary of State as timid, but, unfortunately, the reluctance with which she conceded the need to take action was matched by the timidity with which she is approaching the problem. As she said, she is consulting the regulators, but, rather than an entirely new system, all that she wants to see is a tightening up of the procedures, or possibly an enlargement of them, and more detailed monitoring than is currently possible.It would be useful if the hon. Lady would share her thoughts with us. On Second Reading, she took issue with my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) over those selling personal insurance. She compared them to lawyers who sometimes give advice not to go to court. I am sure that my hon. Friend will forgive me when I say that I was more frightened than reassured by her comparison of lawyers with what we used to know as insurance agents. To most people, they are still agents and not financial advisers. Salesman" is the operative word. They are like shop assistants who try to sell us the dress that suits us best, but it is from their shops that they wish to sell, not from the shops next door.
The Minister was right to say that, provided that the profession is properly regulated and honourably conducted, there is nothing unique about insurance salesmen having to distinguish between best advice and their own financial interests. If there were strict regulations to enforce high standards, all would be well, but there are no such regulations, and she has acknowledged that. I should like her to expand on that statement. The Committee could do with hearing a little more of her thoughts than we heard on Second Reading. What are the complaints being made to the Government? Apart from misleading information, they no doubt include high commission and other charges imposed in the first year. May we be told more about the steps that the Government are considering taking? We feel that the Government are being far too timid, and that they need to be far more positive. I am sure that the hon. Lady does not like being called timid, and I am certain that she will respond to my queries. We want the Government to ensure that this money is given only in respect of laid-down guaranteed minimum pensions, we want the full disclosure of commission and management charges, and we want the Government to institute a statutory code of practice that is constantly reviewed and updated.
Mr. Jeremy Corbyn (Islington, North) : Many members of the Select Committee are deeply alarmed about both the management of private pension schemes and the security of personal schemes. We are concerned about the amounts that are paid into them, and about the amounts that will eventually be paid out. Will the Minister give us some idea of the point at which she proposes to investigate the vast number of personal pension schemes that have been set up over the past five or six years, and also of the degree of investigation that she proposes?
The Bill seems designed, in effect, to assist such schemes in the future, and to provide them with more funds. Many of us are concerned about the methods that will be employed in the investment and control of those funds, and fear that in the future many people will be as disappointed by the pensions paid to them as are current victims of the Maxwell pension fund fraud--whose problems, as we speak, are still unresolved.
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3.45 pmThe Parliamentary Under-Secretary of State for Social Security (Miss Ann Widdecombe) : I assure the hon. Member for
Newcastle-under-Lyme (Mrs. Golding) that I have no intention of being provoked by allegations of timidity into adopting temerity. It would indeed be rash to rush into an entirely new regime without first establishing the extent of the problem--which I do not dismiss, and which the hon. Member for Islington, North (Mr. Corbyn) is right to identify--establishing its nature, and establishing whether existing regimes of control would result in a sufficient tightening of the rules. That applies to the fact-finding that must be carried out, the advice that must be given, training, the extent and frequency of monitoring and, perhaps, other issues.
To say that we are consulting the regulators is not merely to indulge in official jargon. I recently met the Life Assurance and Unit Trust Regulatory Organisation, the Investment Management Regulatory Organisation, the Securities and Investments Board and the Financial Intermediaries, Managers and Brokers Regulatory Organisation to discuss what may or may not be going wrong. The hon. Lady asked me what complaints the Government had received. I certainly do not want to give the impression that we have been inundated by a vast number of such complaints, indicating either widespread malpractice or inefficiency ; we have not. However, personal pensions have now had some time in which to take effect. There are now 5 million pension holders, and a sufficient history has been established for us not only to examine the undoubted success of the scheme, but to ask ourselves how we can improve it.
That was the reason for my rather cautious statements on Second Reading. It was not that I did not want to address problems if they were there ; I did not want to rush into examining imaginary problems.
I do not think that the hon. Member for Newcastle-under-Lyme really addressed the amendment. I understand her embarrassment : the amendment is a bit of a muddle. She was right to describe it as a probing amendment, for there is no way in which it could be translated into law.
