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have sent salesmen off to work after half a day's training with a copy of the "Yellow Pages". Allied Dunbar employs most of its sales work force on a commission-only basis. General Portfolio has indulged in pyramid selling.

Not all companies have done that. Others, such as Clerical and Medical, are moving towards a salaried sales force. It seems to be working for them. All that shows the degree to which we should be concerned about the standards of many, until now, respectable companies within the financial services industry.

A local concern has already been mentioned. Some 67,000 miners and 27,000 teachers have transferred their pensions from occupational schemes into other schemes where they may well be much worse off as a result. Three pits my constituency have closed, and Daw Mill, the only remaining one, has lost half its work force. As soon as the redundancies were announced, the salesmen were trying to encourage the miners to transfer out of their pension schemes and to invest their redundancy payments in particular ways.

Many people lost because those who were advising them were not competent to do so. They were called independent financial advisers, and in some cases they were not independent enough--and certainly they were not good enough to give advice. Today, the chairman of FIMBRA told the Select Committee that he saw the biggest issue facing the financial services industry as incompetence, as did the chief executive of the PIA when she gave evidence to the Select Committee. Turning to the PIA, after hearing from both the chairman and the chief executive of the PIA, I am not convinced that they would restore confidence. Mr. Joe Palmer, the chairman of the PIA, was formerly associated with Legal and General, which has recently been fined because of the lack of proper regulation of its work force. To put in charge of an organisation that is seeking to restore confidence in the financial services sector a person with such a record does not inspire confidence in me, and I suspect that it will not inspire confidence in the public. Also, Miss Colette Bowe is associated in the public mind with the Westland scandal.

It does not reflect upon the honesty, integrity or ability of either of those individuals. Although it may be understandable to have one person who has been associated in the public mind with a scandal being placed in charge of a regulatory organisation which is trying to restore confidence, to have in charge of such an organisation two people associated in the public mind with scandals is not the right approach.

I hope that I have made it clear that what I have said does not reflect on either the competence or the integrity of those people, as individuals ; it reflects more on the perception that the public may well have of an organisation that--if it is to continue--desperately needs public confidence. I suggest that, if those two people remain in place, it will not have that confidence.

Mr. Heald : On a point of order, Madam Deputy Speaker. Is it in order for the hon. Gentleman to attack Miss Colette Bowe--who was a civil servant at the time of the Westland incident--in quite a personal way, when she has no opportunity to defend herself, and, I believe, was not in any way criticised for her personal conduct at that time ?

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Madam Deputy Speaker (Dame Janet Fookes) : That is not a point of order for the Chair. The hon. Member for Hertfordshire, North (Mr. Heald) may well have wanted to intervene on what the hon. Member for Warwickshire, North (Mr. O'Brien) was saying, but it was in order.

Mr. O'Brien : Thank you, Madam Deputy Speaker. May I clarify what I said ? The hon. Member for Hertfordshire, North (Mr. Heald) made a valid point, and I did not raise the issue without giving it some consideration, but I am rather worried about the position in which the PIA has put itself.

When I heard that those two people would give evidence to the Treasury Select Committee about the PIA, I at first hoped that we could have some confidence in that institution. Having heard the evidence and examined the issue in more detail, however, I do not think that such confidence can exist.

Let me repeat that I do not wish to impugn the backgrounds or integrity of individuals ; I am saying that our objective should be not only to establish institutions which--along with those in charge of them--are competent, but to ensure that they are associated in the public mind with images that lead to confidence and faith in those in charge.

I am not making a personal attack. I am saying that, as spokesmen and spokeswomen for the public, we have a duty to ensure that we place people who will secure public confidence in the institutions that we are discussing.

I am also concerned about admission procedures relating to the PIA. I shall not go into the matter in detail : suffice it to say that about 6,000 firms are involved, and some 100,000 salesmen ; the PIA has a staff of 350. Many of those 350 people are not involved in direct regulatory work. The size of the problem with which the PIA is required to deal is not reflected in the resources available to it. Whoever leads the institution, I have grave doubts about whether, in its present form, it can make the necessary series of visits to all companies ; moreover, it may not be able to examine what Miss Bowe, in evidence to the Select Committee, called "sick companies" in the detail required to establish whether disciplinary procedures should result from the question marks hanging over them.

