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and is one example of them. For some reason, the Government seem paralysed and are not prepared to do anything about it. Before he became a Minister, the Economic Secretary used to say there were many criticisms of the regulatory system, but, since taking office, he has said nothing about it. Not surprisingly, the Chancellor has not turned his attention to the matter in detail.

The industry employs 2.5 million people who look to effective regulation to carry out their trade. The public depend on the financial services industry and will increasingly look to it for pensions and savings products. People look to the House and the Government to start to govern and put in place a regulatory system that commands public confidence, but I suspect that when the Minister replies, we shall yet again listen in vain for assurances as the Government continue to abdicate their responsibility in this crucial sector.

Mr. Mike O'Brien : On a point of order, Madam Speaker. Is it in order for me to clarify that my reference to Atherstone Components was a reference to a company which has been taken over in the past three years by reputable directors, and that the pension scheme to which I referred was the Burlington pension scheme which is the one being questioned by those workers now at Atherstone components ?

Madam Speaker : I am grateful to the hon. Member for clarifying his earlier statement. I hope that all hon. Members, before they make speeches and comments, will ensure that what they have to say is absolutely correct before they stand in the House and make such statements. [Interruption.] Order. That applies to all Members of the House, irrespective of their status.

9.43 pm

The Economic Secretary to the Treasury (Mr. Anthony Nelson) : We have had a serious and measured debate, as befits the subject, which is of serious concern to many of our constituents and has raised anxieties beyond the House. I say immediately that I welcome the opportunity of answering what I think has been a forthright and measured debate on an important subject.

The Government give high priority to investor and depositor protection and I shall seek to argue that, in a number of ways, we have sought significantly to enhance the protection of both. We also have an interest in free and fair markets. The employment in the industry to which the hon. Member for Edinburgh, Central (Mr. Darling) referred is extremely important, as are the liquidity and trade it brings to the country. However, while a balance must always be struck between the needs of an important industry--as part of our economy--and the protection of investors and depositors, I must make it clear that, in the context of our responsibilities, the Government and I will always place more emphasis on the latter.

In the short time that is available for me to respond to an extensive debate, let me observe the proper courtesy and refer to some of the points raised by hon. Members. Following the opening speeches by the hon. Member for Glasgow, Garscadden (Mr. Dewar) and my right hon. Friend the Secretary of State for Social Security, the right hon. Member for Berwick-upon-Tweed (Mr. Beith) made an important point about commission-driven business. That point was picked up by a number of hon. Members, including the hon. Member for Garscadden.


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There is a lot of sloppy thinking about this matter. I do not agree with those who say that commission must be outlawed ; I do not believe that it is necessarily a bad thing. I also believe that, if we highlight commission as the cause of some of the serious problems that have undoubtedly arisen, we may not be dealing with the real cause of those problems.

If commission related to these or other products were outlawed, it would certainly lead to a diminution in the number of distribution outlets. Moreover, many people who would otherwise want to give advice--tied company representatives--would find themselves in a difficult position if they could not give that advice, whether on a commission basis or objectively. There is a danger that people would be even less well informed about the products on offer.

Surely transparency of commission is much more important. There should be much more clarity about what is involved in buying a product : we should ensure that people understand what they are getting into.

If I may presume to make one small criticism of the debate, I think that there was inadequate discussion of the awareness of the investing public : precious few hon. Members mentioned that. The Government--as well as the House, in various capacities--should turn their mind to how we can ensure that our constituents are more aware of the novelty and content of products, and the risks involved. We can seek to construct a system that will create greater public confidence in the industry, but we cannot deny that "caveat emptor" must play its part. The taxpayer cannot always pick up the bill for things that go wrong, any more than he can provide an absolute guarantee that everything will go right. We must place some emphasis on protecting the individual.

Dr. John Reid (Motherwell, North) : Will the Minister give way ?

Mr. Nelson : I hope that the hon. Gentleman will allow me to make some progress in the limited time available. I will try to give way later.

The right hon. Member for Berwick-upon-Tweed mentioned the PIA. I reiterate my belief that its establishment may have advantages. I am subject to some limitation : I must wait for a report that I am expecting from the Director General of Fair Trading about the competition aspects before I can extol the PIA with more enthusiasm. However, although it may not be the only show in town, I think it is the best show in town and that it is "on track". I hope that the various constituents of FIMBRA and LAUTRO will view it favourably. I also believe that it should not, and will not, be deflected by the self-interest of some of its detractors. I hope that its prospectus will be carefully and favourably considered.