Let me remind the House of the purpose of the 1 per cent. additional rebate for personal pension holders over the age of 30. Personal pensions have been an enormous success. As I have said, there are now 5 million holders of them, and public demand for the choice and flexibility of provision that such pensions offer has been about 10 times greater than expected. That tremendous growth has not been at the expense of occupational schemes ; the 5 million personal pension holders are largely in addition to the 11 million occupation scheme members.
The 1 per cent. additional rebate is designed to ensure that it is worth while in the short term for the majority of those people to maintain their pensions. It will apply to personal pension schemes set up for a group, as well as to individual arrangements, but it is a temporary measure. In the context of this and other amendments, that must not be overlooked.
We shall shortly be undertaking a review of the rebate structure for personal pensions and shall consider proposals for an age-related system. That review will also include occupational schemes--money purchase and salary related--and, if the hon. Lady will forgive the
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expression as she does not appear to like consultation, we intend to consult interested parties in the first half of next year. I deal now with the detail of the amendment. Amendment No. 2 seeks to make payment of the 1 per cent. additional rebate conditional on the personal pension scheme satisfying very restrictive new conditions. These conditions are the guarantee of a minimum pension, full disclosure of all commission and management charges and incorporating the terms of any statutory code of practice. The amendment would lead to an extraordinary muddle. It would apply only to schemes to which the 1 per cent. additional rebate was paid. No personal pension optant aged under 30 would benefit from the amendment.To explain that more fully, it may help to remind hon. Members how payments are made to appropriate personal pension holders. The Department pays a minimum contribution based on the person's annual earnings between the lower and upper earnings limits. These annual earnings are known as band earnings. The minimum contribution is paid after the end of the tax year direct to the personal pension provider. At present the minimum contribution is made up of the contracted-out rebate amount which is 5.8 per cent. of band earnings ; the 2 per cent. incentive ; and basic rate tax relief calculated on the employee's share of the contracted-out rebate amount, which is currently 2 per cent.
From April the minimum contribution will consist of the new contracted-out rebate amount which is 4.8 per cent. of band earnings, basic rate tax relief calculated on the employee's share of the rebate, which will be 1.8 per cent., and, subject to the will of Parliament, the 1 per cent. addition that we are now discussing for personal pension holders aged 30 and over. The amendment does not propose that these restrictive criteria should apply to the 4.8 per cent. rebate. It therefore seems somewhat contradictory to propose them in respect of the 1 per cent. addition.
I should now like to take each of the restrictions specified in turn. The first is a guarantee of a minimum pension as defined in regulations. I think that we should be clear that, although personal pensions do not provide a guaranteed minimum pension, they do provide protected rights. Personal pensions are a form of money purchase arrangement. The level of pension that is payable depends on the investment that is made, the return on that investment, and the costs. Personal pension providers have to guarantee that the minimum contribution has been invested, and the return on that investment can be considerable--so much so that, over the lifetime, personal pension holders can be in the fortunate position of receiving more than simply guaranteed minimum pension rights. It is not clear from the amendment--or from the hon. Lady's support of it--what type or level of guaranteed pension the Secretary of State is being asked to specify in regulations. Would it be a fixed amount or would it be related to an individual's salary?
There would be a substantial cost in adopting the amendment. Just how great the cost would be is difficult to quantify because it would probably have to be borne through reduced pensions to the personal pension holder at the point of retirement. That is because some contributions would have to be diverted to cover the cost of insuring against the risk that the return on the investment would not fully cover the minimum pension.
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Mr. Corbyn : I understand the Minister's point, but can she give some idea of the number of money purchase personal pension schemes where the companies involved have thus far been unable to pay the guarantee offered to the participants when they joined the scheme?
Miss Widdecombe : The hon. Gentleman will be aware that personal pensions have yet to come to fruition. When we say that we have millions of holders of personal pensions, we mean, not that there are 5 million drawers of those pensions, but that 5 million people have taken out personal pensions. Therefore, the data that the hon. Gentleman seeks would not help the course of the debate.
I said that the amendment would reduce choice. Some current personal pension providers would be prevented from continuing to provide personal pensions. Banks and building societies are prevented by legislation from accepting such a risk. Only life insurance companies and their salesmen would be able to do so. This would limit the market and reduce competition.
