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Points of Order
3.31 pm
Mr. Tim Smith (Beaconsfield): On a point of order, Madam Speaker. May I draw to your attention the story that has appeared on the front page of the Evening Standard this afternoon, which suggests that members of the Public Accounts Committee are demanding the release of details about the royal household's money? Is not it quite wrong that the right hon. Member for Swansea, West (Mr. Williams) should have sought to pre-empt a meeting of the Committee, which is not meeting until 4.30 pm today, when most of us are interested not in pursuing his prurient inquiries into the royal household, but only in value for money?
Madam Speaker: I have not seen the report to which the hon. Gentleman refers, but I shall certainly take a look at it. If the situation is as the hon. Gentleman says, I certainly take such matters quite seriously. I hope that he will leave it in my hands.
Mr. Peter Hain (Neath): On a point of order, Madam Speaker. Are you expecting a statement from the Government about reports this morning that the number of gas complaints have gone up by 150 per cent.? Is not that an example of the privatisation shambles, when the number of gas complaints go up and the chief executive's salary goes up as well?
Madam Speaker: I have not been informed by the Government that they are seeking to make a statement today.
Mr. Mike O'Brien (Warwickshire, North): On a point of order, Madam Speaker. Are you aware of the article in this morning's edition of Today , which shows that Britain tops the league in crime--
Mr. O'Brien: In this morning's Today newspaper--
Madam Speaker: I understood which newspaper, but I did not understand what followed it.
Mr. O'Brien: My point of order, Madam Speaker, is that the paper says that Britain tops the league of shame in its rise in crime since 1979. Given that that information became available--it appears--after Home Office
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questions last week, should not the Government make it clear in all candour when answering questions that their crime record is appalling and not as good as they claim?Madam Speaker: These points of order are totally bogus. Therefore, I am taking no more. [Interruption.] Just a moment--I shall determine whether they are bogus points of order, not the hon. Member for Rutland and Melton (Mr. Duncan). The point of order raised by the hon. Member for Beaconsfield (Mr. Smith) was not bogus, if I may say so. However the point of order raised by the hon. Member for Warwickshire, North (Mr. O'Brien) is bogus. I am not expected to read every newspaper that comes out and I have no intention of doing so. Several hon. Members rose --
Madam Speaker: Sit down. I have not finished answering yet. It is for the Government, if they have anything to say, to say it to the House and not through the hon. Gentleman or me to newspapers. I will take only genuine points of order now. I will listen to Mr. Shaw. If it is not a genuine point of order, he will be sat down.
Mr. David Shaw (Dover): On a point of order, Madam Speaker. I hope that it will be as genuine as I can possibly make it in the circumstances.
Madam Speaker: Order. That is not saying very much at all.
Mr. Shaw: My concern is about the order in the House of Commons in terms of whether we have balanced reading material. It is obvious from the first two points of order--
Madam Speaker: Order. That is nothing whatever to do with me. I warned the hon. Gentleman. Any more points of order? Very good.
Statutory Instruments, &c.
Madam Speaker: With permission, I shall put together the motions relating to statutory instruments.
Motion made, and Question put forthwith pursuant to Standing Order No. 101(3) (Standing Committees on Statutory Instruments, &c.),
Social Security
That the Housing Benefit, Council Tax Benefit and Income Support (Amendments) Regulations 1995 (S.I., 1995, No. 625) be referred to a Standing Committee on Statutory Instruments, &c.
Housing (Scotland)
That the Housing Revenue Account General Fund Contribution Limits (Scotland) Order 1995 (S.I., 1995, No. 188) be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Lightbown.]
Question agreed to.
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Orders of the Day
Pensions Bill [Lords]
[Relevant documents: Memoranda submitted to the Social Security Committee on the Operation of Pension Funds: the Pensions Bill [Lords] (HC 336).]
Order for Second Reading read.
Madam Speaker: I have selected the amendment in the name of the Leader of the Opposition.
3.35 pm
The Secretary of State for Social Security (Mr. Peter Lilley): I beg to move, That the Bill be now read a Second time.
I should like to begin by putting the Bill in context. Pensions are a matter on which Conservatives can be proud of their record. Pensioners retiring now are on average 52 per cent. better off than those who retired in 1979, after allowing for inflation. More of them have private pensions than ever before. Their savings produce a flow of £50 billion a year into industry. The success of private pension provision has enabled us to channel an extra £1 billion to help the less well-off pensioners.
We also need to see the Bill in an international context.