The case can be argued for two tiers of regulation. There should, perhaps, be a less stiff constant regulatory system for big companies that achieve adequate standards and meet inspection limits ; firm regulation is needed for smaller companies, however. Such companies often work quite close to the margins, and we must ensure that they are properly regulated.

The commissions issue has already been mentioned. Some advocate a move to advice for which fees are paid. That is clearly a better arrangement, but I am not convinced of its practicality. The public seem to accept that they must pay for legal and accountancy advice, but they do not expect to pay for advice on pensions, mortgages or insurance. Before we can enforce changes in commission procedures--we may be able to tighten them up, but not abolish commission altogether--we shall need a cultural change in people's attitude to financial institutions.

Disclosure of commissions is important, however. I welcome the rules that the SIB now seeks to implement--not only those relating to disclosure of commissions, but all the other disclosure rules. Mike Newmarch--the man from the Pru--suggested to the Select Committee that the

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public would not understand most of the disclosure regulations. I think that he meant that genuinely : many financial products are very complex, and people would need some understanding of them to appreciate their terms fully. Nevertheless, I think that the fact of disclosure, of itself, gives people an opportunity to understand much better what they are purchasing. If we are to retain the present system--the Government have given no indication of a move to a different one--the SIB must do more to ensure and enforce full disclosure.

As I suggested today to representatives of FIMBRA--who agreed--there should be a system enabling me, when approached by someone trying to sell me a financial product such as a pension, to telephone a regulatory organisation and find out whether, at any stage, that person has been barred from practising as a financial adviser. I should be able to do that easily and immediately, just as my clients can telephone the Law Society and find out whether I, as a solicitor, am on the roll.

Not only should people be able to find out whether a financial adviser is currently on the roll, or has been removed from it ; they should be able to discover whether question marks have been placed over that adviser's behaviour in the past. FIMBRA currently feels that it ought not to provide such information, although it will reveal whether someone has been removed from its register. The PIA does not seem to be clear about whether it is moving in that direction ; I hope that, if it continues to exist, the public will have easy access to such a register.

A number of other issues are relevant to the debate, although we have probably discussed them before. Let me mention a local issue. My constituents are concerned about employers' ability to skim off the so- called surpluses from pensions, and about circumstances that can arise when employers sit on the boards of pension funds.

Atherstone Components, in my constituency, was in trouble, and persuaded the pension fund to buy all the plant and machinery in the factory. The company then went bust, the plant and machinery was worth nothing and the pension fund was massively depleted. As a result, the pensioners may not receive all the money that is due to them.

We also need to ensure that only those who are genuine independent financial advisers can call themselves that. People should not be able to use that general phrase when they are working on commission--unless it is fully declared--or working for only one company.

The fundamental issue is the conflict of interest between advisers and their clients in a deregulated market. Banks, building societies, insurance companies and pension companies all seek to make money out of their clients by providing services. The Government have tried to solve the problem by introducing self-regulation ; instead, they have created a rather ramshackle and complex structure of overlapping self-regulatory authorities, which have presided over a series of growing scandals--the Lloyd's insurance market, Guinness, Levitt and, perhaps biggest of all, the pensions scandal.

If the Government are not going to move to statutory regulation, they should take seriously the difficulties that many in the industry see arising at the PIA. There is no public confidence in it. There is a desperate need to ensure that there is public confidence. The industry must succeed for the sake of the British economy. It is an industry that consumers need and in which most of the public are increasingly beginning to lack confidence.

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8.9 pm

Mr. John Greenway (Ryedale) : I welcome the debate. It is a timely opportunity for the House to discuss and consider some important matters. I disagree with most of the Opposition motion.

I remind the House of my interest. I have worked in the insurance and pensions industry for over 20 years as an insurance broker. I am an adviser to the Institute of Insurance Brokers. Perhaps most important in terms of this debate, I am an elected member of the Insurance Brokers Registration Council which regulates some, although not all, insurance broking firms under the Financial Services Act 1986.

