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Mr. Howarth : I am grateful to my right hon. Friend. It is extremely important that the economic Departments respond to the issue with proper seriousness and address themselves intelligently to the proposition that is before them. It is not something that will go away ; it is a real issue. I am grateful that my right hon. Friend intends to draw to the attention of my right hon. Friend the Minister with responsibility for disabled people the remarks that I made this morning, but what I said was very much addressed to him and his ministerial colleagues.

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Mr. Sainsbury : I take that point. I was present when my hon. Friend was speaking and my right hon. Friend was not.

My hon. Friend the Member for Windsor and Maidenhead (Mr. Trend), in a rather philosophical speech--perhaps appropriate from Windsor--talked about the importance of engineering and spoke of what more we should do to enhance the status of engineers in our society. I very much agree with him. I was glad to hear him applaud the importance of trade. He will not be surprised when I say that I entirely agree that trade should not be disregarded.

I move on to some more substantial points--well, not necessarily more substantial, but matters to which I can refer at slightly greater length. My hon. Friend the Member for Hastings and Rye talked about support for business men who are helping to develop standards in Europe. That is important. We want to ensure that British business makes a full contribution to the development of those standards. If we do not, we can be sure that standards will be developed more to the advantage of industry elsewhere. For that reason, we have consulted on the matter. After listening carefully to the views of business, we concluded that we should contribute £7.3 million to the British Standards Institution and industry concerned with standards writing.

My hon. Friend the Member for Hastings and Rye also suggested that there could be benefits in an exchange scheme between the home civil service and civil servants elsewhere in the European Union and the Commission. I very much agree with her. Indeed, there are regular interchanges of staff with the French, German and Irish civil services. Some 140 United Kingdom officials are currently seconded to the Commission.

In 1990, we introduced a special scheme of recruitment, training and postings designed to equip young United Kingdom graduates to take and pass the European institutions' examinations. Our ultimate objective is to increase the number of UK permanent officials in the Commission and in other European institutions. That is in addition to the Commission's scheme for the exchange of officials which was introduced in 1993.

I am sorry that time is running a little short, and I want now to consider the extremely important subject of deregulation. That subject was referred to by my hon. Friends the Members for Hastings and Rye, for Havant, for Surrey, North-West and for Eastbourne who quite rightly--and I have a constituency interest in this--put his point in the context of tourism.

My hon. Friend the Member for Hastings and Rye emphasised the value of goal setting, risk assessment and compliance-cost assessment with regard to the work of the Health and Safety Executive. I fully agree with her points. My noble Friend--or noble brother--Lord Sainsbury, through the work of the task forces which he superintended, has identified that as an important point.

It is clear that Conservative Members agree that over-regulation reduces competitiveness and impedes growth. As we all know, the lack of legislative time has in the past prevented many common-sense changes to primary legislation. As my hon. Friends have made clear, such changes would benefit businesses, charities and individuals. That is why we attach such importance to the deregulation order-making power included in the Deregulation and Contracting Out Bill which is now being considered in another place and why we find it so strange

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that, once again showing their disregard for the interests of business and the wealth-creating importance of business, the Opposition oppose that Bill. We believe that proper parliamentary scrutiny and other stringent safeguards have been built into the Bill. The cumulative effect of the changes that the Bill could bring about would improve competitiveness by releasing business from unnecessary bureaucratic burdens.

Many of my hon. Friends, and the hon. Member for Newcastle upon Tyne, Central, mentioned the important subject of research and development. The so-called R and D scoreboard, which is sponsored by my Department's innovation unit, is published by Company Reporting Ltd. It is produced using individual company accounts and it helps to promote informed discussion between the industrial and financial communities and, more generally, informed discussion about the overall level of company R and D spend.