Mr. David Winnick (Walsall, North): Will the Secretary of State give way?
Mr. Lilley: Perhaps the hon. Gentleman will allow me to make a little progress. He may find that I answer his points.
Throughout the world, more people are living longer and enjoying longer in retirement, but there will be fewer people of working age to support them. How to pay for those pensions is the most important single issue facing every Government. In most countries, the bulk of all pensions is provided by the state. Indeed, that is the approach that the Labour party would always have preferred for pensions in Britain. When the state finances pensions, this year's pensions are invariably paid out of this year's taxes. It is pay-as-you-go. Nothing is saved or set aside for the future. So in most countries, more and more retired people will impose an ever more crippling burden of tax on the declining number of people of working age.
Mr. Winnick: The Secretary of State said at the beginning that there had been a substantial improvement in the lives of pensioners, but is he not aware, as he should be as Secretary of State, of the literally millions of people in Britain who are retired and live on a pittance on the state pension and income support? They believe that they have been victimised as a result of the Government's changes of the past few years. The Secretary of State should be aware that, with growing unemployment and the rest, it is difficult for potential pensioners to make safeguards for their retirement.
Mr. Lilley: The hon. Gentleman is as ignorant as he is insufferable and I do not know why I gave way to him. He knows full well that every pensioner in Britain is or can be better off. No one need be at the level at which he or she was left by the last Labour Government, who wiped out a quarter of people's savings in a single year of inflation.
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In Britain, the Conservatives' strategy has been to encourage private pension provision, building on the basic state pension. When people opt for private pensions, their money is genuinely saved. It is invested in industry. It goes into the assets that will generate the profits which will pay for their pensions in 10, 20 or 30 years when they retire, without taxing the economy to death.Our policy has been increasingly successful. About three quarters of those eligible have opted out of the state earnings-related scheme and invested in occupational or personal pensions. Collectively, funded pension schemes have accumulated £500 billion of assets to pay for future pensions. That is more than all the assets in all the equivalent schemes in the rest of the European Community put together, which is why other countries look enviously at our system as a model for themselves to follow.
Mr. John Denham (Southampton, Itchen): The Secretary of State said a moment ago that when individuals have personal pensions, their money is genuinely saved. Does he agree that a significant number of low income earners, who opted out of the state earnings-related pension scheme, find that all their savings are absorbed by the fees and charges of the private pension companies from which their pensions are meant to be paid?
Mr. Lilley: Although the hon. Gentleman did not mention it, he must know about and welcome the fact that the Securities and Investments Board has guaranteed that anyone who has been mis-sold a pension in that way will have redress. He is wrong to try to scare people by suggesting that that is not the case.
When I came to the Department of Social Security, there were four outstanding issues on my desk, all of which are addressed by aspects of the Bill. The first set of problems arose from the gaping hole left in the Maxwell pension schemes by that socialist millionaire who, strangely, is never mentioned when wrongdoing is discussed in the media. Existing pensions were then about to be cut off and remaining assets were about £400 million short of those required to pay for future liabilities. The prospect of prolonged and costly litigation looked set to consume much of any assets regained, and confidence in occupation schemes generally was threatened by fears that the regulatory structure was inadequate.
So I appointed Sir John Cuckney, who has successfully brought about a major settlement of the various Maxwell pension disputes. That was an enormous achievement. He has secured the position of 30,000 of our constituents and put their fears at rest. The House will want to join me in thanking him for what he has so skilfully done.
Mr. David Shaw (Dover): As a member of the Select Committee on Social Security, may I congratulate my right hon. Friend because he set up the Maxwell Pensioners Trust and made the arrangements that made that settlement possible? May I also demand an answer from him as to how one of the people responsible for managing about £75 million of the Maxwell money that went missing is on the Labour Front Bench in the House of Lords?
Mr. Lilley: I am grateful to my hon. Friend for his complimentary remarks. I honestly think that his last
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question should be addressed to the Opposition Front-Bench team, and no doubt those hon. Members will tackle it in subsequent speeches.Mr. John Butterfill (Bournemouth, West): As honorary adviser to the Mirror Group Newspapers pension trustees, may I put it on record that they are very grateful to my right hon. Friend for the changes that he and his officials made to the regulations, which have enabled them to restructure schemes in such a way as to secure the pensions of all the employees?
Mr. Lilley: I am grateful to my hon. Friend. I am also grateful for the helpful advice that I received from him, my hon. Friend the Member for Dover (Mr. Shaw) and others--and, indeed from Opposition Members--when we were in the early stages of trying to tackle the Maxwell pension problem.