It may interest the House to know that the IBRC is a statutory regulator, answerable to the House through the Secretary of State for Trade and Industry, operating under the provisions of the Insurance Brokers (Registration) Act 1977 and subsequent amendments. It has a majority of practitioner members, all of whom are elected, which in my experience greatly assists its effectiveness. The registration council was set up to regulate the profession of insurance broking, and I should like to pay tribute to its founder, Mr. Francis Perkins, who sadly died recently, and for whom a memorial service was held in the City of London today.

The IBRC is authorised by the Securities and Investments Board as a recognised professional body. That provides authorisation only for those insurance brokers whose business profile is not wholly or mainly the giving of investment advice. The registration council currently authorises some 1,460 insurance broking firms under the Financial Services Act, out of a total of about 3,850.

The chairman of the council, Mr. Ian Ritchie, wrote recently to all the authorised firms requesting details of any pension transfer business that they had undertaken. No less than 99 per cent. of authorised firms have responded to the survey, and the council's provisional assessment of the responses is that there has been a small number of pension transfer cases transacted by firms authorised by the council. I should make it clear that that relates to people transferring out of occupational schemes into personal pensions. Seven cases have been identified. It does not yet relate to any who have opted out of SERPS into personal pensions, although my impression is that the number will not be as great as in other sections of the market.

I cannot give the House any idea about the position on pension transfers with those insurance broking firms that are regulated under the Financial Services Act--not by the council but by FIMBRA. There are about 735 such firms. It may surprise some hon. Members to learn that there is a division of regulation under the Financial Services Act of members of the insurance broking profession. It arises entirely because of the drafting of the Financial Services Act and the "wholly or mainly" provision. The registration council has consistently argued that that anomaly should be removed, but that is an issue for another day.

The IBRC scope rule permits firms authorised by the council to transact only life assurance and pensions business, not give other investment advice. It is a narrow scope rule. It is important to remember that the registration council provided perfectly adequate regulation of insurance broking firms for that class of business long before the Financial Services Act came into being.

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Under the Insurance Brokers (Registration) Act, the council continues to have a statutory duty, answerable to the House, to oversee all the work of all insurance broking firms for all their business, even that part of the business, such as pension schemes, for which they may be authorised under the Financial Services Act by FIMBRA.

I am sure that the House will see that that leads to considerable difficulty, of which the House should be aware.

Intermediaries--insurance brokers--are sometimes struck off the council's register as a result of disciplinary action, often for failing to provide the required evidence of continuing solvency. Yet their authorisation with FIMBRA continues. They drop the term "insurance broker" from their letterhead and continue to give advice about general insurance, subscribing to the Association of British Insurers' code of practice.

The insurance ombudsman, Sir Julian Farrand, in his latest report criticised strongly the ABI code of practice as inadequate. He has constantly called for all insurance intermediaries to be supervised by the registration council, but that idea has not found favour with the ABI or the Department of Trade and Industry, which appears to take the view that statutory regulation of intermediaries can create a barrier to entry to the profession or business, and that it would be anti-competitive.

In essence, if an intermediary is to give advice about life assurance and pensions contracts, he must be authorised by a recognised body under the Financial Services Act ; otherwise, it is a crime to give advice. However, he does not have the same statutory obligation to be authorised by anybody to give general insurance advice. General insurance is not the subject of this debate, but it is important for the House to understand that that is what is adding to the confusion in the marketplace about the status of various independent intermediaries. The House needs to grasp this issue firmly.

Too much confusion of the differing objectives of regulation and competition policy lies at the heart of many of the problems that we now see in the Financial Services Act regime. It certainly undermines its effectiveness. That is nowhere better illustrated than in commission payments.

There is justified concern that if one company pays a higher level of commission than another, it can influence or be an inducement to the advice of an adviser and the choice or recommendation of the company. That problem dogged the life assurance and pensions industry for years. When the Financial Services Act was introduced, life offices agreed a maximum commission scale, which most people in the industry believed was in the interests of the consumer.