The issue of providing some kind of guaranteed minimum pension for money purchase and personal schemes was discussed at considerable length during the passage of the Social Security Act 1986. The Government's view was that the difference between the two methods of providing for retirement was at the heart of the new pension opportunities provided by that Act, making guaranteed minimum payments inappropriate for personal pensions and for contracted-out money purchase schemes.
I turn now to the second restriction that is proposed. The regulatory organisations lay down requirements for the disclosure of relevant information to investors--the hon. Member for
Newcastle-under-Lyme acknowledged that there were already some regulations- -including charges and commission. These are subject to review at present. In the circumstances, it would not be appropriate for the Government to introduce further disclosure requirements before the result of the review is known.
The Securities and Investments Board has proposed new rules which will require life insurance companies to disclose the effect of charges and expenses as a penny-in-the-pound deduction from the premium. The Director General of Fair Trading is considering this proposal at present, and a report to my right hon. Friend the Chancellor of the Exchequer is expected shortly.
I admit that I am unclear of the purpose of the third restriction that the Opposition seek to place. The Financial Services Act provides the statutory framework for investor protection, and the marketing of investment products is subject to rules made under the Act. The restriction therefore has no practical effect over and above existing law.
I cannot recommend the amendment to the Committee. The effect of accepting it would be to reduce the level of pension and the level of competition. I do not think that the Opposition intended such a muddle when they tabled the amendment.
Mr. Terry Rooney (Bradford, North) : I listened to the Minister's speech with interest. I wonder how much of the speech was her own words and how much was written for her. Does she recognise that the state earnings- related pension scheme and opting out apply largely to people at
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the lower end of the income scale and that people higher up the income scale are more likely to have some kind of occupational pension?Is the Minister aware that Legal and General, which is the largest pensions insurer in Britain, recommends that men and women on an income of less than £9,000 a year should not opt out of SERPS? Much of the Minister's speech appears to contradict that. With the best will in the world, I would rather have the word of Legal and General when it comes to pension investment.
It must be recognised that certain fixed costs and charges always attach to life insurance policies. The lower the income and the lower the premium payment, the higher will be the percentage that goes on commission and management fees. The Minister may be interested to know--I will not name names, but I will send her details afterwards--that last year a member of the Financial Intermediaries, Managers and Brokers Regulatory Association who operated in my home town was gaoled for submitting fraudulent applications. He made applications for personal pensions for non-existent people for which the commission was such that, for more than 18 months, he was able to pay the premiums on the applications and to net himself £68,000 in commission. Such a commission structure may at least dilute the professional opinion of the person involved in selling a pension plan.
The beauty of SERPS is that it offers a guaranteed pension. In some ways, that may also be its drawback. People receive glossy brochures which promise fairly spectacular returns. I accept that they are based on statutorily limited projections. The difference between a 3.5 per cent. return and 10.5 per cent. return is substantial. Companies very rarely advise potential policyholders of the actual returns gained over the years and they very rarely seek to advertise their position in league tables. It is significant that Equity and Law, a company which consistently appears close to the top of the league of historical returns, pays no commission and has no interest in dealing with third parties or intermediaries. There may be a message there for us all.
In the same vein, many private schemes provide for a payment to a widow, but seldom provide for a payment to a widower if the premium payer is female. In this day and age, and in the light of legislation from the European Court, that point should be a matter for the Department of Social Security. In the private pension scheme world, one can have a named beneficiary. However, under SERPS, if a couple are not married, the widow receives no payment. That is a major deficiency in SERPS regulations and application in this day and age when, rightly or wrongly, so many couples live together for decades without marrying.
4 pm
As the Under-Secretary did last week, she again referred today to there being 5 million personal pension holders. I am sure that we all hope that that means that 5 million people will be very happy when they retire. Potentially, that is 5 million people who will know far too late that they have been ripped off.