To restore confidence in the regulatory regime for occupational pensions, I asked Professor Goode to chair the Pension Law Review Committee. His invaluable report provided the essential framework for the parts of the Bill that deal with occupational pensions, which incorporate all that report's major recommendations. Following the committee's recommendations, the Bill establishes six lines of defence against fraud and misuse of pension scheme assets. First, the members are given new rights, notably to nominate a third of the trustees. Of course, that is not a panacea--the main Maxwell schemes had 50 per cent. member trustees. None the less, it will ensure that trust boards have a range of different perspectives on the responsibilities that they are required to discharge. That is why we have gone somewhat further than the Pension Law Review Committee recommendations and proposed that the new requirements should apply to all schemes regardless of their size.
The second line of defence is the trustees themselves. Their powers and duties will be clearly defined and they will be responsible, of course, to the scheme. The third line of defence is the professionals--the actuaries, auditors, lawyers and so on, who will report to the trustees rather than to the employer. Actuaries and auditors will have the duty, and other professionals the right, to blow the whistle to the new regulator if they suspect any abuse. The fourth line of defence is the minimum funding requirement. We have adjusted that in the light of consultation and the arrangements now proposed are as often criticised for being too onerous as for being inadequate, so I suspect that we may have got them just about right.
The fifth line of defence is the new regulator--the occupational pensions regulatory authority. That authority will have all the main powers recommended by the Pension Law Review Committee, but it will not have to get bogged down in the bureaucratic processing of routine forms. It has been suggested that the cost of the regulator should be met from taxation. We believe that a levy on schemes is more appropriate since the benefits of well-regulated schemes accrue only to members and employers. Many taxpayers are not members of schemes, so why should they pay? Finally, if all else fails, we have the compensation scheme, which stands ready to restore up to 90 per cent. of misappropriated funds if an employer is insolvent.
Mr. Hugh Bayley (York): Given that pension funds--occupational pension schemes--exist solely for the
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purpose of providing pensions to their members and not for the purpose of supporting the companies for which their members work, why does not the Secretary of State accept that those members should appoint 50 per cent. of the trustees of a pension fund? That would ensure that the interests of the members, who are the beneficiaries, were properly represented.Mr. Lilley: The hon. Gentleman will know that all trustees have to act in the interests of the trust and the scheme and not in the interests of any particular section that may have appointed them, whether that be the employer or some particular section of the members. We believe that it is right to insist that a minimum of one third of the trustees be appointed by the members in normal circumstances--it could be more if necessary--to ensure the diversity of backgrounds. It is not the case that members appointed by the employer will represent that individual. Those members have a duty under trust law to look after the best interests of the scheme.
Mr. Robert Jackson (Wantage): My right hon. Friend is aware that the Consumers Association is not happy with the strength of the regulator's powers. In particular, concern has been expressed about the absence of any specification of the duties of the regulator, which exist in other areas where regulators are appointed. Can my right hon. Friend explain why that is the case?
Mr. Lilley: As I said, we have included in the Bill all the powers recommended by the Pension Law Review Committee. Some people thought that we would water down those powers, but we have not done so. We have reflected the full powers that the committee wanted us to incorporate. I do not think that anyone need have any worries that the regulatory authority will lack those powers.
After we dealt with the problems arising out of Maxwell, the next big issue was that arising from the European Court ruling in the Barber case. In the 1986 directive on equal treatment and occupational pension schemes, we specifically negotiated the right for occupational schemes to reflect unequal ages as long as they persisted in the state scheme. Unfortunately, the European Court overruled that in the Barber case and required occupational pension schemes to give men and women equal treatment. The appalling prospect that that obligation might be retrospective was ended by the protocol successfully negotiated by my right hon. Friend the Prime Minister at Maastricht and the subsequent Coloroll judgment.
None the less, all private pension schemes had to equalise all rights accruing from the date of the Barber judgment--17 May 1990. That placed British occupational pension schemes in a dilemma. They were simultaneously required, under European law, to offer equal pension ages and, under British law, to mirror the unequal rights that would have accrued had members remained in the state earnings-related pension scheme.
The Bill brings domestic legislation into line with European law and it resolves the dilemma by breaking the links for the future between benefits due under occupational schemes and those due under SERPS. Instead, contracted-out schemes will have to be certified as offering benefits that overall match or surpass those available under SERPS.