What happened ? The Office of Fair Trading advised that the maximum commission agreement was anti-competitive, and it was scrapped. The result was a bidding up of commissions, with life offices doing deals with high street banks and building societies through tied agency agreements, under which over-the-odds commission has been paid for new business in personal pensions and in endowment policies linked to mortgages. The commission scramble coincided with the changes in pensions legislation which allowed pension transfers and allowed individuals to opt out of either occupational schemes or SERPS into a personal pension plan.

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Some six years later, what do we find ? The problem of commission and disclosure of status remains unresolved, because of the continuing confusion between the need for strong regulation in the consumers' interest and the anti-competitive argument from the Office of Fair Trading. We still await the outcome of the SIB consultation on the new commission disclosure regime upon which my right hon. and learned Friend the Chancellor insisted.

I would not argue that all independent intermediaries and insurance brokers are whiter than white--some are not--but independent intermediaries have undoubtedly been disadvantaged by the current regime, while so-called tied agents, or appointed representatives, who currently outnumber them by about 10 to one, have gained considerable business volumes, often at the expense of the quality of advice to the consumer. It is my deep suspicion that, when the inquiries into pension transfers are fully unscrambled and resolved, we shall find that the problem was mostly in the tied sector, where people were not properly trained to give advice.

It is therefore crucial that, in any new disclosure regime to be approved by the Chancellor of the Exchequer and the Director General of Fair Trading, in which I am absolutely sure that my hon. Friend the Economic Secretary will have a considerable involvement, independent intermediaries and tied agents are put on an equal footing.

Mr. Nick Hawkins (Blackpool, South) : Does my hon. Friend agree that part of the confusion has been the concentration in many debates on the divide between the independent and tied sectors ? The consumer requires good advice, and there is a suggestion that somehow "independent" advice does or does not mean good advice, and that "tied" advice does or does not mean good advice. We need good advice, whether it is independent or tied, and we need the same standard for both.

Mr. Greenway : That is true, but the situation is even worse. General intermediaries--household names such as AA Insurance Services and Swinton Insurance--are tied in respect of life assurance. How can they possibly say that they are giving independent advice across the board when, on the general insurance side, they are giving advice from a range of companies while under the Financial Services Act they are tied?

That is why some firms are no longer regulated by the Insurance Brokers Registration Council. It highlights the extent of the confusion in the minds of the public. I was going to deal with the PIA, but my hon. Friend the Member for Blackpool, South (Mr. Hawkins) reminded me of another important point, for which I am grateful. It has been said time and again that the public will have greater transparency about where the problems lie in respect of the PIA and who regulates or authorises whom. The trouble is that, unless we square the circle across the insurance industry in terms of intermediary advice, there will continue to be the confusion highlighted by the Consumers Association in its evidence to the Treasury Select Committee the other day. It said that visiting an insurance broker was like going to the worst kind of disreputable second-hand car salesman. I look forward to seeing the Committee's minutes of evidence to clarify that quotation, which has been reported heavily in the financial press. The trouble is that that notion is not true.

The problem is that people do not know the difference between intermediaries who give the best advice and

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volunteer for effective regulation as all insurance brokers do--as I have already said, there is no statutory requirement to be registered, and one needs to be registered only if one uses the words "broker"--and the typical Arthur Daley outfit which should be drummed out of business. It is a tragedy that that still remains the case. There are encouraging signs that the commission explosion to which I and other hon. Members have referred is at an end, and that we may yet see a return to the more sensible arrangements of some years ago, when commission had to be earned over a longer period, thus creating a much better link between the quality of advice and the commission received--if a policy lapsed immediately, one received almost no money. That is not what happens at the moment.

It is often suggested that some policyholders do not understand the long- term nature of the policy they are buying. On the face of it, that cannot be said of pension policies--one cannot possibly expect to benefit from a pension policy until one reaches retirement age. What has confused the issue, and what lies behind much of the criticism that we have heard today, especially from the Opposition--to the effect that people received bad advice about, for example, opting out of SERPS into a personal pension--is the ability to opt in and out. People were sold long-term contracts for perhaps 25 or 30 years, whereas their personal circumstances were such that, after two or three years of premium payments, large chunks of which were swallowed up in commission and charges, they had to opt back into SERPS, if they were given the right advice. That is one of the issues that the Government must sort out in their review of the incentives for people to opt out of SERPS.