The right hon. Member for Berwick-upon-Tweed also spoke of the need for tougher statutory regulation. I would argue that that is exactly what we have tried to introduce, within the ambit of the Financial Services Act. The hon. Member for Edinburgh, Central, with his revolutionary approach, would seek to cast aside our present system in favour of a lurch into the unknown--a new direct, dirigiste statutory system of regulation. As my hon. Friend the Member for Ryedale (Mr. Greenway) said, we do not support such a system.


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What I found most incredible about the speech of the right hon. Member for Berwick-upon-Tweed was his comment, after he had made the points that I have mentioned, that he did not agree with the motion but would nevertheless vote for it. That is another typical example of the Liberal Democrats' wish to appeal to all aspects of opinion. My hon. Friend the Member for Bournemouth, West (Mr. Butterfill), whom I acknowledge as chairman of the all-party occupational pensions group, made an outstanding speech. He spoke about the KPMG report, and said that the scale of inappropriate selling may not be as widespread as some alarmists have suggested. I agree entirely. The degree of non-compliance with the rules of conduct does not necessarily translate itself equally into the extent of possible mis-selling or disadvantaged selling. That is why the Securities and Investments Board has established a steering group to look into these matters and take a considered and careful analysis of the extent to which things have gone wrong.

My hon. Friend the Member for Bournemouth, West also said that the SIB should have insisted from the beginning on one self-regulating organisation rather than two for the retail sector. Because he was a member of the famous Financial Services Bill Committee, my hon. Friend will remember that there was an argument in the mid-1980s about not having a streamlined, simplistic approach towards regulation, and that there might need to be diffusion.

With the benefit of hindsight, that was an erroneous judgment about how things should or would turn out. The legislation does enable a more streamlined structure to be delivered, and that is exactly what is happening.

The Government's approach has been to seek to maximise within the existing legislation the powers that are available. Andrew Large's report, which I whole-heartedly endorse and support, is determined to do exactly that, by bringing about a quantum leap in the standards and adequacy of investor protection, by using its powers of enforcement, by having more adequate standards of monitoring, and by ensuring that the competence of the SROs to oversee is more adequately met. I believe that it has already signified that such changes are in the making.

My hon. Friend the Member for Bournemouth, West spoke also about the problems of professional indemnity insurance. The PIA is aware of the problem. Cover is available, but I acknowledge that it is at a price. I expect the PIA to look at that.

My hon. Friend made an important point about the training of trustees. That was looked at by the Goode report. It made a number of recommendations in that regard, one of which was that companies should allow time off for their employees who are trustees of occupational pension trust schemes, so that they can engage in training. I attach great importance to the training of trustees, and it is an important recommendation.

The hon. Member for Great Grimsby (Mr. Mitchell) is not currently in the Chamber, but he raised the problems of the cost and burden of commission charges. He said that he felt that, in future, pension provision would be inadequate. That point was picked up by my hon. Friend the Member for Havant (Mr. Willetts), who said that he did not expect a demographic time bomb to explode. However, a theme running through much of the debate was whether


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provision, in addition to that provided by the state, will be adequate for the long-term future, and whether it will disappoint those who have contributed to it.

We know that the size of the working population in this country will diminish relative to the pensioned population. Currently the ratio is about 3.3 :1. Over the next 50 years, it will reduce to 2.5 :1. That need not necessarily bring about major problems if the economy continues to grow, and grows substantially, and if both the private and public sectors can maintain their obligations. However, if the state is not to place an impossible burden on this and future generations, the case can be argued for increasing private provision. That is why the Government have supported the case for personal pensions. That is why the arguments for deferred consumption and displacing spending now for longer-term provision to care for an increasingly elderly populace are well made, and will be delivered more efficiently through the private rather than the public sector. My hon. Friend the Member for Havant made an extremely telling and compelling speech. He denounced Labour's inability to understand that the labour market has changed. Such changes make more appropriate our provision for personal pensions rather than for a monopoly of state schemes. My hon. Friend also said that the concern about transfers was better founded than that about opt-outs. That is absolutely correct.