In respect of regulations, it is interesting that there is one set of responses from the Department of Social Security and another set from the Treasury. The
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Department of Social Security would do well to slow things down a little until the Securities and Investments Board investigation of self-regulation has been published.Miss Widdecombe : I wish that I had responded to that matter before I made my earlier general response. One Opposition Member is urging me to slow things down while another is urging me not to be so timid and to hurry things up. It is impossible to please both of them. I rather prefer the approach of the hon. Member for Bradford, North (Mr. Rooney), who believes that it would be better to try to get things right and to proceed at the best pace. However, I believe that he was wrong in respect of Equity and Law. I am informed that Equity and Law pays commission. The hon. Gentleman must have the wrong company. I take the point about commission charges made by the hon. Member for Bradford, North and his point about the advice on actual returns. Both points could be addressed under the present regime ; they do not require new legislation. My colleagues at the Treasury and I are consulting the regulators precisely to see whether those matters can be controlled. As the hon. Member for Bradford, North seems to believe that we are talking with two tongues, I must point out that one of my Treasury colleagues was at our last meeting with the regulators. It was not noticeable that we had a different approach to the issue. The hon. Member for Bradford, North has not done enough homework.
While I absolutely take on board the need to review the way in which personal pensions are working, I do not accept that there are 5 million potential disasters in the system. The amendment will not help to devise better regulations.
Mr. Donald Dewar (Glasgow, Garscadden) : We all accept that discussions are taking place, and we welcome that. However, presumably discussions take place within a time scale. When will we know the results of those efforts?
Miss Widdecombe : We shall bring our conclusions to fruition as soon as is practicable.
Mrs. Golding : I was deeply hurt and upset when the Minister said that I was not in favour of consultation--and I immediately consulted my colleagues. We have decided that I should beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mrs. Golding : I beg to move amendment No. 3, in page 1, line 16, at end insert
(1A) After subsection (3) of that section there shall be inserted--
"(4) In relation to money purchase contracted out schemes to which Schedule 2 to this Act applies, 1 per cent. of earnings as defined in subsection (aa) above shall be included in the calculation of the minimum contribution.".'.
The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse) : With this we may take amendment No. 1, in page 1, line 21, at beginning insert--
(3) In section 7(1) of the Act of 1986, the words in lines 8 and 9 "within the period beginning on 6th April 1988 and ending on 5th April 1993" shall be replaced by the words "beginning on or after 5th April 1988".
(4) In section 7(4) of that Act, in line 2, after the words "in respect of a tax week" shalll be inserted the words "falling within the period beginning on 6th April 1988 and ending on 5th April 1993" and after paragraph (b) the words,
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"The amount of payment in respect of a tax week beginning on or after 6th April 1993 iswhere
(i) the tax year in which the tax week falls ends before such date as may be prescribed, and
(ii) the earner was over the age of 30 on the 6th April with which the tax year began,
1 per cent. of any such earnings.".'.
Mrs. Golding : The amendment deals with the exclusion of occupational schemes. It attempts to prove further the reason the figure of 1 per cent. is confined to personal pension schemes. The members of the occupational pension schemes joint working group, which brings together the Association of British Insurers, the Association of Consulting Actuaries, the National Association of Pension Funds and the Society of Pension Consultants, put their case for the inclusion of all types of contracted- out pension schemes in a letter to the Secretary of State on 9 September 1992. Unlike us, they do not challenge the purpose of the additional 1 per cent. rebate, which is to dissuade individuals from leaving personal pensions and contracting back into the state earnings-related pension scheme. Indeed, they say that it is welcome because
"some degree of stability is needed, and it is in no party's interest for there to be frequent switching between different types of pension provision."
That is not the pure doctrine of competition, but there we are and so be it. However, the group expressed two concerns. One was that giving the additional 1 per cent. of personal pensions alone might lead some individuals to leave contracted-out money purchase schemes, and, possibly, even final salary schemes, to take out personal pensions. The second concern was there could be a greater danger that employers would consider that contracted-out money purchase schemes were not worth their continued support. leading to COMPS members drifting back into SERPS. They emphasised the unfairness of that by pointing out that employers who responded in 1988 to the Government's desire for personal pensions by introducing group personal pension schemes would see their employees covered by the additional 1 per cent., whereas those who, with Government encouragement, introduced contracted-out money purchase schemes would not.