My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) made a brilliant speech, in which he made it absolutely clear that, although it has to be conceded that there has been bad advice on pension transfers, the scale of the problem may be rather smaller than has been suggested. Although there will be different views about the extent of the problem, it is clear that the industry itself is making excellent progress in putting matters right.

The problems of pension transfer cases are not, as the Opposition would have us believe, evidence that self-regulation does not work--quite the opposite. It is only because regulators, under the supervision of the SIB, have acted as they have that the issue has come so forcibly into the public domain. That is not to say that FSA regulation was perfect when some of the pension transfers about which we are concerned took place.

I have already outlined the problems caused by the commission structure. A matter of even greater concern was the inadequate supervision of life offices by LAUTRO, which meant that far too many representatives were giving advice without proper qualifications or training. More than three years ago, LAUTRO told the all-party insurance and financial services group, of which I am the chairman, that it was tackling the problem head on. We now need to examine the results of its activity.

At that time, more than 200,000 individuals were authorised as appointed representatives or tied agents by LAUTRO for its member firms. We are now down to fewer than 90,000. Why has the number dropped so remarkably ? It is because LAUTRO, like FIMBRA and the Insurance Brokers Registration Council, has introduced a regime whereby one will not be authorised without having passed the exams for the professional qualification, with either the

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Chartered Insurance Institute or the Society of Financial Advisers which is being set up. The industry is now moving towards a situation in which everyone who gives advice will have to have a proper professional qualification before doing so.

LAUTRO realised that Norwich Union had not come up to scratch or met the required professional standard. I dare say that other life assurance companies will receive similar treatment. We should applaud what has happened, and the fact that standards will improve, because that must be in the interests of consumers.

I fail to see how a statutory regulatory regime would have made a scrap of difference to the regulatory improvements that we are now beginning to see. If there is any sadness in this, it is that Norwich Union thinks that it should have an 800-strong direct sales force strong to sell life assurance and pensions contracts. When I was involved with the day-to-day running of my firm, life offices such as Norwich Union used to offer their policies only through insurance brokers and other genuine independent intermediaries, including the banks and building societies in the high street. Of course, that was before the FSA.

With the notable exception of the Bradford and Bingley building society, high street banks and building societies no longer offer independent advice --only tied advice. That is one of the problems that the FSA has created of which we should not be proud, but we can be proud that the industry is at least putting right the quality of advice. Self-regulation is now beginning to deliver a significant improvement in the regulation of investment advice for the benefit of consumers.

In the context of pensions transfers, the current regulatory regime has taken the appropriate action. If the FSA had introduced a statutory regulatory regime, as some suggest is now appropriate, it would not have brought the benefits that some people believe it would, because the same officials at the Department of Trade and Industry and the Treasury and the Securities and Investments Board, or its equivalent, would have drawn up and implemented the various rule books.

It is not meant as any personal criticism of any Minister past or present, but I also strongly suspect that if Ministers had been more directly answerable to the House for regulatory failures, they would have been more, rather than less, defensive in answering questions. We must not forget the lesson of the Barlow Clowes affair. In that case, the ombudsman report said that the officials in the DTI were not sufficiently streetwise to see what was going on in the industry. That is why we must maintain a strong practitioner involvement in all the regulatory regimes.

A number of hon. Members have mentioned the Personal Investment Authority. I simply want to say that the costs of regulation envisaged are far too high, and I fail to see how a 40 per cent. increase in costs for FIMBRA members next year could possibly be said to achieve the Personal Investment Authority's objective of more efficient and cost-effective regulation.

The PIA has not done its homework soon enough and adequately enough on professional indemnity insurance, and it now recognises that. While there has been a lot of consultation already in the formation period for the authority, it would have been better if the prospectus recently published had been more of a consultation document rather than a "take it or leave it" proposition, which has so angered and outraged people in the independent intermediary sector.