Like my hon. Friends, I welcome the increase in overall reported United Kingdom R and D spend which has increased by 9 per cent. to £7.1 billion in line with a similar rise in sales and profits. That is perhaps not altogether surprising because, as we all know and as Conservative Members recognise, it is from profits and retained profits that R and D and investment are likely to be financed. Britain's performance compares very favourably with the world's top 200 companies which reported only a 3 per cent. rise in R and D spend, a 2 per cent. sales increase and a 3 per cent. fall in profits. There were particularly notable increases, for example in the pharmaceutical industry, where the increase was 19 per cent. Other sectors also performed particularly well. In engineering, the increase was 10 per cent. It was 29 per cent. in media and 23 per cent. in support service sectors.

Mr. Cousins : Will the right hon. Gentleman give way ?

Mr. Sainsbury : Could it be brief, please ?

Mr. Cousins : I find the Minister's complacency on that point absolutely unbelievable and very destructive of the interests of Britain. Is he not concerned that about a third of our expenditure on research and development occurs in one sector of industry only, pharmaceutical ? Well done, pharmaceutical ; what about the rest ?

Mr. Sainsbury : If the hon. Gentleman had read the competitiveness White Paper, he would know that we are very far from complacent on the subject. I welcome the increase that we have seen and that we wish to continue in United Kingdom investment in research and development, but we will see that only if we provide a

business-friendly environment and allow business to make profits with minimum regulation, which is the last environment that the Opposition's policies would provide.

The United Kingdom has 13 companies in the world's top 200 spending companies. To put that in perspective, there are 81 in the United States, 48 in Japan, 17 in France, and only 11 in Germany in the top 200. Our top company is Glaxo, the third highest spender in its sector in the world.

Of course, research and development is important, but it is just one aspect of the far wider process of innovation. The White Paper, which I commend to the hon. Gentleman--perhaps he will read it--underlines United Kingdom industry's need to improve in many sectors of management and innovation if it is to be globally competitive. That underlines the fact that we are by no means complacent on

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the subject. My Department's "Managing in the 90s" programme has already promoted and demonstrated aspects of best practice to more than 50,000 managers. Increasingly, business links will be the local providers of that programme, providing the service more locally and effectively than it has been provided in the past.

The White Paper also reinforces the Government's commitment that research and development support is directed at improving our competitiveness. Recent initiatives build on last year's White Paper on science, engineering and technology which, as the hon. Gentleman will know, was the first for a very long time. It focused all Government science and technology expenditure and the science-based Government Departments and Europe on the objective of improving industrial competitiveness and the quality of life.

Our research and development funding is concentrated on sectors in which it can make the greatest difference. One sector of particular need is technology. We are working to help industry, especially smaller firms, to gain access to, and make use of, existing technology from all sources as well as state-of-the-art technology supported by United Kingdom and European research and development programmes. We are expanding our overseas technology services to make sure that innovations, technologies and management practices developed elsewhere in the world are available to British industry through business links and local or national networks. We are working with research and technology organisations and regional and other bodies with technology interests to prepare them to provide effective technology services to business link customers as well as their existing members and clients.

It is by helping firms to achieve maximum benefit from the wealth of research and development funding in the United Kingdom that we are ensuring that the taxpayer gets better value for money, but it is primarily for industry to fund its own research and development. It spends 50 times what my Department does. The important role of Government is to create and to continue to create the right climate for the private sector to be prepared to invest more in research and development. That is the way to sustainable economic growth in the longer term.

Mr. Thurnham : Will my right hon. Friend give way ?

Mr. Sainsbury : I shall give way, but only briefly.

Mr. Thurnham : Does my right hon. Friend agree that what would be most damaging of all to British industry would be to return to the trade union strife that we saw under the previous Labour Government ? Not only have Labour Members stayed away from the debate, but the news tapes outside show that there are cracks in the show of unity among contenders for the Labour leadership. The right hon. Member for Derby, South (Mrs. Beckett) is recorded as saying that she wants a return to secondary picketing and to sweep away large chunks of the Government's trade union reforms.

Mr. Sainsbury : My hon. Friend makes a very important point. It was just those attitudes and inflexibilities that acted as such a deterrent to management to invest and to carry out research and development.