Let me emphasise that it was with Government encouragement that those employers introduced and committed themselves to COMPS, installing the necessary procedures. They believed that COMPS and GPPS should receive the same protection because they were so similar that it was unfair for contracted-out salary-related schemes to be treated less favourably, and they urged the Government to establish a level playing field. Why have the Government refused to provide them with their level playing field, or at least a playing ground on which they would play downhill alongside personal pensions against SERPS ? The Secretary of State, in his reply to the group's letter, pointed out that his predecessor had made it clear that the 1 per cent. additional rebate was a temporary measure pending a review, which is what the Minister said today. I am not sure whether the Secretary of State regards that as an argument against the extension of the 1 per cent. to COMPS--surely not. It cannot be that they are arguing against an extension of the 1 per cent. It is a bit like somebody standing on the river bank and telling a drowning man, or at least one who thinks he is drowning, that he will not throw in the lifebuoy that he is holding but
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that the drowning man need not worry because there will be a review of the availability of lifebuoys and the required standards. The Secretary of State went on to point out the differences between personal pensions and contracted-out money purchase schemes which included"the nature of the contract, the contributions for PPs, the ages at which the benefits may be taken and portability on changing jobs." He added that he would be surprised if some employers felt that they could no longer support COMPS. That would be an unnecessarily short-term view.
On Second Reading, the Under-Secretary of State expanded further on the reason for not including contracted-out money purchase schemes. First, she told us that there were economies of scale. I wonder what that argument actually means. What economies of scale justify such discrimination? Are we to believe that the man from the Pru is a small business man? I have no doubt that the Under-Secretary has a good explanation that will satisfy the occupational pensions schemes joint working group. We should like to hear it. We should like to know what the Under-Secretary has in mind.
Secondly, and reiterating the argument of the Secretary of State, there is inflexibility in the age at which benefits may be taken. This is a good point at which to ask a question which has bothered me ever since I listened to the Under-Secretary on Second Reading. Did not such schemes qualify for the initial 2 per cent? If such schemes did not qualify, I can see the logic, if not the justice, of the Government's position. If they did, why on earth were the present objections of the Government not barriers then? What has changed? What is different?
Thirdly, and most importantly, the Under-Secretary said that there was a difference in the method of payment. COMPS are generally paid monthly, but personal pension contributions are made after the end of the year. That reduces the burden on the employer and throws into question whether it is appropriate at this juncture to extend to COMPS the same arrangement as that which applies to personal pensions.
If the 1 per cent. were purely a subsidy to the personal pension providers, I could understand the argument and the reasons why a similar subsidy should not be paid to employers. However, I understand that the 1 per cent. is an incentive to the individual employee. Perhaps the Under-Secretary could clarify the matter. Is the 1 per cent. a subsidy to the body providing the pension, or is it an incentive to the individual? Considering the reference to expenses by the Secretary of State in his letter and the arguments of the Under-Secretary on Second Reading, it seems that the Government see it as a handout--as a way of offsetting the higher costs of the personal pension providers.
It is difficult to agree with the conclusion of the Under-Secretary on Second Reading that, because of the differences between the operation of corporate schemes and personal pensions, the same arrangement should not be extended to corporate schemes. Perhaps, even at this late stage, the Under- Secretary will think again.
Mr. Archy Kirkwood (Roxburgh and Berwickshire) : I shall say some words in support of the amendment moved by the hon. Member for Newcastle- under-Lyme (Mrs. Golding). I concede that her amendment is much more transparently obvious than mine. I drafted my amendment
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in a moment of haste after Second Reading when I was still quite roused, to use a Scots term, by the rather inadequate explanation given by the Under-Secretary.I cannot for the life of me understand this. I have read the report of the Second Reading debate, and I have re-read it. I simply do not understand why the Government "set their face" against contracted-out money purchase schemes. It is obvious and blatant discrimination. It does not amount to an awfully big row of political beans--or pension beans, if it comes to that-- in terms of making a change because the necessary administrative changes and the amounts of money would not be great.
I do not have the same problem as the hon. Lady about the principle of an incentive. Back in the 1986 Committee, I said that we were relaxed about the matter. I think that the Government may, in retrospect, have overdone it in terms of the amount of money that was spent. However, I well understand the long-term aim, and I support it. The Government were right to examine the long-term implications for the SERPS expenditure, and they proposed the scheme. In the 1986 Committee, I was certainly prepared to go along with the scheme. However, when we have details such as those contained in the Bill, I cannot understand what the Government are trying to do and why there should be such discrimination. It has worrying long- term implications for the review. We are told that the problem is temporary and that we are all bothering about nothing. We are given to understand that if we are a wee bit more patient, everything will suddenly become clear. I am old enough and long enough in the tooth
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