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Nevertheless, I believe that, on balance, the PIA represents the best alternative available for resolving the current difficulties of the financial services industry, especially those relating to compensation and consumer complaints. Opposition Members should at least welcome the fact, as I do, that my noble Friend Baroness Turner of Camden, who used to sit on the IBRC, will be the ombudsman for the PIA.

There may need to be some further legislative change to help the PIA on its way. Perhaps the best thing that could happen in the next two or three weeks is for the PIA to recognise that a start date of 1 July is probably too ambitious, and to consider a three-month delay so that we can resolve some of the problems.

Mr. Hawkins rose

Mr. Greenway : I will not give way, because I want to draw my remarks to a conclusion.

It is undoubtedly a matter of great concern if individuals have been given wrong advice about their pensions. The financial services industry recognises that fact, and is keen to put matters right. Nevertheless, we should ask ourselves what happens when people make bad choices in other facets of their lives, such as buying the wrong house or the wrong car or the wrong shares, or putting their money in the wrong building society. Do we have, or do we expect to have, a regulatory regime to deal with every silly mistake that consumers make ? I believe that we should not expect that.

The last thing I would urge of my hon. Friend the Economic Secretary not to overlook, because it was never answered in the retail regulatory review that the SIB set up on the instructions of the Chancellor 18 months ago, is that we still must work out where the balance should be struck between caveat emptor--let the buyer beware--and a proper regulatory regime for the benefit of consumers. 8.33 pm

Ms Diane Abbott (Hackney, North and Stoke Newington) : Over and over again, we have to listen to Conservative Members get up and make self- serving speeches in defence of the financial services industry. I should like to say a few words on behalf of the consumer. The essential point about the pension transfer scandal is that it goes to the heart of what is wrong with our financial services industry and the regulatory regime with which we have been saddled after 14 years of Tory Government. The Consumers Association described the financial services industry as one which is

"characterised by a level of incompetence, greed, arrogance and fraud".

That just about sums it up. The problem that we face in 1994 is that, as a result of financial deregulation and the policies of the Government, more and more people are being exposed to the workings of the financial services industry, and the regulatory system is failing them. As more and more ordinary consumers whose mothers and fathers would have never had any dealings with insurance agents or stock brokers or the financial services industry have become engaged with them, it becomes clearer that the regulatory system has failed. Where did the pensions transfer scandal start ? I believe that it started, as did so many of the ills that currently beset us, in the triumphalist atmosphere after the 1983 election.

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After that election, a group of Thatcherites based at the Centre for Policy Studies began their so-called campaign to free the pensions industry. It was not about freeing the pensions industry, but about freeing the City to make vast profits out of hapless consumers by selling them insurance and other products. Norman Fowler, the then Secretary of State responsible, set up a retirement study group which involved a number of people including Mark Weinberg, the then chair of Allied Dunbar Assurance plc. At the time when the Government were involved in that project, Derek Bandey of the National Association of Pension Funds Ltd. said :

"I kept warning the Government that there is more freedom, and more security in a fund managed by elected trustees than in private pensions managed by a bank or an insurance company."

The association also said :

"It would be obdurate and shortsighted of the Government to disregard the strength of feeling about the very real disruption that must follow if the proposals are implemented . . . We regret that the stability necessary to provide for the long-term retirement needs of the working population is now to be destroyed",

and destroyed it was.

The Social Security Bill 1986 contained incentives for people to go into their private pension--a 2 per cent. rebate on national insurance contributions--and it was described at the time as a cowboys' charter. Some Conservative Members have talked about the benefit of hindsight, but, at that time, people tried to put to the Government the dangers that would follow from deregulation and opening up ordinary people to the attentions of the cowboys in the financial services market.

As it happens, at the Department of Social Security in those days, there was a Parliamentary Under-Secretary called John Major. When he was asked about the possibility that many people might lose under the new regime that he was bringing in and what he would do to stop people losing out badly, he did not quite say that it was nothing to do with him, but he said :

"The concept of turning this into a one-way risk-free option is entirely alien."