I now refer to the single most important subject that has been touched upon by my hon. Friends, particularly my hon. Friends the Members for Norwich, North and for Havant. It features very largely in the White Paper, and that

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is education and training. Skills have never been more important for competitiveness, and that applies at all levels and in all sectors. The Government are committed to raising the levels of participation and attainment throughout education and training. We must develop the self-confidence and esteem of all pupils and students.

Much has already been achieved. The Government and their partners-- employers, schools, colleges and, of course, students--are beginning to close the gap which has been referred to between our performance and that of the best of our competitors. But there is undoubtedly still much to do. The demanding national targets for education and training provide a valuable focus for that work, and we are better placed to meet the need than ever before.

I shall turn to an example in education. More than 70 per cent. of 16-year- olds now stay in full-time education, and well over 90 per cent. are in some form of education and training. More of our young people secure good GCSE and GCE A-level results than ever before. A record number--it is almost one in three compared with about one in eight in 1979--are now entering higher education, and we have the highest graduate output in Europe. At the same time, our training strategy--training is more the responsibility of industry, as education is more the responsibility of Government--is to provide better training to more people and with more employer involvement, which is so important.

Training and enterprise councils are delivering. They are creating better local training provision, helping local people and regenerating local economies. In a four-week period in 1993, 2.4 million employees received job-related training. That is 70 per cent. more than in a similar period in 1984--nine years earlier. In addition, between 1987 and 1993, the number of workers with qualifications at A-level or equivalent rose by 2.4 million to nearly half the total work force.

Six thousand employers are now committed to meeting the investors-in-people standard for training and the development of their employees to meet the business needs that they perceive for their businesses. To build on that success, promotion of that standard is to be intensified. In addition, I am glad to be able to tell the House that all Government Departments are carrying forward their own plans to become investors in people.

But as several of my hon. Friends have made clear, it remains absolutely vital that businesses continue sufficiently to invest in training because that is the way to take full advantage of the recovery that we have in our economy. It is welcome news that a survey showed that in April 1994, 86 per cent. of manufacturing firms expected to increase or maintain their investment in training. For our part, the last Budget included support for new modern apprenticeships to help young people to gain vital technical and supervisory skills. Modern apprenticeships represent a serious and major reform of the training system and a major change from the old time-served apprenticeship approach. The aim is to increase the number of young people gaining NVQ level 3 qualifications through work-based training to more than 40,000 a year.

But it is important that sights in the field of education and training are raised still further. Skill needs are changing and the levels of skills required is steadily rising. As we look to the needs of the next century, we must

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recognise that our international competitors are hard at work raising the skill levels of their work force to what they see as being required in that century.

Engineering skills--my hon. Friend the Member for Windsor and Maidenhead referred to this--underpin many sectors of industry. I believe that the engineering industry can offer a rewarding career to young people, but employers must make that clearer by demonstrating that they can and will utilise and reward engineering skills. They must do that if they are to persuade more young people--both boys and girls--to follow engineering as a career. The Government, the engineering profession and industry are promoting all levels of engineering careers in schools and working with industry to develop the qualifications needed to train those who enter engineering. This autumn, we are introducing engineering bursaries, to encourage students with good A-levels to choose engineering degree courses. The White Paper on competitiveness announced a demanding and exciting agenda for action on education and training--I should really say further action on education and training. The White Paper measures build on existing policies and successes. In all, the new measures announced represent a Government commitment of more than £300 million in the three years to 1997-98.

On education, we are streamlining the national curriculum. The emphasis will be on the basics--English, mathematics and science--and there will be rigorous testing at the key stages to check on progress. I find it hard to understand how anyone who has any interest in the competitiveness of the wealth-creating parts of our economy could do anything other than support and approve that programme of rigorous testing.

We are giving more choice to young people, by developing vocational options for 14 to 16-year-olds. They can provide motivation for pupils who might have become disenchanted with the conventional academic curriculum--we all recognise that there are bound to be some. Those options will complement more academic work, but I stress that they will not be a soft option. They will also be rigorously assessed, to ensure that they are comparable with more academic courses. In 1995, we will introduce the new general diploma for young people, to acknowledge achievement in English, mathematics and science, plus two other subjects or their vocational equivalents. That will provide employers and others with a quality check that young people have mastered the basics.