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It is paradoxical, to say the least, that the majority of European Community pension funds are in Britain and only for us are occupational pension schemes a crucial part of pension provision, yet British policy is largely being driven by decisions taken by 15 unelected judges in Luxembourg. For that reason, Conservative Members have no intention to sign the social chapter and extend those powers further. [Hon. Members:-- "Hear, hear."] Still less are we likely to follow the advice of the Leader of the Opposition and go even further and propose majority voting on subjects such as the environment and the others that he specified.Mr. Nick Hawkins (Blackpool, South): Will my right hon. Friend give way?
Mr. Lilley: I will, but I hope that I shall be able to make some progress afterwards.
Mr. Hawkins: Does my right hon. Friend agree that many British companies are delighted with his firm stance on the matter that he has just mentioned? He might be interested to know that, this very morning, I was with representatives of a successful British multinational company who have witnessed the harm that the social chapter has done in continental factories in the ways that he mentioned, and do not want to have any of that nonsense here.
Mr. Lilley: I think that such people are even more grateful to my right hon. Friend the Prime Minister for the firm stand that he took in obtaining that protocol and in obtaining the opt-out on the social chapter.
Mr. Harry Cohen (Leyton): Will the right hon. Gentleman give way?
Mr. Lilley: I shall make progress, if I may.
The third issue on my desk when I took over was how best to fulfil our election promise to equalise the state pension age. My predecessor had initiated a public consultation about the main options for implementing that. After studying all the evidence, I concluded that the arguments in favour of equalising at the age of 65 were overwhelming.
People are living longer, healthier lives. Women increasingly expect to work and to earn their own pension. The trend worldwide is to equalise at the higher pension age and even to increase that age. The support ratio of people of working age to those above the existing pension age is on course to decline to 2.1:1--only slightly more than two people of working age to one who has passed the present retirement age--by the year 2030. Moreover, by then the cost of equalising at age 60 rather than 65 would be an extra £12 billion a year; hence our decision to equalise gradually between 2010 and 2020, so that no woman born before 1950 will be affected by that decision. At present, people can defer drawing their pension for up to five years after they reach the basic state pension age, and in return they receive an extra 7.5 per cent. on their subsequent pension for each year of deferral. In future, we shall extend that period of flexibility indefinitely and boost the increment to 10 per cent. for each year of deferral.
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The decision about equalising the state pension age is of enormous importance; in terms of expenditure, it is almost certainly the biggest single decision taken during this Parliament, so it is reasonable to ask the Opposition where they stand. [Hon. Members:-- "Hear, hear."] As usual, the Opposition have refused to commit themselves to a clear policy. Usually, there is a total vacuum. In this case, we have a profusion of policies.The Labour party's most recent manifesto promised to equalise the state pension age at 60.
Dr. Norman A. Godman (Greenock and Port Glasgow): Will the Secretary of State give way?
Mr. Lilley: May I make a little more progress before I--as always-- give way to the hon. Gentleman?
Last year, the Labour party's annual conference reaffirmed that commitment to equalise at 60. That is a £12 billion spending pledge--not bad for starters.
Mr. Alistair Darling (Edinburgh, Central): The right hon. Gentleman just said that we did not have any policies.
Mr. Lilley: I said that the Opposition had a profusion of policies in that area.
Labour's Commission on Social Justice, on the other hand, has supported the Government pretty unequivocally. It says that it is quite reasonable to start phasing in a common pension age of 65 in the next century.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) has attempted to hedge his bets. In an article in The Independent , he argued that it should be possible to draw a pension at any time between 60 and 70. He stated:
"The argument points to 63 as a pivotal age"
at which people draw their full pension. But the hon. Gentleman needs to explain three things about flexible decades. First, in practice, nearly everyone opts to take his or her pension the first year that he or she can. That is certainly the case at present--well over 90 per cent. of people do so. Secondly, a pivotal age of 63 for when people would receive the full basic pension at its present value implies that the pension available at 60 would be about one quarter less than the current pension. Thirdly, because people would retire earlier, the hon. Gentleman's scheme would result in up -front costs in the early years of £5 billion a year more than under our proposals.
Therefore, in practice, the hon. Gentleman's suggestion means that the majority of pensioners would take their pension at the beginning of the decade, at age 60, but at a lower level than is currently available, and struggle into old age on pensions smaller than they currently receive. As usual, however, the hon. Gentleman will not commit himself firmly to that or to any other of the array of policies in the Labour party's portfolio.