The hon. Member for Warwickshire, North (Mr. O'Brien) said that there was a crisis of confidence in the industry. That is an overstatement. There is legitimate concern about the problems that we have been debating, but it is in no one's interest to be alarmist. The Government have sought to be neither alarmist nor complacent about those problems. The hon. Gentleman said that the PIA might not have sufficient resources, but it has also been argued that it is going to make too much of a demand by way of subvention on its members.

It is true that the projected costs for the new PIA will be more than the sum total of the existing running costs of LAUTRO and FIMBRA, but good regulation costs money. Also, there is a clear trade-off between the cost of compensation, which is made if there is inadequate regulation, and the cost of regulation itself. The prospectus for the PIA contains reasonable and modest proposals for funding such activities.

The hon. Gentleman also spoke about Mr. Palmer and Miss Colette Bowe, the chairman and chief executive of the PIA. I consider Mr. Palmer to be well qualified to do the job. He gave considerable public service as a member of the board of the SIB, and it is hurtful and inaccurate to suggest that he is unfit to fulfil the valued role that he is currently undertaking.

My hon. Friend the Member for Ryedale spoke about the Insurance Brokers Registration Council. It is interesting that it has a lower incidence of problems with transfer business : that is indicative of the IBRC's high standards. He also said that a new disclosure regime must put tied agents and independent intermediaries on the same footing. That is an extremely important point, which was also raised by my hon. Friend the Member for Romsey and Waterside (Mr. Colvin). People must understand that the intention is that there should be a more level playing field between tied representatives and independent financial advisers.

For many years, we have been all around the houses on the issue of commission disclosure, and it was only when


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my right hon. and learned Friend the Chancellor of the Exchequer faced up to the problem, made a decision and ensured that it applied not only to independent financial advisers but, on an equivalent basis, to the management charges of the tied sector, that we witnessed a significant change, which has been widely welcomed not only in the financial services industry but by the investing public. Mr. Campbell- Savours rose

Mr. Nelson : I am sorry, but I cannot give way. I wish to deal with the points that have already been made.

The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) spoke up for the consumer, and I congratulate her on that. She said that the industry must be beyond reproach. I agree that that is an aspiration which the industry should always hold before it. My hon. Friend the Member for Esher (Mr. Taylor) did not advocate statutory regulation, but said that the present system must work better. I agree, and that is exactly the course on which the Government have embarked.

My hon. Friend called for redress for those who have been disadvantaged by the problems that we have discussed, and the complicated issues involved in assessing exactly how that can be brought about are now being considered by the working party and steering group of SIB. I attach great importance to the assurance given by the chairman, Mr. Andrew Large, that redress must be forthcoming, but it must not be at the taxpayer's expense. Why should the taxpayer stand as an indemnity behind such cases ? It must be for the industry to put right any mistakes that have been made. Mr. Campbell- Savours rose

Mr. Nelson : I shall give way in a moment.

The hon. Member for Falkirk, East (Mr. Connarty) said that there was inadequate training for representatives. I share his concern to deliver higher standards of training in this respect. It is one of the issues that the PIA should be considering.

My hon. Friend the Member for Romsey and Waterside, with whom I feel a special sympathy for having to make a speech at 9.16 pm at the tail end of a long debate, welcomed the PIA in principle ; I thank him for that. He asked to whom it will be accountable. The answer is that the PIA will be accountable to the SIB. It will have to determine whether the PIA, as an SRO, is conducting and fulfilling the statutory requirements. It will be possible for such authorisation to be withdrawn if it is not fulfilling those requirements.

In that and other ways, I believe that the Government are delivering a step change in standards of investor and depositor protection in the country. We have taken very seriously the concerns that have been expressed in the debate, as I am sure have members of the PIA and the industry more widely.

We must ensure for the future that we have a system of private pensions that meets people's aspirations, but delivers them the security they require. We must have for the future a system of personal social security that not only relies on the provision of state finance but allows people to make provision for themselves. Mr. Derek Foster (Bishop Auckland) rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.


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

The House divided : Ayes 254, Noes 309.