In other words, people were going to lose and he had no plans to do anything about it. In that Bill, John Major turned down statutory limits on commission charges which would have been the answer to many of the problems that we face today. He turned down statutory limits on administrative charges which would have also spared many people the financial misery that they face today.

With the Social Security Bill 1986 and with the green light being given to the private pension industry cowboys, the cowboys went to work and we now see the results. The KPMG survey, to which hon. Members have referred many times--I shall not repeat what has been said--was a careful analysis of 735 client files which found that 91 per cent. did not comply with regulations and that 37 per cent. were suspect.

Conservative Member after Conservative Member has bobbed up to say that the press and Labour Members were making too much of the report, that the report was concerned only with technicalities and that there was not much to worry about. For Conservative Members to say that the KPMG report is simply a matter of technicalities is like Al Capone saying that he was done for his tax problems. The KPMG report revealed, and the further inquiries that the SIB is conducting will reveal, that tens or hundreds of thousands of people will have lost out because of the activities of pensions salesmen. They were not pensions salesmen who did not know, or who had not read

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the right forms, or who had not been trained, but pensions salesmen who were driven by a commission-led system so that they did not care about the outcome as long as they could bank their commission. Some Labour Members will be able to speak from personal experience about the damage that those pensions salesmen have wrought in their communities.

Let us hear less from Tory Members about the problems being mere technicalities. The problems are structural and relate to the workings of an under-regulated sector and commission-led salesmen. One of the characteristics of the debate on the pension trusts debacle has been a high degree of complacency from both the industry and Conservative politicians. Tory Members said that the pension transfer scandal shows that self- regulation works and we should look at how the industry has moved to deal with the matter. The fact is that it has taken from 1988 until 1993 for the regulatory authorities to do anything about a problem that was foreseen when the legislation was introduced.

A series of representatives of the industry have appeared before the Treasury and Civil Service Select Committee and breathed complacency and smugness. Colette Bowe, the executive-to-be of the Personal Investment Authority, said that the problem with pension transfers was largely an issue of competence. We had Mr. Newmarch from Prudential, which was heavily involved in selling pensions to mineworkers to their financial detriment. Mike Newmarch said that Prudential had examined its affairs carefully and found little evidence to support any need for concern among the pension transfers that it had arranged. Up and down the country, people who bought private pensions from Prudential say differently. Mr. Newmarch talked about the possibility of poor selling on the margin.

Worst of all perhaps, Godfrey Jillings, the chief executive of FIMBRA, said that the SIB, in pursuing its investigations into pension transfers, made a mountain out of a molehill. The Chancellor of the Exchequer, Mr. Kenneth Clarke, showed more complacency.

Mr. Deputy Speaker (Mr. Michael Morris) : Order. The hon. Lady knows that if she is referring to current Members, she must give the constituency --in other words, Rushcliffe, Huntingdon or Sutton Coldfield. Perhaps next time we can have the constituency.

Ms Abbott : The right hon. and learned Member for Rushcliffe (Mr. Clarke)

Dame Elaine Kellett-Bowman : You should know.

Ms Abbott : He is no colleague of mine. He came before the Select Committee reeking of complacency and said that the SIB appears to be dealing with the matter ; it seems to be on top of the problem. He should tell that to the thousands of pensioners who now have a shadow of fear over their old age because they believe that, as a result of the activities of private pension salesmen, they will be worse off than if they had stayed with their occupational pensions. Why are the issues important ? They are important not only because the industry is anxious to have its interests catered for. They are important, first, because of the personal plight of the ordinary people who have incurred serious financial losses and who are living in a shadow of

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fear ; and, secondly, because we have a Government who are committed to moving key elements of the welfare state into the private insurance sector.

We have heard the discussions and we have read the papers about the possibility of not only expanding the private pension sector but moving sickness and unemployment insurance into the private insurance sector. If the Government tell ordinary people that the things that they took for granted in the past--security in sickness, security in old age and security in unemployment--will be moved into the private pensions sector, the Government must give them an assurance that the financial services sector is properly regulated. However, that assurance cannot be given at present.