The House will want a clear answer today to the£12 billion question. What would Labour do in government? Would they equalise the pension age at 60, 63 or 65? I shall give way to the hon. Member for Garscadden now if he cares to put us out of our misery and end our uncertainty. He obviously needs more time to think.
Mr. Bayley rose --
Mr. Lilley: I do not think that the hon. Gentleman has yet made the Front Bench, although that promotion will doubtless come.
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The Government's policy intentions on pensions are clear. We want a system that offers the best chance of security to pensioners while not placing unsustainable burdens on future taxpayers. The Labour party's pension policies are a study in vagueness, ambiguity and evasion. The reasoned amendment that it has tabled today is devoid of reasons, opaque as to meaning and in breach of assurances that the hon. Member for Garscadden previously gave the House. When I announced my pension plans in the White Paper, the hon. Gentleman promised:"No one in the House will deny the need for urgent reform."--[ Official Report , 23 June 1994; Vol. 245, c. 362.]
However, in its reasoned amendment the Labour party seeks flatly to refuse to give the Bill a Second Reading. The reform that it previously accepted as urgent, it now wishes to put off for another year. The reasons given for that volte face are so opaque that I genuinely cannot understand what the Labour party is getting at in the reasoned amendment. I offer the hon. Member for Garscadden the opportunity to explain his reasons.
Mr. Andrew Miller (Ellesmere Port and Neston): Will the Secretary of State give way?
Mr. Lilley: No, I must make further progress.
The Bill addresses the issue of giving more choice in pension provision, as we promised in our manifesto. The Government have done a great deal and the Bill further extends that choice.
Mr. Miller rose --
Mr. Lilley: I think that I am answering the hon. Gentleman's point and he will have to be content with that.
It is important to continue to encourage the provision of personal pensions. For those who change jobs frequently or whose employers do not run pension schemes, personal pensions can be by far the best way to build up savings for retirement--indeed, for the latter group, they are the only way. But as people grow older, their funds have less time to grow, so under the present system, personal pensions become less attractive than SERPS for those above a certain age. The Bill solves the problem by introducing an age-related rebate to make it equally attractive for people of all ages to stay opted out of the state scheme.
We also propose to allow individuals on retirement to withdraw an income from their personal pension fund while deferring the purchase of an annuity until the age of 75. That extra flexibility will allow personal pension holders to time the purchase of their annuity to obtain the best possible income in retirement.
I now refer to some of the amendments introduced during the Bill's passage through the House of Lords.
Mr. Miller: I am grateful to the Minister for giving way. I was waiting with bated breath for his fourth point, because I assumed that it would be a response to the commitment that his Department gave to me on 10 December 1992, when I sought to introduce a private Member's Bill on the subject of takeovers. The Minister at the time said:
"I can confirm my support for the general intention of your Bill"
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and he went on to praise the intentions of my Bill. Where are takeovers addressed in the Government's Bill? Are the six principles of my private Member's Bill in the legislation? If they are not, I hope that the Minister will find a place to insert them.Mr. Lilley: I appreciate that the hon. Gentleman is using this opportunity to remind me about his measure. However, it was not one of the four most important items in my in-tray when I assumed responsibility for the Department. My hon. Friend the Minister for Social Security and Disabled People will refer to the specific points that the hon. Gentleman has raised when he has found out what it is all about.
In this 50th anniversary year of the end of the second world war, the whole nation wants to recognise those who sacrificed their lives so that we could be free. This country has rightly long made generous pension provision for the war widows whom they left behind. Nearly all war widows receive almost £143 a week tax free, which is not means-tested, for life unless they remarry.
However, as a result of debates in the House and in the other place, it has become clear that the position of some former war widows who lose their second husbands is unacceptable. I have decided that the war widows pension should be restored to war widows who are widowed a second time, divorced or legally separated. The change will benefit an estimated 16,500 war widows and it will cost about £40 million in a full year. It will be one of the first measures in the Bill to come into effect. Subject to the Bill's progress, claims will be dealt with from this October. I am sure that that announcement will be well received by the whole country as it demonstrates this nation's recognition of the debt that we owe to so many.
Mr. Winston Churchill (Davyhulme): I am grateful to my right hon. Friend for that announcement and I am grateful to the Government for agreeing to the amendment proposed in another place by the noble Lord Freyberg. It will go a long way towards alleviating the pain, hardship and unfairness endured by those who have suffered under the present arrangements. On their behalf and on behalf of all those who have been involved in the campaign in both Houses of Parliament, I express my appreciation of the Government's attitude.
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