We are also developing a head teachers' leadership and management programme ; it is nicknamed Headlamp, but I would not want to minimise its importance in any way. Head teachers have to provide the lead and it is important that they have the quality and commitment and that they cultivate the right ethos and seek support from parents, employers and others in the community.

Mr. Patrick Thompson : Will my right hon. Friend give way ?

Mr. Sainsbury : Very briefly, as we are running out of time.

Mr. Thompson : My right hon. Friend will recall that in my speech I called for something further--a staff college for head teachers. I hope that he will pass that call on to my right hon. Friend the Secretary of State for Education.

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Mr. Sainsbury : That is a very good point. Nearly all my right hon. Friends will have to read the entire debate to pick up the various excellent suggestions that have been made.

On careers guidance, which is another important matter, even without the passport of the general diploma, a clear map of the way ahead is vital for young people. That is why we are improving careers education and independent guidance to help young people to make the right choices.

Mr. Austin-Walker rose

Mr. Sainsbury : I cannot give way as there is too little time left.

As part of that programme, we will invest £87 million in the next three years to enable the careers service to offer earlier and better independent advice to every young person at 13, 15 and 17. The amount of careers guidance, in schools and colleges will nearly double by 1997 and all pupils will receive a statement of entitlement to careers education guidance, and careers officers and teachers will receive extra training.

At the same time, the framework of academic and vocational qualifications post-16 needs to be challenging and attractive. It must enable young people to make the most of their abilities and aptitudes. The White Paper on competitiveness pledged us to strengthen further post-16 qualifications. As part of that process, I welcome the progress made by GCE examining boards towards adopting a code of practice for GCE A-level and AS-level exams. The broadly occupational GNVQs are already proving popular, I am happy to say. The National Council for Vocational Qualifications is reviewing the consistency of standards of rigour across the board.

I should like to say a lot more about education and on a number of other subjects of great importance. I hope that what I have already said about education and training will have made clear to the House the Government's commitment to, and recognition of, the importance of the subject to the competitiveness of British industry. Clearly it is a recognition which is shared by my hon. Friends. Another very important subject to which I should have liked to be able to reply is the importance of inward investment, which has made such a contribution to the success of our economy. My hon. Friends the Members for Havant, for Sutton and for Meriden referred to that issue. There are a number of other points on which I will try to write to my hon. Friends, if I have not already responded to them. The debate has covered a wide range of issues, and it has one simple message : if business and industry are to succeed, they must be competitive. They must provide customers with the products they want at the price they want, of the right quality and service and at the right time. The Government have a role in achieving that objective and my Department's goal is simple : to help British business compete successfully at home, in the rest of Europe and throughout the world. That is a long-term aim which is shared by the whole of the Government

It being half-past Two o'clock, the debate stood adjourned.

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Orders of the Day

Private Members' Bills

DECORATIONS FOR GALLANTRY (DISPLAY) BILL -- Order for Second Reading read.

Mr. Deputy Speaker : Not moved.


Mr. Deputy Speaker : Not moved.


Order for Second Reading read.

Hon. Members : Object.

Second Reading deferred till Friday 15 July


Order read for further consideration (as amended in the Standing Committee).

Hon. Members : Object.

To be further considered on Friday 8 July


Order for Second Reading read.

Hon. Members : Object.

Second Reading deferred till Friday 8 July


Order for Second Reading read.

Hon. Members : Object.

Second Reading deferred till Friday 1 July


(Not amended in the Standing Committee), considered ; read the Third time, and passed, without amendment.


Order read for further consideration (as amended in the Standing Committee).

Hon. Members : Object.