The issues are also important because in the 1990s patterns of unemployment are changing out of all recognition. When I left school in the 1970s, people left school and sought a profession, be it hairdressing, advertising or banking ; we were looking for a job for life. However, young people leaving school now are looking at careers where they will move through a whole series of employers. Perhaps they will work much more on a freelance basis than we or our parents envisaged.

When we talk about a working environment in the year 2000 and beyond, people will not be looking at a single employer for life. They will be looking at a series of employers, a higher level of self-employment than we have seen and a higher level of freelance work than we have seen. That makes it important for the financial services industry, as it relates to personal portable pensions, to be beyond reproach and properly regulated.

The issues are also important because they shed light on the problems that are built into the financial services industry, to which I referred earlier, and the predatory nature of the industry. That predatory attitude is leaking into the activities of banks and building societies. We all find in our postbags complaints from people about the changed attitude in the high street banks and building societies.

The question that the House must address is what should happen now. One thing that should happen is that we should hear fewer complacent and self- serving speeches from Tory politicians and paid representatives of the industry. First, the financial services industry needs to be called to account for the pension transfer scandal. If necessary, people must be prosecuted for mis-selling. With all the soft soap and the talk about the matter being one of technicalities, there is a danger that the guilty people--the managers of organisations who deliberately drove their salesmen to meet targets, regardless of the benefits of the product that they were selling--will go untouched. First and foremost, the people who bought the pensions and incurred a loss want to see the industry called to account ; it must not be allowed to get off scot free.

Secondly, it is important that any investigations into what happened should be made in the open. Last but not least, all the consumers who have lost out should be fully compensated. It is important that Ministers realise that it should not be for the individuals who bought the private pensions to think that they might have been sold a dodgy or inadequate pension. The industry must identify those people and contact them all. Where there has been a loss as a result of mis-selling, the people must be compensated. That is what consumers want to know. It should not be up

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to them to know that they have been sold a poor product. They must all be contacted, and they must all be compensated.

Another thing that should happen is that Ministers must look seriously at a system of commission-only financial advisers. I have no doubt that if we clear away the verbiage about training and competence, at the heart of the problems is a commission-only system which drives people to make sales, whether or not the product that they are selling is in the long-term good of the client.

We must also ensure that we have proper disclosure under whatever regulatory scheme eventually unfolds. I have lost count of the times that representatives of the industry have told the Treasury and Civil Service Select Committee that we cannot have disclosure because the consumer would not understand it and would not know what to do with the information. That attitude is patronising, arrogant, smug and self-serving. Of course, there must be elements of disclosure which even the simplest consumer like myself can understand. The industry must not be allowed to get away with saying that it will not disclose commission and relevant information because the poor consumer will not understand.

Above all, what should happen is that the Government, who are committed to a large and expanding financial services sector, and who some of us believe are committed to moving elements of the welfare state into the private insurance market, must look seriously at the financial services regime. If the current regime has failed, and if the PIA is dead on arrival--as some of us believe--the House must look sooner rather than later at a tough system of direct statutory regulation.

On the pension transfer issue, the right hon. and learned Member for Rushcliffe said that anyone who has been adversely affected can see their way to a remedy. Unfortunately, that is not the case. Thousands of people who may have been adversely affected do not know what the remedy is, and they want the Minister to shed some light on the issue tonight.

The Government seek to dismiss the idea that the question of legislation on financial services can be opened up once again. The Chancellor of the Exchequer has dismissed the notion of statutory regulation. He said to the Select Committee :

"At the moment I have seen nothing which suggests to me that it calls for fresh statutory provision."

Far too many hon. Members who speak about the subject of financial services, far too many who serve on Committees and far too many people who advise the Government represent vested interests and, essentially, represent the industry. It is time the House listened to a balance of voices. If the intention is to open ordinary consumers up to the attention of the financial services industry, people deserve an industry that is cleaner, better regulated and more honest than the current one. The pensions transfer issue is a major scandal--a fact that all the speeches by paid advisers to the industry will not alter. The public are waiting to hear what Ministers plan to do, especially about the structural problems in financial services and about regulation of the industry.

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