Division No. 190] [10.00 pm

AYES

Abbott, Ms Diane

Adams, Mrs Irene

Ainger, Nick

Ainsworth, Robert (Cov'try NE)

Allen, Graham

Anderson, Donald (Swansea E)

Anderson, Ms Janet (Ros'dale)

Armstrong, Hilary

Austin-Walker, John

Banks, Tony (Newham NW)

Barnes, Harry

Barron, Kevin

Battle, John

Bayley, Hugh

Beckett, Rt Hon Margaret

Beith, Rt Hon A. J.

Bell, Stuart

Benn, Rt Hon Tony

Bennett, Andrew F.

Benton, Joe

Bermingham, Gerald

Berry, Dr. Roger

Betts, Clive

Blair, Tony

Blunkett, David

Boateng, Paul

Bray, Dr Jeremy

Brown, Gordon (Dunfermline E)

Brown, N. (N'c'tle upon Tyne E)

Bruce, Malcolm (Gordon)

Burden, Richard

Byers, Stephen

Callaghan, Jim

Campbell, Mrs Anne (C'bridge)

Campbell, Menzies (Fife NE)

Campbell, Ronnie (Blyth V)

Campbell-Savours, D. N.

Canavan, Dennis

Cann, Jamie

Chisholm, Malcolm

Clapham, Michael

Clark, Dr David (South Shields)

Clarke, Eric (Midlothian)

Clarke, Tom (Monklands W)

Clelland, David

Clwyd, Mrs Ann

Coffey, Ann

Cohen, Harry

Connarty, Michael

Cook, Frank (Stockton N)

Cook, Robin (Livingston)

Corbett, Robin

Corbyn, Jeremy

Corston, Ms Jean

Cousins, Jim

Cryer, Bob

Cummings, John

Cunliffe, Lawrence

Cunningham, Jim (Covy SE)

Cunningham, Rt Hon Dr John

Dafis, Cynog

Dalyell, Tam

Darling, Alistair

Davidson, Ian

Davies, Bryan (Oldham C'tral)

Davies, Rt Hon Denzil (Llanelli)

Davies, Ron (Caerphilly)

Davis, Terry (B'ham, H'dge H'l)

Denham, John

Dewar, Donald

Dixon, Don

Dobson, Frank

Donohoe, Brian H.

Dowd, Jim

Dunwoody, Mrs Gwyneth

Eagle, Ms Angela

Eastham, Ken

Enright, Derek

Etherington, Bill

Evans, John (St Helens N)

Fatchett, Derek

Faulds, Andrew

Field, Frank (Birkenhead)

Fisher, Mark

Flynn, Paul

Foster, Rt Hon Derek

Fraser, John

Galloway, George

Gapes, Mike

Garrett, John

George, Bruce

Gerrard, Neil

Gilbert, Rt Hon Dr John

Godman, Dr Norman A.

Golding, Mrs Llin

Gordon, Mildred

Gould, Bryan

Graham, Thomas

Griffiths, Nigel (Edinburgh S)

Griffiths, Win (Bridgend)

Grocott, Bruce

Gunnell, John

Hain, Peter

Hall, Mike

Hanson, David

Hardy, Peter

Harman, Ms Harriet

Harvey, Nick

Hattersley, Rt Hon Roy

Henderson, Doug

Heppell, John

Hill, Keith (Streatham)

Hinchliffe, David

Hoey, Kate

Hogg, Norman (Cumbernauld)

Home Robertson, John

Hood, Jimmy

Hoon, Geoffrey

Howarth, George (Knowsley N)

Howells, Dr. Kim (Pontypridd)

Hoyle, Doug

Hughes, Kevin (Doncaster N)

Hughes, Robert (Aberdeen N)

Hughes, Simon (Southwark)

Hutton, John

Ingram, Adam

Jackson, Glenda (H'stead)

Jackson, Helen (Shef'ld, H)

Jamieson, David

Janner, Greville

Jones, Barry (Alyn and D'side)

Jones, Ieuan Wyn (Ynys Mo n)

Jones, Jon Owen (Cardiff C)

Jones, Lynne (B'ham S O)

Jones, Martyn (Clwyd, SW)

Jowell, Tessa

Kaufman, Rt Hon Gerald

Keen, Alan

Kennedy, Jane (Lpool Brdgn)

Khabra, Piara S.


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