To be further considered on Friday 1 July

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That, notwithstanding the provisions of Standing Order No. 14 (Exempted business), the Speaker shall

(1) at the sitting on Monday 20th June, put the Question on the Motion in the name of Mr. Secretary Heseltine relating to the draft Insurance Companies (Third Insurance Directives) Regulations 1994 not later than one and a half hours after it has been entered upon ; and the said Motion may be proceeded with, though opposed, after Ten o'clock ; and

(2) at the sitting on Monday 27th June, put the Questions on the Motions in the name of Secretary Sir Patrick Mayhew relating to the draft Ports (Northern Ireland) Order 1994 and the draft Ports (Northern Ireland Consequential Provisions) Order 1994 not later than Seven o'clock.--[ Mr. Arbuthnot. ]

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Personal Pension Schemes

Motion made, and Question proposed, That this House do now adjourn-- [Mr. Arbuthnot.]

2.31 pm

Mr. Paul Flynn (Newport, West) : The decision to privatise pensions was the worst and most damaging taken by the Government in the 1980s. It is significant that the Ministers involved are now the Prime Minister, the Leader of the House and the retiring Chairman of the Conservative party. As many as 3 million people have been cheated and defrauded as a result of their actions.Yesterday in the House I vainly tried to raise the subject and to get some kind of intelligent response from the Prime Minister commensurate with the enormity of the scandal. Sadly, although I gave the Prime Minister 24 hours' notice of my intention to raise the matter--as he requested on Tuesday--in the hope that that would mean that the response would be reasonable, all I had back was an answer as vacuous, patronising and insulting as most parliamentary answers are. I was delighted to see that The Times was equally dismissive of it today.

Although I do not want to waste the debate on futile party political points, I must say that it is a great shame that the Conservative party has not realised the damage that it has done through the decision that was taken in 1986. Our debate on the same subject in March which was disfigured by the contributions of a large number of speakers who confessed that they had financial interests in the pensions industry. At times it seemed as if they were speaking not on behalf of their constituents, but on behalf of their outside financial interests. That is one of the problems with our democracy, because I have no recollection of the Prudential party or Norwich Union party winning a seat at the election. It is wrong when the Chamber is abused by various commercial interests, as happened on that occasion.

It is almost impossible to exaggerate the damage that has been done by the Government's decision. Coopers and Lybrand claim that 2.4 million people should not have contracted out of state

earnings-related pension scheme, SERPS, into the scheme. A further 500,000 people also contracted out, as a result of the most wickedly deceitful sales techniques, from the miners' scheme, the hospital scheme and other splendid occupational schemes. It is the worst financial scandal in Britain since the South Sea bubble and it has cost the national insurance scheme £10.5 billion. It is a mess of oceanic proportions.

I want to highlight certain points that have not received a great deal of attention in the past--some of them have received hardly any attention. There is a problem in understanding what a personal pension is, because the concept of a pension is the concept of a sum of money built up into a fund from which people can draw for the last years of their lives. A personal pension is a money purchase amount, which will then buy an annuity which, in turn, will determine the level of the pension.

It is tempting to conclude that the personal pension plan introduced by the Government was a dry run for the national lottery. In effect, that is what it is. It is a gamble. The pensions are as personal as a can of baked beans. They are not portable, as the Government said they would be and they can be changed only at enormous cost. The ultimate

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pension is in the lap of the gods. Recent events have shown that people are likely to lose out a great deal from such a scheme. One iniquitous practice is conducted by a well-known company, Prudential. In common with most of us when we sign forms, people sign that company's form between the two little crosses without noticing the declaration on the form, which states :

"I declare that the Prudential (or any of its authorised representatives) has not advised me to transfer my existing pension arrangement".

That form was in use as long ago as 1992. What on earth is the point of that declaration ? Why were people asked to sign it unless the company knew that it was acting against the best interests of its customers ? That declaration absolves the company from any future claims that people were wrongly advised. People take such advice because they are not self- motivated. They take out a pension on the advice of an expert--the man or woman who comes along and persuades them to buy it.

Even if a personal pension seems to be a good buy, things can go horribly wrong as retirement approaches. First, a downturn in the stock exchange market could reduce the value of the lump sum. Secondly, as has happened recently, a fall in the annuity rate reduces the amount of pension that a given sum will buy.

An annual survey of personal pensions in Money Management shows that the lump sum resulting from a £200 per month payment for 10 years into a Norwich Union with-profits scheme was 14.5 per cent. lower for a person reaching pension age in 1992 than for someone who reached it a year earlier. That represents an enormous drop in a short time. By mid-1993, the pension was more than 20 per cent. lower than that paid in 1991. For someone becoming a pensioner in 1993 rather than in 1991 the amount of money available to buy a pension was reduced by one fifth.

For anyone forced to buy a pension immediately after the October 1987 stock market crash, the loss was even greater. There is no way in which to escape that loss. For someone on a minute disposable income, a loss of between one quarter and one fifth of the income from a pension is catastrophic.

Another risk is that annuity rates will drop, which will have an even more serious effect on the value of pensions. In the four years to March 1994, Norwich Union's annuity rates fell by 31.8 per cent. for men aged 65, and by 36.7 per cent. for women aged 60. It is hard to imagine such a drop in the value of pensions. Hon. Members moan ceaselessly about what is happening to the value of basic pensions, but the falls in annuity rates have happened regardless of inflation and people are unaware of them. Even if the lump sum provided by the scheme had come up to expectations, the pension would still have been a third lower than that.

I do not wish to concentrate on a single company, so have looked at a range of companies. From details published recently by Pensions World magazine, I have calculated, without bias, the four best annuity rates quoted by life offices between 1990 and 1994. The table shows what the monthly pension from a £1,000 lump sum would have brought for a man retiring at the age of 60 or 65. In 1990, he would have received £146.05 but, by 1994, the same sum would have given him only £107.40. For a woman, the drop is from £127 to £87.67. The Minister may say that gainers as well as losers are possible and that we are going through a bad patch. But no

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one could have anticipated the catastrophic fall in the past four years. When people enter the personal pensions market, they are expected to take decisions on their pensions in 20, 30 or 40 years' time and not a soul, however wise he or she may be, knows what will happen in that period. The collapse could be even worse. Now that legislation on this matter is looming, will the Minister say how many people are still buying pensions ? I gather that 100,000 people bought personal pensions in the first quarter of this year. I should have imagined that personal pensions would now be seen as suspect and that no one would want to buy them. Are those now buying them aware of the drop in annuity values in the past four years ? Do they realise what an atrociously poor buy they are, based not on speculation but on recent experience ?

I wish to raise many other factors that have received little attention. This country has a problem with the role of financial advisers. There is a great number of them, and the public think that they give entirely disinterested advice. Sadly, that is not always the case. Unless the financial adviser is of a saintly disposition, he or she is more likely to sell policies that provide large commissions than policies that give good value to the customer, because the whole business is commission-driven.

Although the Government understand that all the 6 million people who have opted out of SERPS will be obliged to come back into the scheme at a certain time, the process is extremely slow. An expert has estimated that at least 1 million people who should have been advised to go back into SERPS are still outside it. I have spoken to some of the more reputable companies on that matter and been told that, although they have advised people to go back into SERPS, those amount to only a tiny number and that about 1 million people are, against their financial interests, still paying into personal pension schemes whereas they should go back into the state scheme. There is a group of people known as, "the orphans". Unfortunately, there are a great many of them. Those are people who bought personal pension schemes through intermediaries--the agents and financial advisers-- who have subsequently gone out of business. No one is left to advise those people when to return to the state earnings-related pension scheme. It should be the responsibility of the insurance company or another provider to give them that advice, but no one has pronounced on that subject.

Low earners especially risk being forced to take their pension at the wrong time. That is because people in a high-income job can often choose the date of their retirement. The lower one is on the ladder--the lower one's wages are--the less likely one is to be able to name such a date.

In Britain, insurance companies can market rotten pension schemes--and many schemes are rotten--with no control other than the Inland Revenue rules, which have nothing to do with value for money. I understand that in Germany, there are controls over financial products at the design stage. One is not allowed to market a scheme that is a rip-off. Such rules are needed here. I hope that in the forthcoming legislation there will be clear definitions of the types of schemes that can be marketed.

People who buy policies directly from providers are charged the same premiums as those who buy through intermediaries. Thus, although no commission is paid on a direct sale by the insurance company, the customer nevertheless has to pay a price that includes commission.

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